American landlords made a record $353 billion in the year before the Covid-19 pandemic.
With so much money to be made, rental property accounting can be completely overwhelming. Whether you're a new landlord or a seasoned veteran, you need a good system to keep track of your income as well as your expenses if you're going to find success in property investment.
In this post, we're going to give you a hand by giving you our top 5 rental property accounting tips. These tips are designed to help you save both time and money, so keep reading and you'll understand what you need to do to maximize your investment.
1. Separate Your Accounting for Rental Property
As a landlord, you should never keep your rental income together with your personal income. You have to treat your rental property like its own business, so start by opening a bank account specifically for incoming rent and outgoing expenses related to your rental.
If you've got multiple properties, open separate bank accounts for each one. This cleans things up and makes your life a lot easier come tax season.
2. Automate Rental Company Bookkeeping
When you have payments constantly coming and going, it makes your money incredibly hard to keep track of. Automating your transactions with money transfer apps and automatic withdrawals from utility companies gives you an easy way to look at everything in one place.
In most cases, your tenants are going to prefer this method of rent collection. Do some research and figure out which of the money transfer apps is best for you and your tenants' needs.
3. Prepare for Taxes Early
Start preparing your tax forms early on in the season and you'll keep things relatively stress-free. The way you set up your accounting system should be with the express goal of easily filling out your Schedule E form for property income.
You'll have to categorize all of your income and expenses in a certain way to fill it out efficiently. You can find instructions for filling out the schedule E form on the IRS website
4. Use Available Tools
There are countless apps available to help you track your money, digitize receipts, and provide reports on your finances. Use these tools to your advantage to make it easier to run your rental properties and focus on the important aspects.
5. Hire a Property Manager
If you're feeling in over your head, even with rental property accounting tips, it might be best to hire a property manager. When you hire a property manager like AMG, for instance, we'll give you a rental property analysis right away.
We'll also perform all of your landlord duties including rent collection, accounting, and marketing. You'll be able to sit back and count your property income without having to worry about the logistics. We'll give you detailed reports and advice on maximizing your investments.
Taking Rental Property Accounting Seriously
With these investment property accounting tips, you should be able to stay on top of all income and expenses relating to your properties. It's so important to keep your books up to date if you're going to diversify your investments and turn them into an important income stream.
Contact us at AMG today to get help with accounting and every other aspect of running your Kissimmee property.