Many short-term rental (STR) owners assume their rental is profitable just because they have steady bookings. But are you really making money? Without tracking your key financial reports, you could be breaking even – or worse, losing money without realizing it.
If you don’t have a clear financial system in place, you’re flying blind when it comes to your STR business. In this article, I’ll break down the three essential financial reports every STR owner needs to review to truly understand their profitability.
1. The Profit & Loss Statement: Are you Actually Making Money?
The Profit & Loss Statement (P&L) – also known as the Income Statement – is the #1 financial report STR owners should review regularly. It tells you whether your rental is actually profitable by summarizing income and expenses over a set period. If you don’t track this report monthly, you might be running your STR at a loss without even realizing it.
📌 Key Profit & Loss Categories
- Income – Rental income/revenue from Airbnb, Vrbo, direct bookings, and cleaning fees. (And yes, your cleaning fees count as top line income!)
- Expenses – Cleaning services, utilities, property management fees, subscriptions, mortgage interest, property taxes, HOA fees, repairs, insurance and more.
- Net Profit (or Loss) – What’s left after subtracting all your operating and property expenses from your income. If that number is positive you have a net profit. If it is negative you have a net loss. If it is zero you are breaking even.
🚀 Pro Tip: Run this report by property to see whether each individual property is operating at a Net Profit or Loss.
💡 Solution: Use the QuickBooks Online Plus locations feature to categorize your transactions by property for more detailed financial tracking.
2. The Balance Sheet: What Is Your Rental Business Worth?
The Balance Sheet provides a snapshot of your financial position at any given moment. It shows what your STR business owns, owes, and retains.
📌 Key Balance Sheet Categories
- Assets – Cash, bank account balances, property value, furniture, and equipment.
- Liabilities – Mortgage balance, loans, LOCs, credit card account balances, taxes owed.
- Equity – The total value of your rental business after subtracting liabilities from assets. This is what your business is worth.
🚀 Pro Tip: If your liabilities are growing faster than you assets, your STR could be in serious financial trouble – even if your income looks good. You’ve taken on too much debt and are what we call over-leveraged and will need to find additional cash to pay down your debt as soon as possible.
💡 Solution: Regularly reviewing your balance sheet ensure your STR business is building wealth rather than accumulating debt.
3. The Cash Flow Statement: Do You Have Enough Money to Cover Expenses?
Even if your P&L shows a profit, you can still run out of cash if you don’t monitor your cash flow. Your Cash Flow Statement tracks how money moves in and out of your business. I’ve found this is the most underestimated and yet vital report to our business.
📌 The Cash Flow Statement is Crucial
- Identifies potential cash flow gaps before they become a problem.
- Reflects investment activities such as the purchase of your property and money you’ve used to improve your property value.
- Reflects financing activities such as owner’s contributions and distributions, which are not shown on the Profit & Loss Statement.
- Includes the principal and escrow portions of the mortgage payments, while the P&L only capture the mortgage interest as an expense.
- Includes adjustments to your operating activities (pulled from the P&L) like the money that has been used to pay down or draw on your credit cards.
🚀 Pro Tip: If your rental is profitable but cash flow is tight, you may need to reserve more cash for big expenses or low cash flow months.
💡 Solution: Run a monthly cash flow report in QuickBooks to ensure you have enough liquidity to cover costs. Ensure you have a reserve account set up to hold extra cash for those unexpected large expenses or low cash flow months.
How to Easily Track These Reports in QuickBooks Online
The key to understanding your STR’s profitability is tracking these financial reports consistently every month without stress.
Here’s how:
- Sync your bank and credit card accounts to QuickBooks.
- Sync your STR platform payouts (Airbnb, Vrbo, etc) directly to your business bank account.
- Create simple and straightforward categories in your Chart of Accounts to report on your financial statements.
- Categorize transactions every month so all transactions are properly recorded and reflected on your financial reports.
- Run monthly P&L, Balance Sheet, and Cash Flow Statement reports to check your financial health.
- Customize and mark these reports as favorites so you can quickly and easily review them every month.
💡 Pro Tip: My QuickBooks Setup Course for STR Owners walks you through setting up all these reports in minutes – so you always know where your STR business stands.
Final Thoughts: Take Control of Your STR Finances
If you’re not tracking your Profit & Loss, Cash Flow, and Balance Sheet, you’re guessing about your STR’s profitability instead of knowing.
📌 Next Steps: Set Up Your STR Financial Reports with My QuickBooks Course! Want a plug-and-play system for STR bookkeeping? Join my QuickBooks SetupCourse for STR Owners and get your financial reports organized in just 2 days!
👉 Enroll Now and take control of your rental finances!
Helpful External Resources
🔗 IRS Guide on Rental Income & Deductions
🔗 QuickBooks Online for STR Owners