As a landlord, you're running a business. Keeping detailed, organized records of your rental property accounting is just as important as it would be for any small business owner.
However, real estate financial management is complex. You have many details to track to get the Chattanooga, TN rental insights you need.
Keep reading for the essential rental accounting tips that will keep your investment properties on track.
Keep Your Rental and Personal Finances Separate
One of the most important rental accounting tips is to keep your business and personal accounts separate. Even if you're an accidental landlord and plan to sell the property, setting up a separate account is worth the effort. You can track your income and expenses more easily.
Tax preparation is simpler if your rental accounting records are separate. You're less likely to miss deductions or claim expenses that aren't tax deductible.
If you get audited by the IRS, having separate accounts keeps the audit focused on your business finances. You don't want auditors unnecessarily going through your personal accounts.
Track Income and Expenses Carefully
Tracking your income and expenses carefully is important for the health of your investments and your tax reporting. You need documentation for every financial transaction related to your properties.
For payments, you should note:
- Tenant's name
- Date
- Payment amount
Expense records should include:
- Name of vendor or service provider
- Date
- Details of the work done or items purchased
Updating your records frequently makes your accounting more accurate. It saves you the stress and time of entering a large volume of data at the end of the month.
You can get monthly reports with insights into your rental property finances. You can make adjustments to improve profitability before a small issue becomes a major problem.
Set Up Your Accounting System Correctly From the Start
Setting up your accounting system correctly the first time will save you time and frustration later. Create income and expense categories that match your tax reporting requirements. The IRS lists the different types of rental income as well as types of expenses you can claim as tax deductions.
Income includes:
- Rent
- Fees, like lease cancellations or late payments
- Non-refunded security deposits
Deductible expenses fall into categories such as:
- Depreciation
- Repairs
- Operating costs
Try to format your accounting records so that you can gain insights quickly.
Rental Property Accounting Software
Many property management and accounting software platforms are available to help you organize your record-keeping. These systems are designed for landlords' specific needs.
They keep your rental property bookkeeping in one place. You can find and access your financial records more easily.
Consider a Chattanooga Property Management Firm
Good rental property accounting is essential for the long-term success of your real estate investments. Accurately recording income and expenses helps you see whether a property is profitable. You have the information you need to file your taxes.
If rental property bookkeeping is more than you want to handle, a full-service property management firm can help. The professional accounting team at PMI Scenic City will keep your finances in order. Our state-of-the-art technology and superior customer service keep you informed about your properties.
We serve clients in Chattanooga and throughout southeast Tennessee. Schedule a consultation with PMI Scenic City today to learn how we can make your property management more manageable.
