The rental market has been on an upswing over the past several years. Rent prices saw an increase of 8.4% between 2021 and 2022 alone. That means there is money to be made by landlords if you're smart with your finances.
But you need good real estate accounting if you want to see a good profit. Follow the rental property accounting advice below to do things right.
Track Every Transaction
You can't build the reports you need if you don't completely understand all the income and expenses in your property. Rental income tracking will help you understand how much rent you have coming in and what you have available for security deposits. Expenses tracking will help you understand where your money goes and how much net profit you have.
Make sure to keep receipts for all these items. Store them in your rental accounting software to categorize everything and build reports that give you a complete financial overview.
Avoid Mixing Finances
The last thing you want to do as a landlord is mix finances. Many new investors make this mistake and mix up their personal and business finances.
Although you can operate this way, it does make things much harder. You'll struggle more to separate transactions and report everything correctly. If you operate multiple properties, a great piece of landlord financial advice is to create separate financial accounts for each rental unit.
Automate Where Possible
You need to remove as much manual work as possible when running a rental business. Every minute you manually enter data is time away from more important tasks.
Luckily, there is a lot of software available to help. You can use accounting software to streamline your processes and property management software to connect rent payments and other financial tasks to your management process. These features will reduce your workload and lead to more accurate investment property finances.
Regularly Audit Records
Although you can greatly minimize mistakes by using software and creating standard procedures, there's always the chance of something being wrong. Unfortunately, a wrong number can lead to poor decisions and cause problems.
Take time to regularly review your records to look for problems. Verify all the numbers are correct and add up to what you expect.
Work With Experts
You can handle finances on your own. However, you may not want to spend the time to do everything required to do it right. The good news is that you have a solution to this problem.
Many property management companies have financial experts to help manage accounting records. Speak with property management experts to learn your options for outsourcing this task.
Rental Success Requires Great Rental Property Accounting
You need to get your numbers right if you want to run a successful rental business. Even if you follow all the great property management tips, you won't get far if you lose money each month and run out of cash. Make sure to follow the rental property accounting tips above to improve your books and create a successful future.
If finances aren't your expertise, having a reliable property management partner is what you need to get your property finances right. Our services at PMI Pheonix Metro will help you keep accurate books and manage the rest of your rental management needs. Contact our team today to learn more.
