Becoming a landlord comes with so many obligations. Along with maintaining the property, you also need to pay attention to the finances of your rental business, and rental property accounting can be complex.
This two-part post will examine some of the basics of rental property accounting. However, this post should not replace professional advice. Consult an accounting professional if you need help with your business.
The Basics of Rental Property Accounting
Separate Your Finances
Your rental property business should have its own accounting system and financial records. It shouldn’t be part of your personal accounting or accounting for other investments. Additionally, rental property banking should be completely separate from personal banking. That means you must set up a bank account for the rental properties.
Track Your Income
Income tracking is one of the most important aspects of rental property accounting. It’s best to track income as it comes in instead of waiting. Rental property income can also vary depending on the property and how you run your business. Rent payments are one obvious source of income, but there could be more. You might also have late fees, pet fees, income from laundry machines, parking fees, etc.
Record All Expenses
Keeping track of expenses is also crucial to accounting for rental properties. Just like with income, it is better to record expenses as you incur them. The types of expenses you have may vary depending on various factors. Most properties will have costs for maintenance and repairs. You might also have expenses like mortgage interest, property taxes, advertising, insurance, and utilities.
Maintain Records
Beyond tracking income and expenses, you need to maintain organized records. You can either do your own bookkeeping or hire a professional. Make sure to keep track of all financial transactions, reconcile bank accounts, and keep receipts and invoices. Additionally, you should keep all records relating to the property’s finances. For example, lease agreements and move-in/move-out records may be relevant.
Tax Laws and Regulations
Landlords may have various tax obligations they need to understand. The basics include reporting income and expenses to pay your taxes. You must also consider federal, state, and local tax laws. It is up to the landlord to understand these laws and ensure compliance. You also need to realize tax laws and rates can change. Property owners often hire tax professionals to ensure compliance and avoid penalties.
These first five points covered some of the basics of rental property accounting. Click here to learn more in part two.
New Orleans Rental Property Management
Do you need help managing rental properties in New Orleans? Click here to contact Redfish Property Management. Our services can help you get more value from your rental properties in the New Orleans area.
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