As a landlord, you’re tasked with handling more than just renting out your property. From collecting rent and handling maintenance to keeping up with your finances, there’s a lot to keep track of.
Luckily, by following some basic guidelines and using the right tools, you can manage your rental property bookkeeping like a pro. In this post, we’ll outline some tips for keeping tabs on your finances and ensuring that everything is in order.
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The basics of rental property bookkeeping
As a rental property owner, it’s important to keep good records of your rental income and expenses. This will help you stay organized and on top of your finances, and will also be helpful come tax time. Here are some basics of rental bookkeeping that you should keep in mind.
First, track all of your rental income. This includes rental payments from tenants, as well as any other money that comes in from the rental property (such as security deposit refunds). Be sure to keep records of when these payments were received, so you can easily see how much rental income you’ve earned over a certain period of time.
Next, track all of your rental expenses. This can include everything from mortgage or rent payments to property taxes, insurance, and repairs. Keeping track of your expenses will help you see how much profit you’re making from your rental property, and will also be helpful come tax time.
Finally, keep some record-keeping system in place. This can be as simple as a folder where you keep all of your rental-related paperwork, or a more sophisticated system using spreadsheets or accounting software. Having everything organized will make it easier to stay on top of your finances and ensure nothing falls through the cracks.
By following these basic rental bookkeeping tips, you’ll be in good shape to manage your rental property finances effectively.
What expenses can be deducted?
There are two types of rental expenses: those that can be deducted in the same year the cost is incurred, and those that must be capitalized and depreciated over a fixed period.
The most common rental property expense deductions include:
- Repairs and maintenance
- Legal and professional fees
- Property taxes
- Cleaning and janitorial services
- Landscaping and gardening services
- Snow removal services
- Security services
- Leasing commissions
- Bad debts
- Casualty losses
When it comes to rental property, two different types of depreciation can occur: residential rental property and commercial rental property. Residential rental property is depreciated over 27.5 years, while commercial rental property is depreciated over 39 years.
For example, let’s say you have a rental property that you purchased for $200,000. Your annual depreciation expense would be $7,273 for each full year of ownership ($200,000 / 27.5). On the other hand, if you had a commercial rental property that you purchased for $1 million, your annual depreciation expense would be $25,641 for each full year of ownership ($1 million / 39).
How to keep track of rental income and expenses
There are a few different rental bookkeeping methods you can use to keep track of your rental property income and expenses. The most common method is to use a spreadsheet, but there are also software programs specifically designed for rental bookkeeping.
The main advantage of using a spreadsheet is that it’s a very flexible tool that you can tailor to your own needs. You can also easily share your spreadsheet with others, such as your accountant or property manager. The downside of using a spreadsheet is that it can be time-consuming to set up and maintain, and it’s easy to make mistakes.
Rental bookkeeping software can be a good alternative to using a spreadsheet. These programs often have features specifically designed for tracking rental income and expenses, making them easier to use than a spreadsheet. However, rental bookkeeping software can be expensive, and it may not be as flexible as a spreadsheet.
Whichever rental bookkeeping method you choose, the most important thing is to keep accurate records of your income and expenses. This will help you stay organized and on top of your finances, and it will also make it easier to prepare your taxes.
Working with an accountant or tax professional
Working with an accountant can help rental property owners in several ways. An accountant can keep track of rental income and expenses, which can be helpful come tax time. An accountant can also offer advice on maximizing rental income and deductions.
Additionally, an accountant can help rental property owners create a budget and stick to it. Rental property owners who work with an accountant may find that they save money in the long run.
Tips for streamlining your rental property bookkeeping
As a landlord or property manager, you know that rental bookkeeping can be a tedious and time-consuming task. But it doesn’t have to be! There are a few simple tips you can follow to streamline your rental property bookkeeping and make it much easier for yourself.
First, get organized. Create a system for tracking rental income and expenses, and stick to it. This will make it much easier to stay on top of your finances and keep everything in order.
Second, automate as much as possible. Use online tools or software to help you track rental payments and expenses, so you don’t have to do everything manually.
Third, outsource when necessary. If bookkeeping is not your thing, or you simply don’t have the time to do it yourself, consider hiring a professional to help you out.
Using technology to your advantage
Landlords can save time and money by using technology for rental property bookkeeping. Here are three ways a landlord could benefit by using technology for rental property bookkeeping:
Technology can help landlords stay organized
There are many software programs and apps available that can help landlords track rental payments, schedule repairs and maintenance, and keep track of important documents. By staying organized, landlords can save time and money.
Technology can help landlords reduce expenses
Landlords can save money on paper costs, postage, and printing by using technology for rental property bookkeeping. In addition, many software programs and apps offer features that can help landlords save money on repairs and maintenance.
Technology can help landlords improve communication
By using technology for rental property bookkeeping, landlords can improve communication with tenants. For example, many software programs and apps allow landlords to send reminders about rental payments and late fees. In addition, some apps allow landlords to provide tenants with online access to important documents. By improving communication, landlords can reduce the chances of misunderstandings and costly disputes.
Keeping organized throughout the year
Rental bookkeeping can be a bit of a challenge if you’re not organized. But, if you take the time to stay organized throughout the year, it can help streamline the rental bookkeeping process come tax time.
Here are five tips for staying organized:
1. Keep all rental-related receipts in one place. This could be a physical folder, envelope, or digital folder on your computer.
2. Track rental income and expenses in a spreadsheet. This will help you keep an accurate record of everything come tax time.
3. Stay on top of repairs and maintenance. Keep track of when things break and when they’re fixed, so you can deduct the cost of repairs come tax season.
4. Keep your rental agreement and lease up to date. This will help you keep track of when rent is due, and any changes in rental terms.
5. Take pictures of your rental property. This will help you keep track of the condition of the property, and any damage that may have occurred.
Setting up a system that works for you
As a landlord, it’s important to keep accurate records of your rental income and expenses. This can be a daunting task, especially if you have multiple rental properties. However, by setting up a system that works for you, you can streamline your rental bookkeeping and make your life a lot easier.
Keep a few things in mind when setting up your rental bookkeeping system. First, decide what type of system you want to use. There are many different software programs available, as well as paper-based systems. Choose the one that will work best for you based on your needs and preferences.
Next, set up a separate bank account for your rental income and expenses. This will help you keep track of your finances and make it easier to file your taxes come tax time.
Finally, keep accurate records of all your rental income and expenses. This includes things like rent payments, utility bills, repair and maintenance costs, and so on. By staying organized and keeping good records, you’ll ensure that rental bookkeeping is a breeze.
By following these tips, you can streamline your rental bookkeeping and make your life a lot easier. Take the time to find a system that works for you, and stick with it. With a little effort, you’ll be able to keep track of your rental finances like a pro.
As a landlord, you know that rental property bookkeeping is important. Not only does it help you stay organized and keep track of your income and expenses, but it also allows you to identify trends and potential problems early on.
The key to successful rental property bookkeeping is to stay consistent and use a system that works for you. Whether you use a software program or a simple Excel spreadsheet, the important thing is that you update it regularly and keep track of all your income and expenses.
By taking the time to manage your rental property bookkeeping like a pro, you can help ensure the success of your business.