Let’s face it: one of the most time-consuming parts of being a landlord is tracking expenses for rental properties. It’s one of those chores that no one intends to do. There is always something more pressing to attend to. That is, until it comes time to file a tax return, request a loan, or face the dreaded IRS audit. When you think you’ve figured it out, you realize an important receipt or bill is missing.
Keeping accurate records is critical for the peace of mind of any landlord. Having everything in order makes filing tax returns easier, and you won’t have to send the IRS any more money than necessary. You also know that each contractor or employee was paid in full by the due date. You keep track of your tenants’ payments. And, if audited, it will go much more quickly and smoothly if accurate records are kept.
Do you want to know how to keep track of rental property expenses? Here’s everything you need to know!
What records do landlords need to keep
An accurate record is just as important as timely rent collection. The bottom line is that your business relies on both. So, what are the essential records that a landlord must keep? The following are some of the essential documents:
- Copies of all tenant communications
- Leases for tenants (past and present)
- Court appearances, inspections, fines, and eviction notices
- Deeds of Property
- Loans, credit documents, and mortgage
- Taxes from previous years
- Insurance policies
You must also keep track of deductible expenses. When staff has an expense account, this becomes a little more complicated because they may not occur on a regular basis or are difficult to track. Some instances are:
- Compensation and benefits
- Rental payment documentation
- Expenses for the utilities, office, and supplies
- Fees for legal and accounting services
- Advertising expenses
- Property repairs and maintenance
Tracking rental property expenses
While hard copies of documents are still common, the digital transformation has urged an increasing number of landlords to switch to digital record-keeping. Given the number of records and paperwork in real estate, it makes sense to look for digital solutions that are industry-specific.
Property management and rent collection apps have many tools to assist you in keeping track of your finances, agreements, communications, and other details. Let’s take a look at how to keep track of rental property expenses and why invest in property management software.
Generate a bookkeeping procedure
Using a property accounting tool, you can track expenses and income on the same device where you manage your properties. Your dashboard is automatically updated with renter payments and repair costs for each rental home. You can also add new transactions gathered outside the app to keep track of your expenses and income in one place.
Each transaction specifies who paid, the date, the amount, the form of the transaction, and the rental property for which it was made. Uploading supporting documents is simple and convenient for future reference. When tax season arrives, you can transfer your rental property income and expenditure tracker to share with tax experts or further customize it.
Landlords and property managers are extremely busy and cannot spend all day at a desk. You must be aware of all business activities and have quick access to transactions and paperwork.
Examine income and expenses using bank statements
Disagreements between your financial documents and bank statements are possible. Check your financial documents on a regular basis to ensure that all of the information is correct, especially if you know how much definite expenses totaled. Doing so throughout the year will help you catch anything that needs to be adjusted and will make it easier to complete your tax forms.
You can easily create several different reports by tracking all expenses and income in an application. This is ideal when filing tax returns or preparing documents for an audit. You will be able to produce income expense reports, rental owner statements, cash flow statements, and balance sheets, among other things.
Importing and exporting
You can quickly send financial information to your accountant if you employ a property management app. You can also download them as a spreadsheet or PDF if you need to incorporate them in your tax returns. You can even install property-specific reports to gain a deeper understanding of your financial position.
Link your bank accounts
You can access—both incoming and outgoing—from your property management application by connecting your business bank account. This feature allows you to associate transactions with specific properties in order to better understand their profitability.
Set up recurring payments
You can set up recurring payments with a property management app. This is an excellent solution for making mortgage or other fixed payments—one less thing to worry about. Your renters can also set up automatic payments for their monthly rent. Several landlords have discovered that setting up automatic payments decreases the number of late rent payments significantly.
How landlords can cut rental property costs
Now that you know how to keep track of rental property expenses let’s look at how landlords can reduce rental property costs. Recognizing the financial aspects of rental properties is critical to the success of your investment. There are key ways to make sure you’re getting the highest return on your investment, from receiving rent each month to regular and preventative maintenance. After all, what landlord doesn’t want to lower rental property costs and save money?
Saving money doesn’t mean sacrificing your property or tenants; it means being business savvy. Everything you put into your property should be returned to you. If your property is in good condition and you provide excellent service to your tenants, there’s no reason why you shouldn’t command the highest market rent.
Here are some ideas for cutting costs and expenses on your investment property:
Check your tenants
It may seem obvious, but thoroughly checking the people who will be living in your investment property cannot be overstated. The small fee for a credit report and background check is well worth it. Knowing this information ahead of time increases your chances of having tenants who pay their monthly rent on time, respect your estate, and adhere to the rules outlined in your lease agreement.
Furthermore, correctly screening renters can save you money in the long run. If you do not screen your renters before they move in, you may face major issues such as evictions, property destruction, and other issues.
Hire a professional cleaners
Saving money is a major concern for rental property owners. Owners are sometimes so motivated to save money that they do the majority of the work themselves. When landlords do this, they are only concerned with the monetary costs of a task, ignoring the dangers of their do-it-yourself approach. Should a property owner devote time to cleaning a rental property on their own?
Should you devote that time to other aspects of your business and hire someone to clean the property? Consider which is more convenient: hiring someone to clean your property or hiring someone to help you grow your rental business. In this case, the latter is more difficult, implying that growing your own business is a more important function than cleaning your property. Here’s how hiring a professional cleaner can help you save a lot of money.
- Sve long-term expense
- Aids landlords in avoiding legal disputes
- Removes ambiguity
- Offers high-quality cleaning
- Employ specialized equipment and tools
- Save you time
Furthermore, landlords cannot predict when the estate will be ready for showing. This costs owners in terms of missed opportunities. Furthermore, professional cleaners do not require supervision; landlords can go about their business confident that a property will be cleaned to specification.
Express Home Maids will provide you with top-quality services when it comes to the linen sheets you will use during your stay. Our team ensures that it is clean and well-prepared before you arrive.
Understand tax benefits
Did you know that there are numerous tax breaks available to investors? Property owners can benefit from tax breaks on purchases, mortgage interest, operating and maintaining their property, and other expenses. Knowing about these deductions and working with a tax professional to help you navigate them is critical to getting the most out of your tax return.
Employ a property manager
Want to save money both now and in the future? Employ a professional. While property management does have a cost, the financial benefits outweigh the costs due to the numerous services they provide, many of which are included in your monthly fees. A property management firm will save you money on everything from marketing to screening tenants to performing routine and regular preventative maintenance, tighter rent collection processes, and legal help when needed.
Also, time is gold! Hiring a property management firm means delegating the numerous responsibilities of governing a property investment to a team of experts. It gives you the peace of mind that your investment property is in the hands of professionals, allowing you to focus on the things you enjoy.
What is another name for property manager?
Manage Homes As A Profession (RMP) General Manager of Real Estate (MPM) Provider of Certified Residential Management and Support (CSS) (CRMC)
There is no such thing as a typical day in the life of a landlord. Day-to-day tasks for any landlord become much easier with good organization, planning, and investing in people skills. You will also have enough time to deal with unexpected problems.