Investing in rental property is a growing business. It is also a profitable business when done right. Contrary to popular belief, there is more to property investment than buying properties and finding tenants.
There are state and federal laws that you must abide by when renting property. You'll also have to deal with rental property accounting. The last thing you want is a dispute with a tenant regarding rental payments.
Investing in good accounting software is an excellent tool to have when managing a rental property.
Are you looking for accounting tips for a new landlord? Keep reading for seven things you need to remember for good recordkeeping.
1. Rental Property Accounting is Essential
Keeping good records is sound business practice. Accounting for landlords will ensure your collecting rents on time and applying applicable fees. Your account records will come into play if you have to evict a tenant.
2. Open a Business Banking Account
Open a business bank account for your rental properties. A big mistake in accounting for landlords is mixing business funds with personal funds.
Consider incorporating your properties into a property management business. This way, it is easier to maintain proper records and legitimize expenses and transactions.
3. Use Accounting Software
Purchase accounting software to help keep up with rental payments. The software will also track your business expenses. You'll have real-time data on your mortgage payments and rental income.
4. Keep Documentation on Repairs
A vital part of managing a rental property is keeping up with repairs to your units. With accounting software, you can document every expense. Trips to the hardware store can add up.
Plus, you want to have documentation at the end of the rental agreement for deductions to the renter's security deposit.
5. Provide Renters with Receipts
The perfect accounting software for rental property is one that also comes with CRM tools. This way, you can allow renters to pay online, generate receipts, and file repair requests.
6. File Your Business Taxes
Filing business taxes has its benefits. You can use several tax-deductible rental expenses associated with your rental properties. Insurance, property taxes, repair and maintenance costs are all tax-deductible.
7. Use Standard Rental Agreements
Utilizing standard rental agreements will allow you to document all fees associated with the lease. You can easily keep track of application fees, security deposits, and fees for amenities.
Accounting software will help with deducting costs from the tenant's security deposit and providing accurate end-of-lease statements.
Simplify Your Property Management Business
Rental property accounting is an essential part of your business. As with any industry, accurate recordkeeping will save time and energy when dealing with disputes filing taxes.
Proper records can also help you expand your portfolio or improve services. Banks are more likely to extend credit when there are clear records showing profitability.
We'd love to hear from you if you own rental property in the Dallas/Fort Worth area. Contact us today for resources and tools you can use to improve your property management services.