Being a rental property owner is not all that it's cracked up to be. You're realizing that it takes a lot of work to generate enough income to see a return.
Luckily, you can change your luck by following the best rental property accounting practices. Ewing, New Jersey, landlords no longer have to guess when it comes to bookkeeping.
Keep reading to learn what you need to do to get started.
1. Keep Accounts Separate
Rental income and your personal finances should always be kept in separate bank accounts.
Open a business bank account with a debit or credit card. Expenses related to the property should only come out of this account. Income from the property should only trickle into this account.
Landlords in New Jersey cannot commingle security deposits with their personal funds by law.
If you ever get audited by the IRS, you'll be more organized with separate bank accounts. Rental property accounting becomes more efficient whether it's tax season or not.
2. Create a System
Create a system at the beginning of opening your rental property business so that you get it done right the first time. Find what works and makes sense to you, but consider digitizing the process.
Formatting your income and expenses can provide you with quick insights into your finances as a whole. You can make more informed decisions about your property without making it a time-consuming task.
A great system will include:
- Financial report generation
- Cloud-based data
- Bank feed reconciliation
- Income and expense tracking
Some software programs have mobile apps so you can access your books in real-time.
3. Categorize Expenses
Property bookkeeping is not something you should forget about until tax season. You should regularly track and categorize expenses to get a holistic view of the financial health of your business.
If you don't have a large number of expenses, you can complete this quarterly. Weekly and monthly tracking is more common.
The more often you update your accounts, the less time it will take. Plus, your accounts are more likely to be accurate.
4. Streamline Rent Collection
Rental real estate makes you money through rent collection. You can streamline the process of rental collection with the right property management software.
Tenant portals can work with your financial tracking software to streamline rental property accounting. Online rent collection is the best way to automate the income tracking process.
5. Make Accounting a Priority
Stay on top of rental property accounting throughout the year. Staying on top of your finances with key reports will benefit you in more ways than one.
You'll be able to see where your money is going and coming from. You can use the information you find to improve your property. Paying property taxes and other expenses will be easier with a comprehensive approach.
Rental Property Accounting Made Easy
Rental property accounting has never been easier with the help of professional property managers. At PMI Essential in Ewing, New Jersey, our property management team has accounting experience to handle your bookkeeping needs.
We also offer tenant screening, property marketing, and other necessary services to make your rental a success. With 20 years of local experience, we know how to make owners like you happy.
Contact us today to begin the best partnership.
