The state of California has the 4th-highest rent in the United States today. If you're a real estate investor trying to grow your revenue or income, this is an excellent state for you to set up shop.
However, greater rent prices mean you must also handle your accounting so that every cent is noted. Investors make several common rental property accounting mistakes that can be detrimental to your business.
Let these tips guide you when doing what's best for your rental property accounting.
Failing to Separate Expenses and Accounts
One of the main accounting mistakes landlords make is not separating their expenses. When all your expenses are lumped into one pot, it's hard to differentiate between business and personal.
This makes for messy accounting and can lead to big mistakes. It's best to create different accounts for each property. Definitely never use a personal checking or savings account for business needs.
Clean up your books, and you'll have a far easier time staying organized and addressing your rental property needs.
Not Hiring a Professional
Another big mistake that property investors make is trying to do their own accounting. It's easy to get in over your head when you do this.
When you're a real estate investor, you likely have your hands full with other areas of interest. Hiring a professional accountant can assist you in taking care of your books so that you can focus on other matters.
Some professionals specialize in rental properties and can ensure you get the most from your investment. They understand real estate laws and statewide practices that can dictate how you handle your accounting.
If you have a strong network of real estate investors you exchange notes with, ask them who they use for their accounting. Check the California Board of Accountancy for information on some available professionals who can help your rental property business.
Neglecting to Check the Books
Always stay on top of your books when you're handling your real estate accounting. It's easy to forget to do this if you automate your accounting or simply log items and then go about your business.
Schedule time every week to sit down and go through every penny. This way, you will catch errors before they get too confusing to correct.
Forgetting About Taxes
When you are handling your accounting, always make contingencies for your tax obligations as well. This can include local, city, and statewide taxes for your property.
Plan ahead for this and open up a bank account strictly for holding your tax money. Make sure to pay all of your real estate taxes on time and use the correct forms.
Get Your Rental Property Accounting in Order
These words of wisdom will help you with your rental property accounting. If you need professional help, we're happy to take you on as a client.
Blue Line Property Management is a rental property management firm that can assist you with your accounting. Drop us a line or call (925)754-6100 for further help.