Washington State has a booming real estate market. That is promising for investors and property owners, but it also means increased competition. They must be meticulous in their planning and management, including owner disbursements.
These refer to policies and plans for distributing profits to business owners. They can vary based on factors like the legal structure and financial health of the business. They are also important for tax considerations.
Below are strategies for maximizing earnings with owner disbursement while minimizing other risks. Keep reading to find out how they might help your real estate business.
Set Up a Separate Account
Owner disbursements can come from different sources. These include rent or other payments from tenants, such as money for utilities, pet fees, or fines. Disbursements can also be from other profits generated from the property.
This can be a lot to keep up with. One of the most basic but important things you can do is to have a separate business account for rental finances. Regardless of the scope of your real estate business, keeping finances separate will help with accounting and carrying out owner disbursement.
Keep Detailed Records
Keep detailed records of every financial transaction related to the property. This will help you track expenses, which can be valuable for filing tax deductions.
This also allows you to look at your monthly cash flow and have an accurate picture of the revenue each property is generating. It also lets you allocate funds for repairs, maintenance, or property improvements as needed.
Set a Schedule
This is especially important if the business has more than one stakeholder, but it is good practice for anyone. Setting a schedule for owner disbursements makes accounting much easier. It can be useful for budgeting purposes as well.
Understand Tax Implications
Like other forms of income, most rental income is taxable. However, common deductions include expenses related to property.
Real estate owners can also typically claim depreciation on their properties. This can yield significant tax benefits in reducing your taxable income.
For these reasons, it is vital to understand how both federal and local tax structures impact your business. This allows you to better budget for owner disbursements and avoid having to pay hefty adjustments at tax time.
Hire a Property Management Company
One of the simplest ways to handle owner disbursements is to seek outside assistance. A property management company will help you set up a system to clearly see funds that are available for dispensation. They will also provide you with detailed statements.
This will give you the confidence that the disbursement process is accurate and that all other expenses have been covered. It also will ensure you are in full compliance with tax laws and other regulations.
Learn More About Owner Disbursements
Now that you understand some strategies for owner disbursements, you can maximize real estate earnings while ensuring your expenses are covered. An experienced property management company can further advise you on steps to take.
SJC Management Group is a comprehensive real estate company that has been serving Pierce and South King, Washington state for more than 30 years. We offer a range of services, including accounting and owner disbursement management. Reach out to us today to learn more about financial management for your real estate business.
