You must monitor your rental property expenses if you’re a property manager or landlord. Knowing your expenses will be helpful for tax purposes, but you’ll also get an idea of your cash flow. As a result, you’ll be able to make more strategic decisions for your rental business. Here are five straightforward methods of tracking rental expenditure:
Keep a Separate Bank Account for Rental Property Expenses
This may seem like a no-brainer, but having a separate bank account for your rental property business is important. This will make it much easier to track your expenses and see where your money is going. You can set up a separate business account at most banks and credit unions, and some online banks offer special accounts for businesses.
There are a few things you can do to make the process of separating your bank account for rental property expenses easier:
- Make sure that the account is specifically for your rental property business. This will make tracking your expenses easier and seeing where your money is going.
- Use online banking to access your account. This will make it easy to track your expenses regularly.
- Set up automatic payments for your rent, mortgage, and other recurring bills. This will help ensure that your rent and other expenses are paid on time.
- Keep a record of your transactions in a spreadsheet or a dedicated accounting software program. This will help you keep track of your expenses over time.
Use Accounting Software
There are a lot of great accounting software programs out there that can make tracking expenses a breeze. Accounting software can save you a lot of time by automatically categorizing your expenses and generating reports that show you where your money is going.
There are a lot of great benefits to using accounting software for tracking your rental property expenses. Some key benefits include the following:
Automatic Categorization of Expenses
This can save you a lot of time by automatically categorizing your expenses into the appropriate categories. This will help you keep track of your spending and see where your money is going.
Accounting software can generate detailed reports showing how your business performs to help you make more strategic decisions for your rental property business.
Ease of Use
Many accounting software programs are easy to use and are designed for business owners like you. This means that you’ll be able to quickly learn how to use the program and start tracking your expenses right away.
Many accounting software programs are affordable and can fit into any budget. This means you don’t have to break the bank to get the tools you need to track your expenses.
Most accounting software programs are flexible and can be customized to meet your specific needs. You can tailor the program to fit your unique business requirements.
Set Up a Tracking System for Each Property
If you own multiple rental properties, setting up a tracking system for each one is important. This way, you can see exactly where your money is being spent. You can use something as simple as an Excel spreadsheet or Google Sheets.
If you are implementing a Bring Your Own Device (BYOD) policy for your business, it is advisable to download remote desktop software to easily access your files from anywhere. This is also a great way for your employees to work remotely and, at the same time, have access to all the same files.
There are a few things you should keep in mind when setting up a tracking system for your rental properties:
- Be sure to include all the necessary information for each property, such as the address, square footage, number of bedrooms/bathrooms, and monthly rent amount.
- Include a column for each month so you can track your expenses every month.
- Include a column for each type of expense, such as mortgage/rent, utilities, insurance, repairs/maintenance, and property management fees.
- Keep track of all receipts and invoices so you can easily reference them when needed.
Keep Detailed Receipts and Documentation
Keeping detailed receipts and documentation for all your rental property expenses will help if you ever need to prove an expense to the IRS.
It would help if you kept all your documentation organized in one place, whether in a physical folder or an electronic file on your computer. Be sure to include the following information for each expense:
- Date of purchase
- Description of purchase
- Amount of purchase
- Method of payment (cash, check, credit card)
- Reference number (receipt number, invoice number, etc.)
File all your documentation chronologically to easily find what you’re looking for. The good idea is to digitize your documentation so you can easily search for specific keywords.
Hire a Property Management Company
If keeping track of all your rental property expenses sounds like too much work, consider hiring a property management company. A good property management company will handle all your rentals, including advertising, screening tenants, collecting rent, and maintaining the property.
While there is a fee involved in hiring a property management company, doing so can save you time and money in the long run by taking care of all the details for you. Other benefits of hiring a property management expert are:
Hiring a property management company may be your solution if you feel overwhelmed by the prospect of managing your own rental properties. A good property management company will cover your details, including advertising, screening tenants, collecting rent, and maintaining the property. This can save you time and money in the long run.
Other benefits of hiring a property management company include the following:
- They have extensive experience in the rental industry and know how to handle all types of situations that may arise.
- They have a large network of resources they can draw from, such as contractors and service providers.
- They are well-versed in landlord/tenant law and know what is required by law in your area.
- They can help you maximize your profits and minimize your losses.
- They can take care of all the paperwork and filing associated with owning rental properties.
- They are experts in accounting and bookkeeping, so they can help you stay on top of your finances.
- They keep up with the latest trends in the rental industry, so you don’t have to.
Hiring a property management company is a wise decision for any rental property owner. They can take care of everything for you so you can relax and enjoy the benefits of owning rental properties without worrying about day-to-day operations.
Tracking your rental property expenses doesn’t have to be complicated or time-consuming. There are plenty of easy ways to do it! By following these tips, you can easily stay on top of your expenses and ensure your rental property business is running smoothly.