Rental property accounting is an important part of owning a Roseville rental home. Whether you’re trying to determine what your expenses are likely to be before you invest in a property or you’re tracking what you spend on existing investments, there are a few things that require your attention.
Good documentation will help you have a better and more successful investment experience. Be detailed and accurate, and seek help from a professional Roseville property management company if you don’t have the tools or resources required to create accounting statements and financial reports.
Organize and Document Your Rental Property’s Income and Expenses
The most basic real estate accounting practices that you’ll need to adopt involve your income and expenses.
This does not have to be anything fancy. You’re simply showing how much money was earned on your rental property in a given time period and how much was spent. The best income and expense statements look at monthly period and also have totals quarterly and annually.
When it’s time to file your taxes, the IRS will require documentation that demonstrates what you earned on your rental property and how much you spent maintaining it. This has to be clear, accurate, and transparent. Even if you work with an accountant or a CPA, you’re likely the one who will be collecting the rent and paying for repairs. Make sure you’re saving and logging receipts.
These numbers need to be correct and supported. Misjudging even a small amount can lead you to bad decisions that hurt your ROI.
Investment Property Budgeting and Forecasting
Budgeting is going to be important before you buy a rental property and as you move through the leasing and management process. It’s especially important when it comes to things like vacancy and maintenance. You should set aside a maintenance reserve, if you can. Put a small portion of the monthly rent you collect into a reserve fund so you’re prepared when you have to replace an appliance or pay for a plumber.
Set up a budget for recurring expenses you can plan on, such as landscaping, property management fees, and pest control. Forecast when you’ll have to make big expenditures. Plan for your new roof, for example, even if you won’t have to worry about it for five or ten years. Estimate the lifespan of your air conditioning unit, your flooring, and your appliances.
Rental Property Accounting Technology
Professional property managers invest in accounting software that can help you easily manage your bookkeeping. There are plenty of software options out there, even for individual landlords who may only be renting out one or two properties.
Look for programs and platforms that are accessible, user-friendly, and transparent. If you find yourself having to go to court, for example, you’ll want to be able to share an accounting breakdown for a tenant you’re evicting for nonpayment of rent.
When you’re planning your rental property accounting process, think about whether you should be working with a Roseville property management company. There are a lot of excellent reasons to use a professional property management company, and accounting services are one of them. You won’t have to do any of your own accounting, and you will receive monthly financial statements, reports when you need them, and an online portal that allows you to view maintenance invoices, lease documents, and security deposit funds at any time.
Let’s talk about your property management accounting needs. Contact us at Action Properties.
