A rental property should be treated like any other business with detailed records of rental payments. Many landlords rely on receipts which can be disappointing when they want to look into historical records. The rental property business requires advanced methods of reporting to give the landlord better insights into the performance of their rental income. The rental ledger comes in at this point. From the ledger, a landlord can check rental records on what has been paid and what is expected. The landlord can tell the good tenants and the bad ones in terms of rent payments.
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Rental Ledger Templates
What is a rental ledger?
A rent payment ledger is a document that shows a breakdown of rent payment records for each rental unit. The tenant ledger contains details of historical rent payment records for every tenant who has ever rented a unit in your rental property.
The document also shows a record of any rental arrears by any tenant and their patterns of rent payment. The landlord can solve disparities fast if there are any disputes. If they need to evict any tenant due to prolonged periods of nonpayment of rent, the landlord can use the payment ledger as a supporting document for their poor payment history.
Rental Ledger Examples
Why is a rent payment ledger useful?
Another name for rent payment ledger is lease ledger. It is an important document in the rental property business. Your rental property is a business and you should always treat it as such.
Every business requires records to help the business person know if they are making profits or losses. It will help you know who owes you rent arrears so that you take action. The lease ledger is important in a rental property in various ways.
It keeps records of your rental income and expenditure
You will spend some of the rent you collect to maintain the property. You could use the money to repair damaged pipes, paint the exteriors, repair doors, or improve the property in various ways. The payment ledger keeps records of your income and expenditure.
It helps you know the income your property is generating
It’s not easy to tell the amount you earn each month from your rental property without any records. You will keep collecting rent but you can never tell your income in a particular period. It is important to record all the rent you collect in a tenant ledger to give you a detailed record of the amount you are generating.
It gives you records on which tenant is lagging
If a tenant has been faithful in paying their rent and then they lag for one time only, it is understandable. However, if they keep lagging all the time, it shows there is a problem. The rent ledger will show which tenants have a lagging tendency so that you approach them to find out if there are any challenges they have.
You can easily notice any discrepancies and solve them in time
If an agent is collecting rent on your behalf, they should keep the banking records updated all the time. The amount reflected in the bank statement should align with tenant ledger records.
If, for any reason, they are not aligning, you can demand an explanation from the agent. The ledger will help you pinpoint the differences and solve the discrepancies before it’s too late.
It is your supporting document in time of evictions
A time will come when you must evict a tenant because they delay rent payment too much. The tenant might insist they have been paying rent in time. If you don’t have any proof to show they haven’t been paying, it might be impossible to evict them. The lease ledger is your supporting document for court evidence.
What information is contained in a payment ledger?
You must make sure your payment ledger contains every important detail that will help you keep a detailed record of rent payments. When any information is lacking, there will be loopholes in your ledger which could be used against you in a court case.
If you are not certain about every detailed information it should have, refer to a rental ledger example online for ideas. You can use the rental ledger example as an inspiration document as you create your own rental ledger. The document should include the following information.
Owner name: This is the name of the person who owns the rental property. In this case, you are the owner and you should type your name here.
Physical address: This is the physical location of the rental property. Indicate the state, city, street, and area code of the property to show exactly where it is located.
Rental property type: rental properties are different in terms of size and structure. You should indicate what type of rental property it is. Here are examples of rental properties: –
- Getaway rental homes
- Single-family rental homes
- Vacation rental homes
- Condos
- Luxury rental homes
- Multifamily rental homes
- Student rental rooms
Your rental property will likely fall under one of these categories, no matter the type of building.
Lot size: The lot size is indicated as the size of land occupied by the rental property in square feet. The lot size is usually calculated by taking the size of the land in square feet divided by the size of an acre of land in square feet. One acre of land in square feet is 43,560. This is how you get the lot as a fraction of an acre.
Property zoning: In building and construction laws, zoning means the local laws that regulate the way a real estate property can be used. The same laws give restrictions on what the property cannot be used for.
These laws are applicable in specific geographic areas. If the local government feels the property in question will help serve the community better, the laws can be adjusted to favor the property.
Unit number: Each unit should have a unique number. The landlord may decide to use alphabets instead of numbers or a mix of both.
Tenant’s name: If the unit is a large family unit, indicate the name of the head of the family. If two people are renting the unit, indicate the name of the person who will be responsible for rent payment.
Unit size: The unit size is indicated in square feet
The number of bedrooms or bathrooms: Rental units are usually described in terms of bedrooms. It can be a single room, bed seater, one bedroom, two bedrooms, etc.
Lease start date: This is the date when a new tenant moves in
Lease end date: This is the date when the rental lease will expire, subject to renewal. If the tenant fails to honor rent payments, the lease agreement can be terminated.
Monthly rent: Sometimes, the rent might be paid quarterly or semiannually. Regardless, you should indicate the amount of rent per month.
Any additional payments: These are payments such as appliances, pets, etc.
Rent due date: If they are paying per month, weekly, etc., indicate the date by which the rent must be paid
Date rent is paid: This is the date when the tenant pays their rent. It could be past the due date, on the exact date, or before.
Deposit for security: This is the deposit made to remain as security in the case the tenant defaults payment or damages the property.
Notes: This portion contains any additional notes you might want to record, such as incentives, replacement of floor tiles, repainting, etc.
Free Lease Ledgers
How a property owner benefits from a lease ledger?
The main benefit a property owner gets from having a tenant ledger is the ability to have a consistent record of their rental income flow. The purpose of investing in real property is to get a continuous income and a payment ledger comes with multiple benefits.
Better financial records
A rent payment ledger can also be used as a balance sheet. The property owner can modify it and add columns that indicate the amount used for repairs, paying the caretaker, and other miscellaneous costs.
If the property was built on a mortgage, there could be a column that shows mortgage payments. The owner can determine how long it will take to recover the cost of construction.
Obtaining loans
Lenders ask for records that show a borrower shall manage a loan before approval. The landlord can use the lease ledger as proof they have a regular income. If they have been keeping the ledger for some time, it will be a legitimate support document.
The property manager can identify opportunities
Sometimes it’s difficult to identify the opportunities your property might provide without a tenant ledger. A year down the line, you might notice a certain unit has never been without a tenant. This is an indication the unit is in high demand, mostly because your property is in a prime location. This might be your opportunity to increase rent.
You might also notice there have been irregular patterns in rental income. The number of defaulting tenants could be high. This could be an indication that the agents you have hired to do tenant screening are not doing a good job.
Another challenge you might notice is tenants moving out too often or sooner after moving in. This is an indication there is an underlying problem. It could be the amenities are unconducive, or the cleaning company is not doing its best. It will be time to improve or upgrade your property to attract tenants who will stay in your property for longer.
Adding value to your property during the sale
After a certain period, you might decide you want to sell your property. It will give you a better negotiating opportunity. If your payment ledger shows the property is full of tenants who are consistently paying rent, the property will increase in value. It will also sell first because there will be a catch for the buyer. They will be convinced that they will start to earn from the property with immediate effect.
Tenant Ledgers
Who can use a rent payment ledger?
The tenant ledger is an important document that can be used by various entities or different types of individuals.
Investors
Investors invest their money in viable businesses that will give them a consistent flow of income. They are not just seeking to get an income but profits from their real estate investments. They ensure each rental property has a lease ledger that they can study to see its performance year after year.
Depending on tenant trends, they can accurately predict if the property will give them the same amount of income or not. For example, tenants could be consistently renewing their leases each year. The investor can use the payment ledger records to predict if they will likely be screening new tenants in the coming year.
Property managers
Property managers manage a property on behalf of owners. They keep records of property maintenance, tenant records, and cash flow records. The rent payment ledger will help them keep consistent records on behalf of the property owner.
They might be managing many properties around a city or state. The ledger will help them know when a lease is expiring, tenants with rent arrears, and any property that requires repairs or other kinds of maintenance. When they are negotiating to manage the property of another landlord, the tenant ledger can be used as a document to prove their good track records.
Tenants
During a tenant screening process, property owners or their agents ask for documents that prove they are good at paying rent. They might not have all the receipts with them but they can have a copy of their rent payment ledger.
They only need to request a copy of the ledger from their property manager or landlord so that they will have something to show to their next landlord. Sometimes the landlord might process an illegal eviction notice. If they have been paying rent consistently, a copy of the rent ledger can be used in court to stop the illegal eviction notice.
Lenders
Banks and other financial institutions can use a copy of a lease ledger when they are processing loans to landlords. It is a document that shows they are creditworthy and the financial institution can easily process their loans after studying their lease ledger.
