There are over 10 million individual investor landlords in the United States.
If you’re one of the millions of Americans that own rental property, you’ve likely invested a lot of time and effort into it. An essential part of managing your rental property is good accounting practices.
Keep reading to learn three tips for rental property accounting.
1. Separate Business and Personal Accounts
One of the best pieces of advice to keep your finances organized is to open a business account for rental property once you become a landlord. Separating your business and personal accounts is important no matter what legal structure you use. It will help you avoid any future tax or legal complications.
You should use the business account solely for property-related income and expenses. This makes it easy to track expenses for your rental properties and will help you when it comes time to do your taxes.
2. Record Transactions and Reconcile Your Accounts
It’s important that every single transaction related to your rental property is recorded. Creating a consistent method for recording transactions will help you in the long run if you ever face an audit. Start by blocking off time each week to ensure all transactions are appropriately recorded.
Recording your transactions is only half of the equation. You also need to reconcile your accounts to make sure money is accurately accounted for.
In simpler terms, this means your bookkeeping ledger should match up to what is happening in your bank account. You can perform reconciliation by hand or through a reconciliation tool that may be available in your software.
Reconciling should be completed monthly. Be sure to save your reconciliation data, as it may be needed for state compliance reporting, taxes, or in case of an audit.
3. Use the Right Software
Thankfully there is software available that helps make it easy to achieve good accounting practices. Rental property accounting software helps landlords with their accounting and bookkeeping tasks.
Software designed specifically for the real estate industry includes features that help streamline rental management. These features include:
- Online rent payments
- Prospective tenant screening
- Online lease agreements
- Full reporting functions for accounting
To find the best software for rental properties, do your research on the popular companies in the market. Choose software that comes with a suite of features that fits your needs and makes your rental management easier.
Looking for more Rental Property Accounting Help in Washington, DC?
Now that you know the top three rental property accounting tips, are you ready to roll up your sleeves and get to work? From opening a separate business account to using the right software, these tips will help you get your finances in order.
If you’re feeling overwhelmed or need help with your property in Washington, DC, HomeRiver Group is here to help! Contact us today to see how we can help with all of your property management needs.
