In the United States, in 2021, around 18.4% of home purchases were made by investors.
Owning property is a great way to make money; however, being a landlord is a lot of work. There are many tasks that you're going to be in charge of and one of them is finances.
Rental property accounting can be confusing and overwhelming if you've never managed rental properties before, but don't let that stop you from purchasing investment properties. We are going to tell you everything you need to know about handling your rental property accounting system. Read on so you don't lose track of your spending and profits.
One of the first things you're going to do is set up a different bank account for your investment properties. You want your personal and business accounts to be separate.
You can set up separate accounts for each property if that helps you keep things organized. It may be easier to do it that way in the beginning, so you evaluate each property individually.
Create A Budget
Creating a budget is crucial when it comes to rental property accounting and it will be hard to be successful without one. You need to keep track of how much money you spend and how much you have coming in every month.
Having a clear budget will also tell you how much you need to set aside for marketing, maintenance, repairs, and emergencies.
A budget will also tell you how much you need to charge in rent to break even and how much you need to make a profit. Tenant turnover is another thing that as a property manager, you'll need to think about. The time between renters can be costly if you aren't prepared.
Establish a Recording System
You should also set up a recording system so you can match each transaction with the correct tenant. Once you know how you're going to organize the recording system, it's important that you set time aside to ensure it's accurate.
If everything is organized, it shouldn't take you too long to check everything, and if something is off, you'll see it immediately. You may want to dedicate a few hours a week to properly recording all the transactions.
Work With A Professional
Working with a property management team can make handling the finances of your investment property much easier. They will have software specifically for rental properties and they will be able to share their knowledge of the industry, making it easier for you to learn. It will take a little bit of stress off your plate.
Rental Property Accounting
Rental property accounting doesn't have to be intimidating. Your goal for owning an investment property is going to be to make money and properly handling your finances can make or break your profits. Take the time to make an accounting plan and don't worry if you still have questions.
We have lots of experience working with investors and we are confident we can help you too. Contact us here and we will get you started.