How to create year-end financial reports for rental properties

Closing the books at year-end is a big lift, especially when you’re managing a growing portfolio. Owners need to see how their investments performed, and their accountants need accurate numbers for tax season. Good rental property accounting is the foundation for all of this, but getting it right can feel overwhelming.

This post breaks down the entire process into manageable steps. We’ll cover the key financial reports everyone expects (such as the P&L and balance sheet) and share a checklist for closing your books correctly. You will learn how to assemble professional report packets for owners and what to do to make tax time easier for everyone involved.

What Year-End Reports Do Rental Owners and Lenders Expect

Year-end financial reporting for your rental properties is all about creating specific documents that tell the right story to the right people. Property owners want to see how their investment is performing, while lenders and tax professionals need to verify financial health for loans and tax returns. Good rental property accounting practices help you produce these reports, which are fundamental for making smart decisions and keeping everyone on the same page. Understanding property management accounting basics ensures you’re building on a solid foundation.

Profit and Loss Statement

A profit and loss (P&L) statement, sometimes called an income statement, shows your rental income minus your operating expenses. This calculation gives you the net operating income (NOI), a key metric for understanding a property’s profitability.

Your P&L should list all sources of rental income, such as monthly rent, pet rent, or application fees. Then, it subtracts operating expenses such as property management fees, property tax, insurance, and repairs and maintenance. This report gives a clear picture of how much money a property is making before considering mortgage payments or major capital expenses.

Balance Sheet and Cash Flow

A balance sheet is a snapshot of your property’s financial position at a single point in time. It lists assets (what you own, such as the property value), liabilities (what you owe, such as the mortgage), and the difference, which is owner equity.

The cash flow statement tracks the actual movement of money into and out of your bank accounts. It’s different from the P&L because it shows your liquidity. A property might be profitable on paper but have negative cash flow if you’ve had a month with high repair costs, giving owners a real-world look at their available funds.

Rent Roll and AR/AP Aging

The rent roll is a list of all current tenants, their unit details, lease terms, and, most importantly, their payment status. This report shows your occupancy rate and highlights any tenants who are behind on rent.

Accounts receivable (AR) aging shows who owes you money and for how long. Accounts payable (AP) aging does the same for money you owe to vendors. These reports help you manage cash flow by showing what payments to expect and what bills are coming due.

Security Deposit Ledger and Trust Reconciliation

Most state laws require you to hold tenant security deposits in a separate trust account. A security deposit ledger tracks every deposit for each tenant, from the initial payment to any deductions at move-out.

Reconciling this ledger with your trust account bank statement is a regular task. A perfect match confirms you’re holding the correct funds and are compliant with trust accounting regulations. This protects both the owner from legal trouble and the tenant’s deposit, and since trust accounting requirements vary by state, consult with a legal professional for compliance.

T12 and Owner Statement

A trailing twelve months (T12) statement shows a property’s financial performance over the last 12 consecutive months. Lenders often ask for a T12 because it reflects the most current performance, which is more relevant for a new loan than older calendar year data.

An owner statement is a summary of a property’s financials, usually sent monthly or annually. It gives owners a high-level view of their investment’s performance, including income, expenses, and any contributions or draws they’ve made.

Now that you know what reports to prepare, let’s walk through the steps to get your books in order so you can create them accurately.

Step-by-Step Year-End Close Checklist

With the key reports in mind, the next step is to close your books for the year. This isn’t just about running reports; it’s a systematic process to make sure the data going into those reports is complete and accurate. Following this checklist in order helps you avoid errors that can cause headaches later.

Finalize Bank Reconciliations

Before you do anything else, reconcile every bank account for the month of December. This means matching each transaction on your bank statements—for operating, trust, and reserve accounts—to the corresponding entry in your accounting records.

If something doesn’t match, now is the time to figure out why. It could be a simple bank fee you missed or an outstanding check that finally cleared. Getting your bank accounts to balance with your books is the foundation for all other year-end rental property accounting tasks.

Categorize Income and Expenses

Go through your general ledger and look for any transactions that are uncategorized. Every dollar of rental income and every expense needs to be assigned to the correct account for your P&L statement to be accurate.

This is also a good time to double-check for misclassifications. For example, a major roof replacement is a capital improvement, not a simple repair, and your owner’s tax professional will want to see that recorded correctly for depreciation purposes.

Tie Out AR/AP and Rent Roll

Your rent roll and your AR aging report should tell the same story. If the rent roll shows a tenant is behind, the AR report should show the exact same overdue balance. Compare these two reports side-by-side to catch any discrepancies.

Do the same for your AP. Make sure every outstanding vendor bill is recorded. This check helps confirm that your balance sheet will accurately reflect what’s owed to and by the business at year-end.

Reconcile Security Deposits and Trust Ledgers

Your security deposit ledger should list every tenant deposit you hold. The total of these deposits must equal the balance in your trust account.

If the numbers don’t match, you’ll need to trace the discrepancy. Did you forget to record a new tenant’s deposit? Or did you return a deposit to a former tenant but not update the ledger? Keeping these records perfect isn’t just good practice—it’s a legal requirement in many places, and since trust accounting requirements vary by state, consult with a legal professional for compliance.

Confirm Cash or Accrual Basis for Reporting

Decide whether you’ll report on a cash or accrual basis. Most property managers use cash basis, which is simpler: income is recorded when you receive it, and expenses are recorded when you pay them.

Accrual basis records income when it’s earned and expenses when they’re incurred, regardless of when money changes hands. Whichever method you choose, apply it consistently. This consistency is key for accurate year-over-year comparisons and tax reporting, which may vary by jurisdiction and individual circumstances, so we recommend consulting with a qualified tax professional.

Run Variance Review and Add Notes

Once your numbers are solid, compare this year’s income and expense totals to last year’s. Did property taxes go up? Did a long vacancy cause rental income to drop?

For any significant changes, add a note to your reports explaining the reason. An owner is much more likely to have questions about a sudden jump in repair costs, and having a ready explanation shows you’re on top of things.

Prep 1099 Recipients and Totals

Finally, get ready for tax season by identifying all the vendors you’ll need to send a 1099 form to. Identify vendors potentially requiring 1099s—generally, payments of $600 or more for services to non‑employees (see IRS rules and exceptions).

Make a list of these vendors, confirm you have a W-9 form with their correct tax ID number, and total up your payments to each. Having this information organized makes filing 1099s in January a much simpler process, which may vary by jurisdiction and individual circumstances, so we recommend consulting with a qualified tax professional. Common expense categories for rental properties:

• Property management fees: Your monthly management fees
• Repairs and maintenance: Costs for routine work and service calls
• Utilities: Any utilities paid by the owner, such as water or trash removal
• Property taxes: Payments made to local tax authorities
• Insurance: Premiums for property and liability insurance
• Advertising: Costs to market vacant units
• Professional fees: Payments to accountants or legal counsel
• Landscaping and snow removal: Groundskeeping costs
• Pest control: Regular service fees

With this checklist complete, your data is clean and ready. The next step is to assemble these reports into professional packages for your owners and their advisors.

Compile a Complete Year-End Report Packet

Once your books are closed and the numbers are verified, it’s time to assemble everything into a clear, professional report packet. The key is to tailor the information to the audience. An owner might want a high-level summary, while their accountant will need much more detail.

Owner Packet Contents

For property owners, start with the essentials. A year-end profit and loss statement gives them a quick look at their property’s performance. Accompany it with a detailed owner statement that shows monthly breakdowns and any contributions or draws they made.

Include the current rent roll so they can see occupancy status at a glance. A summary of maintenance activity is also helpful, as it explains where repair funds were spent. A short cover letter explaining any major events—such as a large capital improvement or an unexpected vacancy—adds a personal touch and shows you’re thinking about their investment.

Lender and Accountant Packet Additions

Lenders and accountants need to dig deeper. In addition to the P&L, they will want to see the balance sheet to understand the property’s assets and liabilities. The T12 statement is also a common request, as it shows performance over the most recent year.

Be ready to share debt service coverage ratio (DSCR) calculations, which show if the property generates enough income to cover its mortgage payments. You should also include copies of the current property insurance policy and the latest property tax assessment. Having these documents ready makes the process of applying for a new loan or preparing a tax return much easier for them.

Delivery and Storage Best Practices

How you deliver these reports matters. Sending sensitive financial documents in an unencrypted email is a security risk. A better approach is to use a secure owner portal where owners can log in to view and download their documents. For example, Buildium’s Owner Portal provides a secure, centralized place where owners can access financial reports and documents for their properties in real time.

Whatever method you choose, keep organized archives of year‑end reports consistent with IRS guidance (often three years, longer in certain cases) and your organization’s retention policy. This recordkeeping is helpful for historical analysis, tax audits, or future property sales. Using a cloud-based system for your rental property accounting means these documents are stored securely and are accessible whenever you need them.

With your reports compiled and delivered, you can think about how to make the process even smoother next time by using templates.

Templates and Examples to Download

Using standardized templates for your year-end reporting can make a big difference. They help you maintain consistency across your portfolio and reduce the chance of manual errors. Once you create a good template, you can use it year after year.

P&L Balance Sheet and Cash Flow

You can create templates for your core financial statements in a program like Excel. For a P&L, set up columns for each month and a final column for the year-to-date total. Use formulas to automatically sum your rental income and operating expense line items to calculate your net operating income.

Your balance sheet template should have clear sections for assets, liabilities, and equity. For the cash flow statement, create sections for operating, investing, and financing activities. Linking cells between these sheets can help information flow from one report to the other.

Owner Statement and T12

An owner statement template can be designed for either monthly or annual reporting. The annual version should have room to add notes about significant expenses or capital improvements.

For a T12 statement, the key is to set up a rolling 12-month calculation. Your template can be designed to automatically pull the last 12 months of data from your monthly records, so you can generate an up-to-date T12 at any point during the year.

1099 and W-9 Tracking Checklist

A simple spreadsheet can serve as a tracking checklist for your 1099s. Create columns for the vendor’s name, total payments for the year, their tax ID number, and a checkbox to confirm you have their W-9 on file.

Use a formula to sum up all payments to each vendor from your expense records. This simple tool helps you quickly see who needs a 1099 and whether you have all the required information to file.

Keep in mind that 1099 and W-9 requirements may vary by jurisdiction and individual circumstances, so we recommend consulting with a qualified tax professional. Templates are a great start, but as you manage more doors, you’ll find that automation is what truly helps you scale your reporting process.

Automate and Scale Reporting as You Grow Your Portfolio

As you grow from managing a few units to a few hundred, manual reporting with spreadsheets can be difficult to sustain, making scalable bookkeeping systems essential. The sheer volume of transactions makes it hard to keep up, and the risk of errors increases. This is where automating your rental property accounting workflows can help you scale your operations.

Consolidated Multi-Property Reporting

When you manage multiple properties, especially for a single owner, you’ll need to generate consolidated reports. Buildium offers portfolio‑level reporting so you can view performance across properties from one place.

Owners can access financial reports and documents for their properties via the Owner Portal; managers have portfolio‑level reporting and analytics in Buildium. To make this work, it helps to use a consistent chart of accounts across all properties so that income and expense categories align perfectly.

Report Packages and Scheduling

Instead of manually creating and sending reports each month, you can set up automated report packages. You can configure automated report bundles (e.g., income statements, rent rolls, owner statements) to generate and share on a recurring schedule.

You can create different packages for different owners based on how much detail they want to see. Scheduling these reports frees up your time and gives owners the consistent, predictable communication they appreciate.

Payments 1099s and Error Reduction

Automation can also help with payment tracking and tax-time preparations. When you use online payment systems, every transaction is recorded and categorized, which means your payment data for 1099s is always up to date.

Connecting your bank accounts to your accounting setup can further reduce manual work. For instance, Buildium’s accounting features can import bank transactions and instantly match them to entries in your books, flagging only the items that need your attention. When it’s time to file taxes, its 1099 e-filing feature can use the year’s payment data to prepare and send forms with just a few clicks, which may vary by jurisdiction and individual circumstances, so we recommend consulting with a qualified tax professional.

Close the Books With Confidence and Give Owners Clarity

Wrapping up your year-end reporting is more than just a box to check—it’s about giving your owners a clear, accurate story of their investment. A disciplined process helps you produce professional financial statements that build trust and set the stage for a successful year ahead. When your rental property accounting is solid, everyone can move forward with confidence.

Here’s what it comes down to:

• A step-by-step approach to closing your books prevents errors from the start
• Tailoring report packets to owners, lenders, and accountants to make everyone’s job easier
• Using templates and automation to help you work smarter, not harder, especially as you grow
• Clear notes and variance explanations that show owners you’re paying close attention

If you’re ready to put these systems to work, you can explore how property management accounting software can support your year-end close by signing up for a 14-day free trial or scheduling a guided demo.

Frequently Asked Questions About Year-End Rental Property Accounting

Should I Use Cash or Accrual for Year-End Rental Property Accounting?

Most property managers find that cash basis accounting is the most straightforward method. It records income when it’s received and expenses when they’re paid, which aligns directly with your bank statements and simplifies the reconciliation process.

How Should Security Deposits Appear on the Balance Sheet and Trust Account?

A security deposit is a liability on your balance sheet because it’s money you owe back to the tenant. The total amount of deposits held should always match the balance of your separate trust account, as required by law in many areas, and since trust accounting requirements vary by state, consult with a legal professional for compliance.

What Reports Do Lenders and CPAs Usually Ask for at Year-End?

Lenders commonly request a trailing‑12 operating statement and current rent roll; additional financial statements (such as balance sheets) may be required depending on lender and deal. CPAs often need a detailed profit and loss statement and general ledger to prepare an accurate tax return.

What Do I Need to Prepare for 1099s and When Are the Deadlines?

To prepare for 1099s, you’ll need a W-9 form with a tax ID number for every unincorporated vendor you paid $600 or more for services. The deadline to send 1099-NEC forms to both the recipient and the IRS is January 31, which may vary by jurisdiction and individual circumstances, so we recommend consulting with a qualified tax professional.

When Should I Send a T12 Versus a Year-End or YTD Report?

A T12 statement is best for lenders evaluating a loan, as it shows the most recent 12 months of performance. A year-end report is ideal for annual owner reviews and tax preparation, while a year-to-date (YTD) report is useful for tracking progress against budgets throughout the year.