Everyone dreads tax season, but it might be especially annoying for rental property owners. If you find that tax season is complicated and confusing, you likely need to keep better rental property accounting records.
Not only is creating an accounting system efficient, but it can also prepare you for that dreaded tax day. You'll find that rental property accounting isn't so bad when you implement these best practices.
1. Separate Accounts
You won't have accurate rental property accounting records if your personal and business accounts are mixed. Set yourself up for success by opening a business account different from your personal finance account.
Open checking and savings accounts, and consider applying for business credit cards. The separation ensures your business finances don't mix with your personal affairs.
Depending on the rental laws in your state, you might have to place tenant security deposits in a separate account as well.
2. Track Expenses
Your rental business will have regular expenses you need to track. Create a reliable system for tracking inflows and outflows of cash for each of your properties.
You can use rental property accounting software to design expense worksheets instead of opting to create them yourself manually.
If you hire a property manager, they can also help with expense tracking. They can create owner statements that help you keep your finances in order.
3. Go Digital
A property management company can help you go digital. You can scan applications or have applicants apply online, digitize receipts and invoices, and store files in accounting software.
Digitizing your bookkeeping can declutter the office and keep you on top of invoicing. As an additional plus, you'll be saving the planet!
Cloud-based software is the best option for landlords who want to share rental income data with professionals within their team.
4. Automate Accounting Tasks
Accounting is hard enough without automation. Keep your accounting process simple by automating where you can.
Set up automatic payments, withdrawals, and reminders. Automation can save time and help you prepare for when it's time to pay landlord taxes.
If your property manager is responsible for accounting, they will have free time to improve tenant relations with automated accounting tasks.
5. Prepare in Advance
Accurate recordkeeping can help you prepare for future expenses using past data.
Set aside a percentage of your rental income to your savings each month. This can help if you notice increased maintenance costs in a certain season and other unexpected expenditures.
The more historical financial data you get, the more accurate you can forecast costs.
Hire a Property Manager for Rental Property Accounting
As a landlord, you might not have time to keep accurate rental property accounting records. Hiring a rental property manager can help with all of the above best practices.
At PMI Pinellas, we can help you separate your accounts, track expenses, automate tasks, and more to ensure you are successful.
With over 20 years of property management experience, we know what it takes to improve rental accounting practices. Contact us today to get your finances in order.
