You own a handful of rental properties, each bringing in steady income. But when tax season rolls around or a tenant has a question about their payments, you find yourself sifting through spreadsheets, old emails, and scraps of paper to track down every last dollar. What should be a seamless part of managing rental properties turns into hours of frustration and number-crunching.
This is where mastering rental property accounting can change everything. Let's go through what to know about rental property accounting.
Organize and Track All Expenses
Effectively organizing and tracking expenses is one of the most critical aspects of real estate accounting. Keeping detailed records of every expense ensures that you have a clear picture of your Murray property's financial health. Start by categorizing expenses into clear, consistent categories.
Utilizing digital tools, such as spreadsheets or dedicated rental property accounting software, can make this process more streamlined and less prone to error. These tools not only help you stay organized but also allow you to run quick reports, giving you insight into:
- Monthly spending
- Quarterly spending
- Annual spending
Record All Income
Track monthly rent payments, ensuring each payment is recorded promptly. Late fees, if applicable, should also be documented separately to help you keep track of any delinquent payments as you work on investment bookkeeping. If your rental property generates extra income record these items as distinct income sources. These might include:
- Laundry facility fees
- Parking charges
- Pet rent
This level of detail will provide a comprehensive view of your property's total revenue, making it easier to assess profitability.
Hire a Property Management Company
Property management companies often provide financial services, such as collecting rent, handling maintenance costs, and preparing monthly income and expense reports. By outsourcing these tasks, you can ensure that every financial transaction is properly documented and categorized, reducing the risk of errors and missed income or expenses.
Professional property managers also keep your financial records organized and up-to-date. That's particularly valuable for preparing year-end reports and simplifying tax filing.
Establish a Regular Review Schedule
Regular reviews can reveal trends, such as seasonal spikes in utility costs or recurring maintenance needs, which help you better anticipate and plan for future expenses. This consistent monitoring also gives you an opportunity to check for any inconsistencies or unexpected costs, enabling you to address potential issues before they escalate.
A review schedule is particularly helpful when it comes to tracking cash flow, which is the backbone of a successful rental business. By comparing monthly income with expenses, you can ensure your property is consistently generating positive cash flow. A routine review makes it easier to evaluate rent levels and assess whether adjustments are needed to stay competitive with the market or to meet your financial goals.
Rental Property Accounting: Improve Your Systems Today
It's not as hard as you think to boost your rental property accounting processes. Use these property management tips, and you'll have a much easier time.
Are you ready to hire Murray property managers? PMI Wasatch Front LC is part of a franchise with over 20 years of experience helping landlords like you succeed.
Call us to get started.
