Rental properties are in high demand. As a result, the rental vacancy rate in 2022 was only 5.8%.
One of your top goals as a landlord is to keep your units occupied. After all, you need rent money to pay your bills. However, another goal you should have is proper bookkeeping records.
Handling your property accounting tasks might not be your favorite task. Yet, it's a vital part of running a business.
If you need help with this activity, check out the following six property accounting tips for investors.
1. Don't Mix Business and Personal Finances
Keeping your business expenses separate from your personal finances is the first principle you'll discover in an accounting guide. However, when you mix your business with personal, you'll experience confusion and other issues.
For example, you could inadvertently miss some business expenses on your records. Thus, you might lose beneficial write-offs for your business.
Open a business checking account for your rental property business. Then, use this account for all your business transactions.
2. Keep Your Receipts
You receive receipts when you spend money. For example, you might purchase items at a hardware store to fix problems with your properties. You might also receive a receipt when an HVAC company repairs a furnace.
These receipts are evidence of your expenditures, and you must keep them.
3. Post Every Transaction
Reading an investment guide gives you ideas to help you manage your finances. Another example of something you'll learn is to record every transaction in your records.
You can record your transactions manually or electronically. Using rental property accounting software is one option. But you can also hire someone else to record your transactions.
4. Categorize Everything
A transaction occurs when you spend or receive money. Each time this happens, categorize the money with bookkeeping accounts.
Accounts help you manage your finances, as they record balances of your expenditures or income. For example, use a utility expense category to record all the money you spend on utilities.
5. Review Monthly Statements
If you record all transactions electronically, you can print monthly reports. These reports summarize your income and expenses each month.
Reviewing these statements can help you learn about your company's cash flow. They can also help you find ways to reduce expenses. For example, you might want to find ways to reduce your property maintenance costs.
6. Hire It Out
Many rental property owners work in other industries. For example, some people buy rentals as a side job. However, others buy them to earn passive income.
Running a rental property business requires time and knowledge. In addition, the required bookkeeping tasks can be draining.
You can hire a property management firm to handle these tasks for you. Doing this relieves some of your duties and ensures accurate accounting records.
Stay on Top of Your Property Accounting Duties
Tracking your property accounting records helps you control your money. It also helps you prepare for tax season. Thus, it's a vital part of your business.
You can hire us if you need help with your accounting. We can also help with other property management tasks if you're in the California Bay Area. So contact us today to learn more.