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Your Landlord Resource Podcast
Your Landlord Resource Podcast
Stop Guessing, Start Budgeting
Stop Guessing, Smart Budgeting — it’s time to take control of your rental property finances.
In this week’s episode of Your Landlord Resource Podcast, we share smart budgeting tips for rental property owners that turn your rentals into a confident, well-run business.
Building on Episodes 78 (Bookkeeping & Accounting Tips for Landlords) and 79 (Accounting Software for Landlords), we discuss how self-managing landlords can create a practical budget, forecast expenses, manage reserves, and plan for profit. You’ll learn how to track cash flow, prepare for maintenance and capital projects, and stop reacting to financial surprises.
We also dive into the best tools to help landlords stay organized and in control and explain which ones fit best depending on your portfolio size and experience level.
By the end, you’ll know exactly how to use budgeting as your most powerful business tool — not just to survive, but to grow.
What You’ll Learn
- How to build and manage a rental property budget
- Why reserves matter and how to fund them
- How to plan for maintenance and CapEx
- How to budget for profit, not just expenses
- Which software tools make it easier
🔗 Links & Resources Mentioned
Listen:
Episode 78: Bookkeeping and Accounting Tips for Landlords
Ep 79: Accounting Software Options for Real Estate Investors
Ep 28: The Cash Reserves Blueprint: Protecting & Expanding Your Portfolio
Connect with Us:
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📧 Subscribe to our newsletter.
👆Click HERE for our FREE Landlord Forms and Doc’s
🤳Text Us: 650-489-4447. We love questions and love letters!
📩Email us at: Stacie@YourLandlordResource.com, Kevin@YourLandlordResource.com
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Monthly budgets help you stay on top of short-term spending, while annual budgets give you the big picture. And if you really want to plan ahead, create a five-year projection for your major expenses. Now, that might sound fancy, but it's basically a simple timeline of when you expect to replace big systems or make improvements. The more you plan, the less you react. And that's what separates a calm, confident landlord from one who's always playing catch up.
Speaker:Welcome to Your Landlord Resource podcast. Many moons ago when I started as a landlord, I was as green as it gets. I may have had my real estate license, but I lack confidence and the hands-on experience needed when it came to dealing with tenants, leases, maintenance, and bookkeeping after many failed attempts. Fast forward to today, Kevin and I have doubled our doors and created an organized. Professionally operated rental property business. Want to go from overwhelm to confident if you're an ambitious landlord or maybe one in the making. Join us as we provide strategies and teach actionable steps to help you reach your goals and the lifestyle you desire. All well building is streamlined and profitable rental property business. This is your landlord resource podcast.
Stacie:Well, hello there landlords. Thanks for tuning in and listening today. I'm your host, Stacie Casella, and I'm here with my co-host, Kevin Kilroy. And Kev, how you doing today?
Kevin:I'm good. I mean tired, but good.
Stacie:Yeah, we've been on the road a lot.
Kevin:Uh, yeah, I mean, not complaining in the least, but. We got back from Europe, what, a couple weeks ago, and for some reason the time changed in jet lag kicked our butts.
Stacie:Yeah, I know. I mean, usually we usually bounce back pretty easily, but this time we were definitely on that struggle bus. And for those of you who may not have read our newsletter, we did have a few issues that came up when we were away for those two weeks, and our team was able to handle all of it.
Kevin:Right. So in our biweekly newsletter, we give updates on what we've been doing with our rental properties and how we handle the issues. What Stacie is talking about is her letter to our subscribers discussing all the things we did to prep in order to be able to leave for two weeks. And then how that prep paid off with our team, which is really our contractor, Jim here in California, and our son, kid two in Idaho, by having them take the lead on any issues that arose. And both of them had to handle problems for us while we were away, you know, gallivanting around Prague, Vienna, and Budapest.
Stacie:Yeah, yeah, gallivanting. We walked over 80 miles in 15 days. Yes, our, our prep put us in a position where we never even knew about any of these issues until we returned and, you know, then the fun started'cause we had to deal with them.
Kevin:Yeah, well it was really only one issue in Idaho. And if you guys have been following along here for a while, you might know that in 2024 we had a lot of expenses on that fourplex. New water heaters, a couple new heaters, all new appliances in one unit that we also swapped out the carpet for luxury vinyl plank flooring. New lighting in two units. What else?
Stacie:Could to remove the yellow Formica kitchen counters and installed beautiful white quartz countertops. And we fully painted top to bottom two of the four units. So a lot of time and money for that complex last year.
Kevin:And we were hopeful we'd be in the clear except we had a couple of roof leaks and are now looking at a whole new roof. At the tune of about$14,000.
Stacie:Yeah. So if you're out there and you just said, oh damn. Yeah, that was us too. But don't get me wrong, we're good. We have the reserves to cover it, but we will have to really focus on building those reserves back up after this one capital improvement.
Kevin:Which is the perfect segue into today's subject.
Stacie:Yeah, for sure. Today we will be giving you guys budgeting tips for handling the financial aspects of your rental properties. So whether you're managing one rental or ten like us, keeping your finances organized and understanding your numbers is what separates a landlord from a true rental business owner. And we have said this all along, owning rentals cannot be a hobby.
Kevin:And it's certainly not passive. I mean, especially if you're self managing.
Stacie:Oh my God, no. Listen, you have gotten into the rental property space because when done well, it can become quite lucrative. It really does have its tax advantages, but it's a business and it needs to be treated as such. It's also work. It takes organization not only with the maintenance and the tenants, but especially with your financials. Which is where having a solid budget comes in. And this is not something your CPA does for you. This is something you have to learn as part of the operational tasks when owning any business.
Kevin:And I think that owning rentals takes discipline.
Stacie:Well, it has to be viewed as a job, really. And I know there's people out there who are looking to buy rentals to get away from working and grinding away at their nine to five. But with self-managing rentals, you don't get away from the work. You are working to build something, a business for yourself and no one else. And to get that success that so many landlords are chasing it takes ambition, organization, time, and a whole lot of patience to make it to the next level. Which is why we are here and do what we do. We were just like all of you and you guys, if we can do this, then anyone can.
Kevin:It's like you're the Tony Robbins of rental property Stace.
Stacie:No, not, no. I wish. Yeah, right. Okay. I just know owning rental properties is scary stuff and I was lucky enough to have mentors to learn from. And you can have good tenants and maintain your property until you're blue in the face. But if you don't have a good grip on your financials, you will have a much harder time reaching that financial independence that drove you to invest in rentals in the first place. So let's get to what we want you to know about having a budget. If you've been with us for a while, you might remember last fall we released episode 78 called Bookkeeping and Accounting Tips for Landlords. That one was all about organizing your finances, separating business from personal, and setting up those reserve accounts that we're talking about here today.
Kevin:Right. And then the week after, we dove into accounting software in episode 79, because once Stacie starts talking about reports and charts of accounts, I just grab a coffee and let her go.
Stacie:Yeah. Well, you know me too well. But today's episode is where those two topics finally come together because bookkeeping tells you what already happened,
Kevin:and budgeting tells your money where it's going next.
Stacie:Exactly. So this episode is all about smart budgeting for rental property owners. We are going to talk about how to build a realistic rental budget, plan for maintenance and capital expenses, manage your reserves, and most importantly, budget for profit, not just survival.
Kevin:And we promise to keep it fun. I mean, you don't need a finance degree for this one, though it does help if you've got Stacie on your speed dial.
Stacie:Yeah well, my goal today is to make sure every landlord listening can finish this episode with a clear plan for their rental property, finances, even if they're brand new, or just managing one or two doors.
Kevin:So here's the big question. Why bother creating a budget at all?
Stacie:So when you own rental property, it's easy to get caught up in the, collect the rent, pay the bills, rinse and repeat cycle. But the real power in owning rentals comes when you plan for your money instead of just reacting to it. Budgeting helps you forecast what's coming up so you're not blindsided by expenses like that insurance premium that goes up 10% out of nowhere.
Kevin:Or that roof that finally gives up on Christmas Day. True story. I mean, right in the middle of the walkway from the kitchen to the living room, on a rainy Christmas morning,, water starts dripping, rather quickly I might add. So instead of hanging out in our sweats and enjoying a nice morning with the family, kid two and I are up on the roof in rain gear, throwing down tarps and working to secure them so that when our family and guests show up a few hours later we don't have to have them dodge a bucket full of water when walking through our home.
Stacie:Oh yeah, that was a fun one. And you guys, here's the thing. We knew this roof was coming. We saved a little money each month into a quote unquote capital expense reserve account that we have just for large expenses like this roof, or replacing the fence that costs us$15,000. This was for our personal home. Imagine if we didn't do this. Where would the money for the new roof come from? The same goes for your rental property. When you first start out you may not have hundreds of dollars per month to put away for capital expenses, but just know that anything helps, and we'll talk more about reserves in a little bit.
Kevin:And that's the difference between running a rental and owning a rental business. A good budget gives you options. I mean, it lets you handle stuff calmly instead of in panic mode.
Stacie:And, and budgets aren't just about avoiding stress. They also help you make smarter, long-term decisions. You can look at your numbers and say, all right, so if we increase rent by 3%, that's gonna cover our insurance hike and it still leaves some room to build our reserves.
Kevin:Right. And you can project what's happening across your portfolio. See which properties are pulling their weight and which ones need a little more TLC.
Stacie:Yeah, exactly. The other big benefit of budgeting is credibility. When you apply for financing or look to expand your portfolio, lenders will want to see how your business performs financially. A solid budget paired with accurate bookkeeping makes you look like the pro that you are or that you're aspiring to be, maybe as little fake till you make it. But that's actually something that we learned the hard way early on. We didn't have a formal budget, just kind of rough estimates. And when we went to refinance the sixplex, the lender asked for year to date financials and a budget projection.
Kevin:And we didn't have a formal doc for that, did we?
Stacie:We did not.
Kevin:But it's true. Having that data ready shows you take your rental business seriously. It's the same reason you separate personal and business accounts, which we covered in episode 78. You know, it all comes back to being organized and intentional with your money.
Stacie:So think of bookkeeping as the rear view mirror. It shows you where you've been. And budgeting is your windshield. It helps you see what's ahead so that you can steer around problems before you actually hit'em.
Kevin:And let's be honest, landlords hit plenty of bumps. I mean, there's vacancies, tenant damage, property tax increases, random new city fees, I mean, you name it. All of which you can handle better when you plan ahead. So for example, right now property insurance rates are climbing pretty much everywhere. And a lot of landlords really didn't see that coming. But if you built a small percentage increase into your annual budget, it wouldn't have been a shock. There's landscaping costs. Now in Idaho, we only have landscaping six to seven months out of the year during spring, summer, and part of fall. Then in winter when a bigger storm comes in, we need snow removal. But that is not a fixed expense. So this is why we recommend reviewing your budget quarterly, not just once a year.
Stacie:Yeah. Quarterly budget check-ins are, are really a game changer. But maybe you guys can just set a recurring reminder in your phone or write it on your calendar. You can use, QuickBooks or Rent Ready to run a simple budget versus actual report. If you're spending more in one category than planned you can catch it early on and make any adjustments you need to make.
Kevin:And that doesn't have to take long. I mean, we usually do it over coffee one Saturday morning. Stacie opens up QuickBooks, I open up my donut box and we review.
Stacie:True story. I keep the laptop open, he keeps the donuts going.
Kevin:Perfect division of labor.
Stacie:Yeah, all right. But seriously, doing those small reviews every quarter keeps you proactive instead of reactive. And it's not about creating the perfect budget, it's about knowing your numbers well enough to make quick adjustments.
Kevin:So if you're listening right now thinking, Ugh, budgeting sounds like homework. We get it. But trust us, once you've built a system that works, it really becomes second nature.
Stacie:Right. You don't need fancy formulas or twelve different spreadsheets. You really just need a plan that matches your properties, your goals, and your comfort level.
Kevin:And that's exactly what we'll cover next. How to actually build that plan.
Stacie:Yep. Next up, we will break down the building blocks of a great rental budget, including how to forecast expenses, plan for capital improvements, and organize your money in a way that keeps you sane.
Kevin:Grab another of the coffee landlords. The next part is where we turn numbers into strategy.
Stacie:Okay, so now that we've talked about why every landlord needs a forward thinking budget, let's dive into the how. Building a rental property budget really starts with using the data that you already have. And I don't mean that you need to be an accountant or have a giant spreadsheet going. I'm talking about pulling out last year's numbers, which is your income, your expenses, and your cash flow, and you know, read them over and let them tell you a story. If you use bookkeeping software like QuickBooks or Rent Ready, you can literally pull that story up with one click. Many landlord software companies have accounting built into them, like Turbo Tenant, which uses REI Hub, which is like a cash basis accounting. No matter how you manage your financials for your rental, start by figuring out what you actually earned and what you actually spent over the last 12 months. Then break it down by property if you have more than one. I kind of like to see a per door view because it shows us which rentals are carrying their weight and which might be eating into profits. Once you have that information, you'll start sorting it into two main categories, fixed and variable. So fixed expenses are those that you can count on, your mortgage payment, insurance, property taxes, HOA dues, and set property management fees if you have'em. They don't really change much month to month. Now variable expenses are everything else. Repairs, maintenance, utilities, landscaping, pest control, turnover costs, and actually sometimes even property management fees if you only pay them when you units are occupied. And here's the key part. You're not just listing these numbers, you're using them to create a realistic, predictable map for the coming year. Take your total rent income and subtract your fixed expenses first. Whatever's left is gonna cover your variables, your reserves, and your hopefully a nice profit margin for yourself. Now, some landlords like to use a spreadsheet, totally fine. Others prefer to use a property management app that automatically pulls in data like Turbo Tenant, Rent Ready or Door Loop. The point is to get everything visible. If you can't see your cash flow, you can't manage it. When you finished organizing these numbers, the next step is to decide how detailed that you want your budget to be. And personally, I like detail. But not to the point where it's overwhelming. You want enough information that you can make decisions, but not so much that you dread updating it. So for example, I might have one line item called maintenance, and that includes all minor repairs and cleaning. A separate one for capital expenditures or also known as Cap Ex, which those are big ticket items like the new roof or a new HVAC system. Once your categories are set, think about the timeframes that matter. Monthly budgets help you stay on top of short-term spending, while annual budgets give you the big picture. And if you really want to plan ahead, create a five-year projection for your major expenses. Now, that might sound fancy, but it's basically a simple timeline of when you expect to replace big systems or make improvements. The more you plan, the less you react. And that's what separates a calm, confident landlord from one who's always playing catch up.
Kevin:You know, I used to hate budgeting. I mean, it felt like this chore where you're finding new ways to tell yourself no. But once we started looking at it as a tool instead of a restriction, it really did make a lot more sense. When we build our property budgets each year, we start by looking at what broke, what got replaced, and what's showing its age. If the water heater is 12 years old, I don't just hope it lasts another decade, I start setting money aside now. And here's a case in point. When we bought the Idaho property, the inspection showed the water heaters would all need to be replaced in the next couple of years or so. There were signs of age that repairs would not fix. The inspection also gave us an idea of the cost, so we made sure we had that set aside for when that day came. And it did come in early 2024, just two years after we bought it. One went out and the plumber we called inspected all four water heaters and said, yep, it's best just to replace them now. And because we did all at the same time, it did cost us a bit less than the quoted amount from two years prior. But this concept of knowing what's coming and getting ready for it is what people mean by financial forecasting. You can't predict every expense, but you can absolutely prepare for most of them. Now we follow what's called the 5% rule. Basically set aside 5% of the property's monthly rent for maintenance, 5% for vacancies and 5% for capital expenditures. So 15% of rents are set aside. You can also use the 1% to 5% method where you take the value of the property and hold back 1% to 5% of the value each year. If it's a newer place, 1% to 2% might cover it. If it's older or you've got high maintenance tenants, get closer to five. So if you've got a duplex worth 400,000, budgeting 3% means saving$12,000 a year toward repairs and maintenance. Now, that might sound like a lot, but you'll thank yourself when that HVAC quits in August and you're not scrambling for cash. The other side of that is capital expenditures or CapEx. These are your long-term big dollar projects. I'm talking roofs, plumbing replacement, driveways, siding, flooring, paint, windows. They don't happen every year, but when they do, they'll hurt if you haven't planned for them. This happened when we owned the Chico property. It was a hundred year old single family home that was fine when college kids were living there, but to rent it to a family or get it ready to sell, we needed to do some updates, which included repairing dry rotted wood windows, and siding. We actually keep a simple CapEx schedule. I mean, nothing fancy, just a table with every big component of our properties, the estimated remaining life, and an estimated cost to replace. If the roof has five years left and it will cost$12,000, we divide that by five and budget$2,400 a year into reserves. That way when year five rolls around, we're ready. And here's the part I love. Once those reserves build up, you start to see how much freedom they give you. Instead of worrying about where the money's coming from, you get to make decisions based on timing and opportunity. You can choose to do upgrades that add value rather than waiting until something fails. And for landlords just getting started, my advice is to budget by category, not crisis. Don't throw everything into a single repairs bucket. Break it out into preventative maintenance, emergencies, tenant damage, and improvements. It's not just about where the money goes, it's about what it's doing for your business. And for those of you who like technology, QuickBooks and Rent Ready can automate a lot of this. I mean, QuickBooks lets you build budgets by property or by category, and Rent Ready ties those numbers directly into your rent collection and expense tracking. Door Loop has a really intuitive budgeting dashboard too, and it's a great option if you like to visualize trends month to month.
Stacie:So I love that you mentioned the freedom part because that's really what budgeting gives you. You know, I tend to have some anxiety issues and one thing I worry about along with other people is money. And by budgeting for our rentals and even for our personal home, that anxiety has has really diminished. Because it's not about limiting your spending, it's about controlling your decisions. Once you have your core categories in your CapEx forecast, you can start thinking seasonally. As landlords often forget that not every month is created equal. You'll spend more time in the spring when landscaping and pest control and annual maintenance pickup. You'll spend less in the dead of winter unless of course you're paying for heat in a multifamily. So build those seasonal fluctuations into your plan. For example, if your property taxes and insurance renew every December, budget extra in the fall those big expenses don't wipe out your reserves. And for landlords in snowy climates, plan ahead for things like salt, snow removal, or emergency heating repairs. I also like to build in a small inflation line item. And I know it sounds fancy,. but it just means adding a 5% to 10% cushion across your major expense categories. Inflation hits everything from lawn care to insurance, and that little cushion keeps your budget realistic year to year. And speaking of keeping things realistic, remember that your budget isn't a one and done document. You know, it's a living plan. Review it every quarter or please at least every six months, and compare what you projected to what actually happened, and then adjust. Now let's talk quickly about how budgeting ties into technology. If you're using QuickBooks, you can generate a budget versus actual report with a few clicks. It'll show you where you're overspending or where you have some wiggle room. You know, Rent Ready does something similar. It can tag each expense by property and category, so you can see patterns like, wow, maintenance costs are trending higher on property B. And that insight lets you act early. Maybe get a quote on a plumbing update before the next leak happens. Door Loop is really good for this because of its dashboard view. You can log in and see a snapshot of income and expenses and upcoming renewals all on one screen. Door Loop also offers various reporting features. Now Turbo Tenant and Avail offer a simpler setup, and that's ideal if you are still in the one to three unit range. It's clean and easy, and you can always export your data later if you upgrade to a more advanced system. For landlords dreaming big, maybe you're planning to scale from a few doors to a small apartment building someday. You guys wanna keep Buildium on your radar. It's a professional grade platform that manages complex portfolios beautifully. And it's not the best fit for beginners because of the learning curve and of course'cause of the cost. But it's a fantastic one once your business grows. So no matter where you are on your landlord journey, there's a tool that matches your level. The key is to start tracking now because those numbers will become the backbone of your business decisions later on.
Kevin:I mean, that's such a good point. I think a lot of new landlords wait until they've got multiple units before they start formal budgeting. But honestly, even if you have only one rental, this is the best time to start. It's a whole lot easier to develop good habits with one property than to try and backtrack later when you're juggling 5 or 10. Budgeting might sound intimidating, but really it's just the business side of being prepared. It's your plan for peace of mind. You can't control when a tenant moves out, or when the water heater leaks, but you can control how ready you are to deal with it. So don't over complicate it. Use the tools that fit your style, check in quarterly, and always set something aside for the stuff you know is coming eventually.
Stacie:That's perfectly said, Kev. And honestly, you guys, when we got the sixplex, we had no formal financial forecasting budget, anything. We went right into six units. And it was a couple of years before we realized we need to get this all dialed in. So, you know, we're, we're right there with you guys, but we've, we've been at this a little longer, so. Anyway. Next up we're gonna talk about the other half of this equation, how to manage those reserves and cash flow once your budget's in place. And we're gonna give you some smart strategies specifically for those smaller landlords with the 1 to 10 units.
Kevin:That's where things get fun, because once you've got the plan, you get to watch it actually work.
Stacie:Right? So now that you've got your budget built and your expenses forecasted, let's talk about the real world side of things, which is managing cash flow and building your reserves. Because let's be honest, even the best budget won't save you if you're not managing your money wisely from month to month. And here's something that every landlord needs to remember. Your rental income is not your paycheck, it's your business revenue. And just like any small business, you gotta manage that revenue so that your operation stays stable even when things go sideways. And that's where reserves come in. Reserves are your safety net, the money that you set aside to handle the unexpected items. We did a whole episode on reserves back, I think it was episode 28. We'll link that in the show notes for you as well as all the episodes mentioned and any software that we're discussing today. But I do wanna go a little deeper into how to build reserves, how to organize them, and how to keep'em healthy. And for starters, I like to think of reserves in a few different buckets. Now there's your operating reserve, which covers your regular monthly expenses, your mortgage, utilities, management fees. And that's all in case rent is delayed or a tenant moves out. Then there's your maintenance and repair reserve. And that's for when that water heater goes out or their garage door motor quits, or you have to call a plumber out on a Sunday night. And then finally, there's your capital improvement reserve, which is where those big, long-term stuff that we've talked about before, the roof, the hvac, the new fence. If you're just getting started and can't fund all these right away, that's okay. Start small. Aim for at least one month of total expenses per property as your baseline. And then over time build that up to three to six months.'Cause that cushion gives you breathing room. If a tenant misses rent or a big repair hits, you won't be forced to dip into your personal savings or max out a credit card. And another trick that really helps is automating your savings. So you can use systems like QuickBooks, you can set up transfers directly into separate sub-accounts, labeled maintenance vacancy in CapEx. Rent Ready lets you tag income and expenses, which makes it easy to see how much of each rent payment should be allocated to your reserves. And if you prefer to do it manually, that's totally fine too. You wanna create a separate bank account for each property and transfer a set percentage of rent every month or whatever it is that your budget is every month. The key is to treat your reserves like a bill. So you're not gonna skip your mortgage payment, right? So don't skip paying yourself first. And I know it sounds like we're saying pay yourself your profits, but paying these reserves is like paying yourself'cause then you're not gonna have to use your personal money later on. One more thing. Resist the urge to use those reserves unless it's truly necessary. You know, it's really easy to dip in for something that feels like an upgrade, but that money's there for emergencies and for long-term stability. Keep it sacred.
Kevin:Yeah. I'll say we have done that before and it really did not work out well. I mean, doing a big remodel on one unit in Idaho is an example. The rents earned afterwards are lower than what we were getting before, so we're having a harder time building those reserves back up. Improvements need also to be evaluated as if they are needed or not.
Stacie:Yeah, and can the rents that you're gonna get after doing those improvements support it?
Kevin:Right. I mean, look, you guys, even with all the experience we have, we still mess up and make mistakes. Which is one of the reasons we're here today to push you all to understand why creating and sticking to budgets and reserves are so important. Look at reserves as the insurance you pay to yourself. It's money that earns peace of mind. We learned the hard way that nothing kills momentum faster than being unprepared.
Stacie:Yeah. Cue Stacie's anxiety.
Kevin:Right? You don't wanna be forced to sell a property or take on high interest debt because you didn't have enough set aside for an emergency. Which we didn't, but we did have to dig into our personal savings, and that wasn't any fun at all. For newer landlords. Here's a real simple rule of thumb that's worked for us. Whenever you collect rent, immediately set aside a percentage before you do anything else. 5% for vacancy and turnover, 5% for repairs and maintenance, and another 5% for capital projects or reserves. So obviously that's a total of 15%. If your property's older or needs more attention, bump it up to closer to 20%. You won't miss it once it becomes routine, and you'll never be caught off guard when a$1,200 repair pops up. And if you can put your reserves in a high yield savings account so they earn a little interest while sitting there. Wealth Front, Ally or Capital One all have solid rates and FDIC protection. We put our proceeds from the Chico property into a Wealth Front account and have done really well the last year from that. I think right now at the time of this recording, we're earning somewhere in the neighborhood of 3.75%. And I do believe they have a bonus incentive for a new client, so check that out if you can. We'll pop a link in the show notes for them. It won't make you rich, but it's better than leaving your money in a checking account and earning nothing. Now for landlords managing smaller portfolios, say 1 to 10 doors. I think this is where smart budgeting really shines. You don't have the same economies of scale that a large property manager does, so your margins matter more. Every dollar counts and every decision has an impact. So start by budgeting per unit, not just for the property as a whole, but for each individual unit. When you can see which rentals are performing well which are lagging, you can make better decisions about improvements, rent adjustments, and long-term holds. We like to run what we call scenario budgets. You create three versions of your budget. A conservative budgets where you assume higher expenses and lower rent collections, and good for economic uncertainty. A realistic budget, you know, based on your current numbers. A growth budget where you plan for upgrades, rent increases, or portfolio expansion. Now that exercise forces you to think through the what ifs before they actually happen. What if rent prices dip like they did for us in Idaho? What if property taxes jump 15% next year? What if your insurance renewal doubles? I mean, having those scenarios mapped out means you're never caught flatfooted. And here's the actual fun part. When your conservative budget still shows a profit, you know, you're running a strong business.
Stacie:Yeah, that's a really good point. And it's one that many landlords overlook. Because you guys, budgeting isn't about surviving, it's all about positioning yourself to grow and make smart, confident choices. One of my favorite budgeting tricks is adding a small contingency line item, just 1% or 2% of your total annual expenses. It's kind of a catchall for all the little things that you didn't see coming. Maybe you need a legal consult for a lease update or your lawn equipment suddenly needs to be replaced. Whatever it is, that tiny cushion keeps your numbers honest. Another area where budgeting can really make a difference is turnover planning. So we know that turnovers are expensive. There's cleaning and repairs, painting. Sometimes new flooring or appliances, you know, and marketing costs. If you assume each unit will turn over every one to two years and you budget accordingly, it won't be a surprise when it happens. And, and don't forget to factor in your time. Self-managing landlords often forget that their labor has value. If you spend hours coordinating maintenance, showing units, or collecting rent, that's time that could be spent elsewhere. So even if you're not cutting yourself a paycheck, budget for your time. It helps you to understand what your business truly costs to run. Lastly, let's talk about measuring the return on your improvements. When you do a capital project, like upgrading appliances, adding washers or dryers, or modernizing your kitchen, track whether that improvement increases rent, reduces vacancy, or lowers maintenance calls. It could be all three, right? That's how you know whether an upgrade pays for itself or was just kind of nice to have. All this becomes much easier if you're using a digital system that tracks your data for you. Now, I know we've mentioned QuickBooks, Rent Ready, and Door Loop earlier, but I'll say it again. Use something, use anything. You know, even Avail's free version can handle basic budgeting and expense tracking. It doesn't have to be complicated, it just has to be consistent. Once you can see patterns over time, like which units are more profitable, which ones are maintenance hogs,, and when expenses spike, start managing your properties with confidence instead of guesswork.
Kevin:You know, I love that idea of budgeting for your time because it really changes your mindset. I mean, once you start treating the work you're doing as a landlord like a professional service, you naturally start making better business decisions. You stop saying, oh, it's fine I can just handle it myself. And you start thinking, would it make more sense to hire this out so I can focus more on strategy or acquisition? And that's what budgeting ultimately gives you, clarity. You see what's working, what's not, and where your effort really pays off. So if you're listening to this and thinking, man, I gotta get better about planning, don't worry. Start small, build your reserve habit, create a simple annual budget, track what's actually happening month to month. And you know the rest gonna come naturally. I mean, we didn't build our system overnight. We started with one spreadsheet and then upped our game to QuickBooks.
Stacie:Yes, one donut at a time. All right, coming up next you guys, we are going to wrap this all up by showing you how to budget for profit, not just break even. We'll also touch a little bit more on how the right tools like QuickBooks and Rent Ready and Door Loop, Turbo Tenant, Avail and eventually Buildium can help you stay consistent and scale your business as it grows.
Kevin:And that's where it all comes together, the numbers, the systems, and a little bit of landlord sanity.
Stacie:All right, landlords, we've talked about how to build your budget, how to forecast for maintenance, and how to manage your reserves. Now let's bring it all home and talk about budgeting for profit, not just to cover your costs. You know, this is where most self-managing landlords miss the mark. They think as long as the rent covers the mortgage and the expenses, I'm fine. You guys, that's not a business plan, that's survival mode. And if you stay there too long, you're gonna burn out or you're gonna miss a lot of good opportunities to grow. The goal of your rental business should be to generate profit intentionally, not by accident. When you're building your annual budget, don't just stop at break even, set a profit goal just like any other business would. That could be a flat dollar amount or a percentage of your gross rent, maybe 10 or 15%, like we mentioned that before. Once you've set that goal, you can reverse engineer your budget. So here's how it works. You start with your expected income, subtract your profit target, and what's left becomes your allowable spending for the year. That single shift forces you to make decisions through a more strategic lens. Instead of thinking, can I afford this, you start asking, does this expense support my profit goal? And not every expense is bad. Some investments are going to increase profit, like preventative maintenance that reduces long-term repair costs or doing upgrades that are gonna justify a higher rent. When you budget with profit in mind, you stop treating every dollar spent as a loss and start seeing the return that it can bring back. Another tip is to measure your results quarterly. Don't wait for December to find out how your business has performed for the year. Use your software tools to run reports and see how your actual numbers stack up against your plan. Now QuickBooks, as we mentioned, has a budget versus actual report, and it lays this out very clearly. You can see in real time where you're overspending, where you're underperforming, and it takes about five minutes to run that report. Rent Ready has a similar dashboard that displays your income, expenses, and net profit across all your properties In one simple view. It's like a little mini CFO sitting on your phone. And remember, these reports aren't just for you. If you ever have to show your numbers to a lender or an investor or your accountant, having this data all ready instantly makes you look like a pro.
Kevin:You know, when we started setting profit goals for our rentals, everything about how we ran the business changed. I mean, before that we treated rent collection like a paycheck. If there was money in the account, great. And if not, well there's always next month, right? But once we decided to build real margins into our budget, we started operating like investors instead of hobbyists. We started to ask better questions. Should we refinance to improve cash flow? Obviously not in the last couple of years, but definitely pre covid. We also asked, should we raise rent strategically or just add new income streams like pet rent or storage? Now, for us, this depended upon the property. Idaho, the units are larger and pets are more commonplace in that area. We are earning more on pet rent than we could raise rent, so it makes sense to allow pets. In Sacramento our quote unquote clientele is different. I mean, they're more single professionals and the units are much smaller making pets not as optimal. Plus we can increase rents a nice amount with each turnover there. And the last question, should we tackle upgrades that add long-term value instead of just short-term appeal? We mentioned we did do some upgrades to a unit in Idaho, and the reason behind those upgrades weighed more on the fact that we may sell that property at some point, and that if it's upgraded, it would sell quickly and for more money. We did know that current rents were not going to support the improvements. What we didn't know was that rents would go down. I mean, making the decision to do improvements, sting a little bit more than when working to recover those reserves. But here's the funny part. When you plan for profit, your properties start performing better even when nothing else changes. And it's because you're watching the right numbers. You're the one in control. Another thing budgeting for profit does is help you reinvest strategically. Maybe your reserves are full and you've hit your income goals. That's the perfect time to upgrade a unit, pay down a loan or save for your next property. The point is you want your money working for you, not just sitting there keeping the lights on. Now, since we've been talking a lot about tools and systems, let's take a minute to go over some of the software options we personally use or recommend, and where they fit in for different types of landlords. We'll start with QuickBooks because honestly, for us, it's the backbone of our business. It's great for landlords who wanna see their numbers clearly and get ready for tax time without that last minute panic. You can categorize income and expenses, reconcile accounts, and even create budgets by property. The pros, it's incredibly reliable, it integrates with your bank and creates professional reports your accountant's gonna love. Now, if you do the online version of QuickBooks, CPA can be allowed to access your account so they can go in and grab what they need for taxes. Or if you have a bookkeeper, they can go in and do entries or make sure the entries you've done were done correctly. Now the cons, there's a bit of a learning curve I mean, especially at first. QuickBooks has preset accounting systems already set up for most business types. Think plumbers, electrician, restaurants, retailers. But not for rental properties. It has to be set up manually. But once it's all set up, I mean, it runs like clockwork.
Stacie:Yeah. Which is why for dedicated automated features, many landlords will opt to use specialized property management software instead. You know, like Rent Ready. This one is more of an all-in-one property management platform. It handles rent collection, tenant screening, maintenance tracking, and your expense reporting. And the big win for budgeting is how it lets you tag expenses by property and category so that when you log into your dashboard you can see exactly what's happening across your portfolio. And the pro here is simplicity. You can literally manage everything on your phone. The only downside is that it's not quite as detailed on the accounting side as QuickBooks is well, obviously. But you can integrate them and together they are a powerhouse combo.
Kevin:Yeah. I mean, many landlord softwares can be integrated with QuickBooks, which is a very nice feature. One of those is Door Loop. It's like the next level up when you're managing several units or small multifamily properties. Door Loop's reporting dashboard is beautiful and easy to read. It's great if you're visual because it gives you quick insights at a glance. Income trends, expense spikes, rent reminders. The only con is that it's a little bit more software than you need if you've only got one or two properties. But if you're sitting around five or six doors and thinking about scaling this one's a good fit.
Stacie:And you guys, for landlords who want something lightweight, Turbo Tenant or Avail are great starter options. They're perfect for managing one to three units and you really just might need simple rent collection, expense tracking, and maybe use some maintenance logs. So the pro, it's free for basic use and it's super beginner friendly. The con is that it's limited. You know, as your portfolio grows, you're gonna eventually grow out of it. And you know, that might be where Buildium comes in. If you're a real go-getter, Buildium is like the Cadillac of property management software. It's built for landlords managing 10 or more doors, for those that are transitioning into full professional management. It's robust and it's detailed and it's perfect once your operation becomes more complex. It also integrates with QuickBooks, which is a huge plus. But it's also more expensive and it requires setup time. Which is why we usually recommend newer landlords are gonna start with something simpler like Turbo Tenant, Rent Ready, or Avail. So, you know, basically to sum this all up. Start small, use the right tools for your stage, and grow into the next one as your business expands. You don't need every fancy feature right now. All that's going to do is overwhelm you. What you need is a system that helps you stay organized, pay attention to your numbers, and track your progress. Okay you guys, before we wrap up, I wanna remind everyone that budgeting isn't just about cutting cost, it really is about creating confidence. When you know your numbers, you're gonna make better decisions. You can weather unexpected repairs, you can stay calm through vacancies, and you can even plan your next move with a lot more clarity. Now, if you haven't listened to episode 78 yet, go back and check it out'cause that's where we covered the bookkeeping foundation that made all this possible. Episode 79 dives into accounting software and we did touch on some today. If you're ready to automate some of what we've talked about. And episode 28, is all about your reserves blueprint.
Kevin:And don't forget, we've got links in the show notes for all the tools we mentioned, QuickBooks, Rent Ready, Door Loop, Turbo Tenant, Avail, and Buildium so you can check them out and see which one fits your rental property best. If you take anything from this episode, let it be this. A smart budget isn't about limiting your business. It's about empowering it. You can't grow what you don't track, and you can't track what you don't plan. So set your goals, stick to your plan, and give yourself some grace when things don't go exactly as expected, because that's just part of landlord life.
Stacie:Yeah, absolutely. So you guys, thanks for spending your time with us today. We hope this episode gave you the tools and the motivation to start building your rental property budget with confidence. And you guys make sure you're subscribed to the podcast wherever you listen, so that way you don't miss any of our episodes.
Kevin:And if you found today's episode helpful, we'd love it if you'd left a quick review. It really helps other self-managing landlords find the show and join our community.
Stacie:Yeah, you guys, until next time, keep your numbers tight and your coffee strong. And remember you've got this landlords.
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