Renting is a great way to make extra income. You not only get to take advantage of property appreciation, but can also make income through rent payments. And when there are an extra 2,654 new renters yearly, there are constantly new opportunities to find tenants.
But you'll great rental property accounting if you want to see success as a real estate investor. Read the five pieces of landlord advice below to keep better records.
1. Separate Your Accounts
If you're just getting started with rental properties, you may have the temptation to keep things simple with a single bank account. Although this slightly simplifies things, it can cause headaches in the future.
Before you start with property finance, create a separate bank account for your real estate business. Collect all rent payments there and use this account to make all payments. Doing this makes it easier to track everything.
2. Track Everything
You need to be exact with everything about your rental finances. This means tracking all sources of income your property makes and every expense required to maintain things.
You need these things for tax season. You'll be able to write off expenses and prove they are valid deductions. Understanding these numbers will help you better plan your rental business and avoid making expensive mistakes because of inaccurate numbers.
3. Learn Tax Law
There is a lot you can deduct from your taxes as a property manager. However, if you aren't aware of real estate tax law, you may accidentally deduct something you aren't supposed to and get an audit from the government.
Make sure you understand what you can and can't do on your taxes. Ideally, work with an experienced tax attorney to ensure you do everything right and pay the least in taxes.
4. Automate Where Possible
The last thing you want to do in finances is do things manually. It takes too much time and is prone to mistakes. One typo could lead you to make an error based on bad data.
It makes more sense to use software to automate where possible. For example, you can use accounting software to automatically connect to your accounts to download and categorize your transactions. Doing this will save time and offer more accurate books.
5. Find Experienced Help
You may not want to handle your finances once your real estate business is running. You're too busy trying to grow your business, so wanting to pass the work to an experienced professional makes sense.
Don't hesitate to find a property management company or accounting company to take on the work. They will ensure your books are always up-to-date and accurate. This means you'll have good data to base your decisions on and can focus on the more important work in your business.
Take Rental Property Accounting Seriously
As you continue to grow your rental income, you'll find that your books will get more complicated. With so many inflows and outflows, you'll need a reliable system for tracking everything. Use these rental property accounting tips to optimize your rental bookkeeping process.
Are you looking for assistance with finances and property management? From bookkeeping to full-service management, PMI Diversified Properties has every service you need. Reach out to our team to learn what we can offer.
