Owning rental property offers an excellent source of income. That's the upside. The downside is that rental properties require work, and some tasks are more difficult than others.
For many landlords, rental property accounting is a challenge. However, accurate, thorough records are vital for your budget and taxes.
You can handle the work yourself, but hiring it out is the easier solution.
As you decide how to handle it, keep reading to learn a few accounting strategies to follow with your rental properties.
Use a Separate Bank Account
Keeping your accounting records accurate requires accounting for every dime. You must record all your rental income and expenses. You can do this easily if you use a separate rental property bank account for your business.
In other words, keep your business income and expenses separate from your personal finances.
Track Expenses in Categories
One of the best ways to budget is by watching your expenses. To do this, you'll need to track your expenses in categories. This is a standard part of the accounting process, but you might not realize its importance.
Tracking your expenses in categories summarizes how much you spent on each category. You can use this information to reduce your expenses. You can also use it to see where your money goes.
You should learn some accounting basics if you do not know a lot about accounting. Learning the various accounting methods can help you track your expenses properly.
Maximize Your Income and Expenses
The main two components of your rental property bookkeeping are income and expenses. Maximizing your income is one goal every rental property owner has.
You can do this by performing a rental market analysis of each property. You can also do this by keeping your units occupied. Maximizing your income helps you earn more money.
However, maximizing your expenses can help you reduce your tax liability. You can write off all your expenses. The result is lower taxes.
Therefore, investing money into your properties can help you pay lower taxes. Using depreciation also helps you lower your taxes. Depreciation is an expense that lets you write off part of your property values over the years.
Keep Up With the Work
Finally, you must keep up with your rental property accounting. Record your income when you receive it. Record every expense when it happens or when you pay for something.
You can always outsource your accounting work and other things. Many property owners outsource their tenant screenings, accounting, maintenance, and numerous other routine duties.
Hire Someone to Do Your Rental Property Accounting
Rental property accounting can be a challenging part of running a business. Yet, it's a vital part. Your accounting records help you budget and prepare your taxes.
Do you need help with your bookkeeping?
PMI Property Prime Home can help. We are a full-service property management firm serving Orlando, FL. We are locally owned and operated and specialize in all property management tasks.
Get in touch with us to learn more about our services.
