About 10.6 million U.S. citizens declared rental income on their taxes in 2023. This amounts to around 7.1% of 1040 filers that could be landlords. Do you know what all those people have in common?
All these landlords must deal with rental property accounting, which is a large part of property management and cannot be ignored.
However, record-keeping and organization can be tedious and challenging. Doubly so for a new income property owner. It can be hard to know where to start.
Don't jump into real estate accounting if you're unsure what to do. We have three tips to aid you with rental property accounting. Read on to learn more about this helpful landlord advice.
1. Track and Organize Your Expenses
Landlording comes with various expenses. You can expect maintenance fees, property taxes, HOA fees, mortgages, and marketing.
There are many more expenditures, but to sum it up, you're spending a lot of money in various places. Not tracking all these expenses is a mistake; make a habit of noting where your money goes.
Setting a schedule can help with this task. You can list expenses weekly, monthly, or quarterly. Organized lists of operating costs will make account updates a less complicated job.
2. Stay on Top of Finances
Newer landlords often forget (or neglect) to generate income statements. An income statement reports a business's financial performance. The first step in making reports is to keep your expenses listed and organized.
These lists will make filing income taxes less tedious and help you improve your finances to improve profits. Everything you need to tell you how your rental income is coming along is in one place.
You can use software to create these reports, but it might be difficult if you're unfamiliar with these financial tools. A property manager might be the right organization to handle this work.
3. Separate Business and Personal Accounts
The average person may use a single account for personal expenses and bills. That is not a great idea when you own an investment property. You need to open a separate account for business transactions.
This is especially advisable if you're operating as an LLC. This unattached account makes tax reporting, audits, and liability expenses easier.
Untangling your expenses from the business can become messy and time-consuming even with well-kept records.
Your new business account should have a credit or debit card to pay for business expenses. Conversely, money made from the property should go into the account.
Do Rental Property Accounting the Right Way
Rental property accounting can be demanding. A large part of maintaining property finances and records is staying organized and keeping up with expenses.
You can do these accounting duties yourself, but working with professionals can make the job easier. PMI Fountain City is based in Kansas City and offers various services to help your investment property flourish.
We can help you with accounting, finding tenants, marketing your property, and collecting rent.
You don't have to struggle with rental property accounting. Contact us today if you have questions or would like our assistance.
