Did you know that around 70% of rental properties are owned by individual investors? Investors are great at investing, but not many of them know what it takes to run a rental property.
If you're a rental investor in need of some property accounting tips, you've come to the right place. Keep reading to learn the do's and don'ts.
Do Keep Personal and Business Accounts Separate
The first rule of rental property accounting is to keep your personal and business accounts separate.
Rental property owners that mix their finances together lose out on business-related tax deductions. Property owners will pay more in taxes as a result.
Managing multiple accounts might seem inconvenient, but doing so is necessary for organization and tax purposes.
Don't Use One Bank Account for All Properties
In addition to separating personal and business accounts, you should also use separate accounts for each rental property you own.
An owner with multiple properties can easily keep track of income and expenses when the accounts are separated by property. Doing so allows you to identify income, identify expenses, and keep track of profitability.
Multiple accounts also keep your property accounting organized for when tax season rolls around.
Do Track Income and Expenses
Professional accounting services will tell you how important it is to track all income and expenses for each property. Create a system for tracking these numbers.
Implementing rental property accounting software is the easiest way to do this. If you hire a rental property manager through a property management company, they can handle this task for you.
At the end of each month, you'll receive owner statements indicating all income and expenses.
Don't Forget Large Expenses
There are financial ups and downs that come with owning rental property. There are large expenses you'll have to pay every so often. Don't forget about them!
These expenses might include:
- Appliance replacements
- Maintenance costs
- Property marketing
- Low tenancy rate
If you don't anticipate the ups and downs to come, these large expenses will throw a wrench in your financial plans. Plan for these expenses so they don't derail finances when they inevitably happen.
Do Automate Accounting Tasks
It's time to go digital if you haven't already. Property owners should take advantage of the ability to automate certain accounting tasks. These are the easiest things to automate:
- Online rent collection
- Mortgage autopay
- Linking online accounts
Collecting rent online and linking your online bank accounts can get you paid faster. When you ask for rent online, the money goes directly into your bank account.
Offering autopay to tenants also ensures that you don't have to chase them down to ask for late rent.
Hire Us for Property Accounting!
Do hire a rental property management team that understands the ins and outs of rental finances.
Our team can help with rental property accounting by separating your accounts, tracking income and expenses, and automating accounting tasks.
Don't wait any longer to learn how we can help you. Contact us today for more information.