Experts estimate that up to 12 million landlords are in the United States. With so many benefits to owning a rental, it is no surprise that the number is expected to grow.
One of the only downsides is rental property accounting. However, this is a crucial step towards maximizing your investment return. By maintaining records, you can streamline your finances and keep in compliance with regulations.
Accounting for rental properties can be challenging. But luckily, you came to the right place. In our article, we give you three tips to help you manage your rental property accounting records in Utah.
1. Establish a System for Record-Keeping
Setting up a well-organized system for record-keeping is crucial for rental property accounting. This system should include physical and digital components. It will ensure that all necessary documentation is properly stored and easily accessible.
Consider using cloud-based accounting software to maintain digital records and automate processes. Some areas that will be helpful are expense tracking, rent collection, and financial reports.
It is also good to create folders or binders. Then, you can store physical receipts, invoices, and other papers.
Consistency and attention to detail in recording transactions and maintaining records is critical. It will save you valuable time, hassle, and effort. This is especially true during tax season and when analyzing property performance.
2. Separate Business and Personal Finances
It is no surprise if you put your business and personal costs as one. It is easier for you, and it can save you time. However, keeping your rental property finances separate from your home finances is essential.
Not only does it contribute to your investment, but it also plays a role in your mental health. Studies show that 52% of Americans are stressed over finances.
Begin by opening a dedicated bank account for your rental property. Use it exclusively for all income and fees related to the property. This separation helps you track your rental income, expenses, and cash flow.
Over time, it is easier for you to analyze your property's financial performance.
It also simplifies tax preparation. You can smoothly identify and report rental income and deductibles to the authorities.
3. Track Income and Expenses in Detail
Detailed rental income and expense records are critical for an accurate account. You must track all sources of rental income. Your list should cover monthly rent, late fees, pet deposits, and any other fees charged to tenants.
On the expense side, categorize and record all costs associated with the property. Some of the most noticeable expenditures include:
- Mortgage payments
- Property taxes
- Repairs and maintenance
- Property management fees
- Advertising expenses
Be sure to save receipts and invoices for every transaction. They serve as supporting documentation and are necessary for precise financial reports.
Utilize Our Rental Property Accounting Tips Today
Accounting is the backbone of any business and is no different in real estate. After reading our guide, you know its importance and that it requires planning and hard work.
But now you also know it is not rocket science. With our three rental property accounting tips, you will have a successful future in Utah.
Get your free rental analysis today if you are ready to take your rental to the next level. We will handle all the hard work while you enjoy the rewards!