Rental Property Bookkeeping Tips For Landlords

Save yourself time and hassle by centralizing your processes with easy documentation, automation, work order management, and robust accounting features. Nowadays, property managers and landlords need a more customized solution to handle the increasing demands of managing properties at scale. Note that the sample Schedule E below does not have an expense line item for the mortgage payment, only for mortgage interest. That’s because interest on the mortgage is tax-deductible for real estate investors, while the mortgage principal payment reduces the mortgage liability you have on the balance sheet.

Good accounting is more than tracking income and expenses — it’s also about good financial management. When setting up your accounting system, you should also establish a budget for your rental home. SimplifyEm is a property management software geared toward small- to mid-sized businesses. Its communication and reminders features are particularly lauded as making the process of creating invoices and collecting and tracking payments easier. Rent Manager is a dedicated rental property management software with a robust set of features.

Best Accounting Software for Rental Properties of 2023

Whereas if you use accrual accounting, you’ll denote when the rent payment is due. Keeping detailed and accurate accounts is vital when managing properties. The advanced plan costs $200 per month and can be accessed by more than 5 users.

• With these reports you can learn invaluable things, like where you are spending too much money which can help keep your properties in the green.
• While his real estate business runs on autopilot, he writes articles to help other investors grow and manage their real estate portfolios.
• If you’re looking to maximize returns on your real estate investment, it’s important to understand the basics of accounting for rental property.
• You also need to understand the difference between improvements and repairs.
• Nobody enjoys using complex software or doing mind-numbing repetitive data entry.
• So, it is advisable to take the help of the landlord account to record the expenses and ultimately avoid any legal issues.

Managing your rental property income doesn’t have to be time-consuming. Here are three steps to help you manage your finances and stay on top of important rental property bookkeeping transactions. Supporting documents provide evidence in the event of a tax audit by the IRS that the expenses you claimed for your business are valid.

What Is Accounting Software for Rental Properties?

It has good accessibility, cloud-based desktop and mobile app versions, and solid customization settings. Reconciling is the process of comparing your property bank statement to your financial statements for the rental property. If they don’t, figure out where the error occurred and correct the mistake. When you reconcile your accounts monthly, preparing year-end financials at tax time will be stress-free. With Landlord Studio, you can track and create income vs. expense reports to easily manage your finances.

Many property management software platforms like Innago also have accounting capabilities that can help you manage your rental finances. Schedule E tax reports are built into Baselane accounting software for rental property management. Rental bookkeeping software creates a custom chart of accounts in a single click. Baselane captures every line item with bookkeeping software for rental property management so you can focus on expanding your portfolio.

Track expenses and rent payments on your rental properties

It is strongly encouraged for business owners to go digital for all things accounting and bookkeeping. Property managers often handle bookkeeping in addition to other tasks, such as filling vacancies, collecting rent, and managing maintenance requests. But the smartest move is to set up both a checking account for each of your properties to manage most of the finances, and a separate savings for each of your properties to manage deposits. For one, you don’t want to commingle deposit money with other income, and also, many states actually mandate separate, dedicated accounts for deposits. It should go without saying, but seek out a tax professional with expertise in real estate investing; that will reduce the chances you’ll accidentally underpay or overpay your taxes. Staying on top of these things provides a number of other benefits, too.

Assigning one bank account for each rental property ensures landlords can accurately track their finances. It also assists landlords by separating their business financials from personal expenses. Maintaining precise records of each rental property’s costs is the first step in efficiently managing your property’s finances.