One of the more common goals in real estate investing is to generate as much cash flow as you reasonably can. Generally speaking, this is typically a function of how much rent you collect and how well you minimize expenses.

Even with just one rental property, keeping up with rent payments and logging everything correctly can be difficult without going through payment receipts or downloading a monthly bank statement.

A rent ledger, also known as a lease ledger or tenant ledger, is one of the most valuable reports that property owners can use to help make sure they’re getting paid in full and on time. Used properly, it can ultimately increase cash flow and property value. 

Key Takeaways

• A rent ledger typically tracks critical details like rent received, past due rent, lease expiration date, and security deposit amount.
• Investors, property managers, lenders, and tenants can all use a rent ledger.
• The benefits of using a good rent ledger include improving property financial performance and identifying opportunities to increase cash flow and/or property value.

What Is a Rent Ledger?

A rent ledger is an important document that real estate investors and property managers use to understand the rent payment status of each tenant at a glance.

The ledger compiles critical data such as the monthly rent, when the rent was received, and what amount. Owners also use the rent ledger to see if there is an outstanding balance owed by a tenant, whether any late fees are assessed, and understand when the next rent payment is due.

An excellent way to think about a rent ledger is as a cross between a simplified revenue statement and an accounts receivable report for a rental property. All businesses keep track of revenue received and outstanding payments due, to better manage cash flow.

How to Create a Rent Ledger: What to Include

In addition to providing real-time rent payment updates, a well-designed rent ledger includes a good amount of additional information. So, what should you include on a rent ledger? Let’s take a look.

• Owner name
• Property address
• Type of property (single-family, multifamily, short-term rental)
• Address/Unit number (for multifamily buildings)
• Tenant name
• Square feet (of home or unit)
• Bedrooms/Bathrooms
• Lease start date
• Lease end date
• Monthly rent
• Additional rent (such as pet, appliance, or roommate rent)
• Due date of rent
• Rent paid date
• Security deposit
• Notes (any credits for maintenance work, renewal incentives, history, etc.)

A Rental Ledger Template for Landlords

We’ve gone over what to expect on a rent ledger, but in case you need an example to customize, we’ve got you covered. Take a look and download our free, customizable rent ledger template in Google Sheets and Microsoft Excel.

• Download for Google Sheets
• Download for Microsoft Excel

Simply click on the appropriate link and download it to your device to start customizing. After you open the spreadsheet, save it by another name so you always have the original document to refer back to.

Related: If you’re not interested in manually updating a spreadsheet, Stessa offers an easy automatic way to keep track of tenant charges, payments, and balances. Just sign up for a free Stessa Essential account to check it out. The tenant ledger in Stessa automatically keeps track of outstanding tenant balances, due dates, partial month rent, and late charges, among other key details.

With Stessa, you also get access to things like:

• Automated accounting tools
• Manual expense tracking
• One-click smart receipt scanning
• Mileage tracking
• Automated bank feeds
• Centralized dashboard with key metrics and complete chart history
• Rental applications
• Tenant screening
• Landlord banking*
• Mobile app (iOS and Android)
• eSigning for documents and leases

Who Else Uses a Rent Ledger?

While rent ledgers are important tools for landlords that actively manage their own rental properties, a few other players in the rental industry also find this report to be essential.

Rental Property Investors

More passive rental property investors can still benefit from a rent ledger to help anticipate problems with cash flow before they occur and identify potential opportunities to help improve property manager performance.

Reviewing a property’s rent ledger over multiple years allows an investor to identify problem tenants, discover patterns of late rent payments, and learn if the overall gross rental income is growing, declining, or staying the same.

For example, if the rental income the property generates consistently goes down year-over-year, that may indicate a problem with property management, the property itself, or the local market. When a home is older and poorly maintained, it may take more time to find a new tenant whenever someone vacates, thereby increasing the average vacancy rate over the years.

On the other hand, if the tenants are “seasoned” and have been consistently renewing their lease every year, an investor may predict that tenant turnover will remain low. You might then expect gross rental income to stay the same or continue to grow, with the property generating consistent revenue.

The historical rent ledger can also reveal potential windows of opportunity to a savvy real estate buyer. If a rental property is generating less gross rental income than expected, sometimes the reason is due to lack of attention from the current owner or a significant amount of deferred maintenance.

By investing some money in updates and improving property management, a new owner may attract better tenants willing to pay a fair market rent, which can increase ROI.

Property Managers

Landlords hire a property manager to handle the day-to-day ownership details, such as ensuring the home is well maintained and maximizing rental income.

By regularly reviewing the rent ledger, a property manager can quickly determine if a tenant is behind on rent and immediately take steps to address the issue. A past-due tenant balance on the rent ledger also indicates that decisions must be made regarding charging late fees, notifying the tenant, and possibly pursuing legal action against a tenant for failure to pay rent when due.

A rent ledger is also a helpful tool a property manager can use to help keep tenant turnover low. When a property manager sees that a tenant’s lease is coming up for renewal in the next few months, the property manager can proactively contact the tenant and work to extend the lease. The manager can also determine if the tenant is due for a rent increase by running updated rent comparables and comparing the tenant’s existing rent to the current fair market rent.

Lenders

One of the many factors lenders look at when approving or denying a rental property loan is the home’s net operating income (NOI) and debt service coverage ratio (DSCR).

NOI is the amount of cash left over after the rent has been collected and the regular property operating expenses have been paid, excluding the mortgage. For example, if a fully-occupied 3-unit multifamily property generates a gross monthly income of $3,600 and operational costs are 50% of the rent collected, the NOI would be $1,800 per month.

The lender will review the rent ledger to see what the vacancy level of the property has historically been. If the vacancy rate for the property as a whole is averaging 10%, the lender may conclude that the amount of net operating income available to pay for the mortgage is actually $1,620 ($1,800 monthly NOI at 100% occupancy less 10% or $180 per month for a vacancy allowance).

After the lender reviews the rent ledger to help predict the actual NOI the property will generate, the debt service coverage ratio (DSCR) is typically calculated. The DSCR compares the monthly mortgage payment to the property’s NOI and forecasts how much extra cash flow is left over each month after the operating expenses and mortgage have been paid.

If a property generates an NOI of $1,620 (after allowing for vacancy) and the monthly mortgage payment is $1,200, the DSCR would be 1.35 ($1,620 NOI / $1,200 Mortgage payment = 1.35). Most lenders look for a debt service coverage ratio for a rental property loan of at least 1.20 but there is no hard and fast rule and every lender has their own requirements.

In this example, the property generates enough net operating income to cover and service the expected debt payments after paying regular operating expenses.

Tenants

When applying to rent a new home, a tenant can submit a copy of their prior rent ledger to help gain a competitive edge.

A recent rent ledger that shows the tenant has been paying the monthly rent as agreed can be a powerful document to provide to a new landlord while they are evaluating prospective tenants. A rent ledger can also help to speed up the approval process for a new tenant, in case a former property manager or owner is slow to respond to a rental history reference check.

Tenants can also use a rent ledger if there is a dispute about a late fee being charged or an eviction being started. By having access to the rent ledger, a tenant can make sure their monthly rent payment is posted correctly and can also ask the landlord to correct any mistakes.

If a landlord proceeds with an eviction that the tenant believes is improper, the tenant can use the rent ledger in court to attempt to demonstrate to the judge that all rents were in fact paid when due. Many state landlord-tenant laws allow the tenant to be awarded damages when a wrongful eviction occurs.

Why Smart Landlords Keep a Rent Payment Ledger

The ability to generate income through recurring cash flow from rent payments is one of the many reasons to invest in real estate (along with potential appreciation in property value over the long-term and tax benefits).

Improve Financial Performance

By closely monitoring the rent ledger, an owner or investor can anticipate potential rent collection and/or cash flow problems before they become more difficult to manage. A tenant that routinely pays late is at much greater risk of becoming a tenant that can’t or doesn’t pay at all. By quickly addressing emerging late payment issues, landlords can signal to tenants that they are paying attention and that rent is expected to be paid on time every month.

In the long run, the benefits of a well-managed tenant ledger extend well beyond the direct impact to cash flow. When the time comes to refinance the property, sell the asset, or even purchase another rental home, lenders and/or potential buyers will be keenly interested in how your existing property has performed.

Are your tenants reliable? Do they pay on time? Do you exercise sound judgment as a landlord and take corrective action when problems arise? The answers to these questions can impact the perceived risk of making a new loan as well as the terms a lender (or buyer) might be willing  to offer.

Identify Opportunities

A rent ledger provides information on the revenue component of a property’s current cash flow and any rental income that remains unpaid. If a specific property or real estate investment portfolio isn’t generating the expected gross income, it may be due to poor property management or an indication that the tenant screening process needs to be improved.

The rent ledger also helps to reveal long-term property performance trends in terms of rental rates, tenant quality, and management competency.

For example, if a tenant ledger for a single-family rental home consistently shows that the property generates higher gross rental income year after year, that’s likely a clear signal that demand for the home is strong, possibly due to its location, upkeep, management, or various other factors.

By contrast, assume that one unit in a small multifamily building consistently generates less rental income than the others. While the property as a whole performs well, the fact that the tenant ledger clearly shows one unit repeatedly underperforming, is a red flag that

should be investigated. Perhaps the flooring or appliances need to be updated, the kitchen or bathrooms need to be refreshed, or the unit needs to be repainted.

Prove a Tenant Is Not Paying

A rent ledger also provides a potential “source of truth” in the event a tenant and landlord end up in court during eviction proceedings. While bank and other financial records may also play an important role, an updated tenant ledger can also be extremely helpful.

While the rules for evictions based on non-payment of rent vary based on state landlord-tenant laws, most require a landlord to provide a full accounting of rents paid and those that remain outstanding, along with associated due dates and evidence that notices of non-payment were sent to the tenant.

Providing an accurate copy of the r

ent ledger to the court may make it easier for a judge to review and understand the circumstances underlying the eviction proceedings.

Additional Tenant Ledger Benefits

It’s also important to keep in mind that a rent ledger can include much more information than just a record of rent payments due and received. Let’s take a look at some of the net takeaways that you may benefit from when using a more comprehensive rent ledger, like the one Stessa provides.

• Metrics regarding the gross income the rental property is generating
• Insights as to possible changes in the future rental income
• Opportunities to increasegross rental income
• Evidence as to which tenants are paying their rent in full and on time
• Whether late fees are being assessed and collected per the lease
• Lease expiration dates
• Rent payment history of each and every tenant
• Occupancy timelines for each tenant
• How much cash flow the rental property is currently generating

*Stessa is not a bank. Stessa is a financial technology company.Terms and conditions, features and pricing are subject to change. This article, and the Stessa Blog in general, is intended for informational and educational purposes only, and is not investment, tax, financial planning, financial, legal, or real estate advice.