Atlanta has one of the hottest real estate markets in the country. That is good for property owners and investors, but it also means increased competition. To be successful, landlords must put their best foot forward and manage resources effectively.
That is why rental property accounting is so important. It helps you plan for anticipated and unexpected expenses. If you lack a background in accounting or finance, it can be difficult to know where to start.
Below are some landlord accounting tips. This information will help you get organized and ensure the financial health of your Atlanta real estate business. Keep reading to learn more.
Keep Separate Business Accounts
Landlords who only have a single property or who get into real estate as a side business often fall into this trap. They fail to see the value in having separate personal and business accounts. From an accounting perspective, there are many advantages to doing so.
The main one is financial organization. It helps keep your business income and expenses separate from your personal life. This makes budgeting and financial planning much simpler.
It is also good for record-keeping purposes. It will make filing taxes simpler and provide a basic level of legal and liability protection. For instance, it shields your personal finances from legal disputes.
Detailed Reporting
Make reporting a regular part of your rental property accounting practices. Reconcile monthly bank statements with your accounting records. This will help identify discrepancies and errors.
Generate basic reports such as profit and loss statements, cash flow statements, and balance sheets.
Detailed real estate bookkeeping will give you a clearer picture of your financial health. It also lets you make more informed decisions about how to manage properties.
Property Expense Management
Expense management is a major component of successful rental property accounting. There is no single method of keeping up with what money is going out, but breaking expenses down into major categories is a good place to start.
Keep maintenance costs, like pest control, separate from utilities. Set aside money every month for property repairs, improvement projects, and unexpected emergencies. Some simple budgeting can help you manage the money that is in your account and plan for the future.
Accurate Rental Income Tracking
On a basic level, detailed income tracking is vital for cash-flow management. It helps you keep up with what tenants have paid, identify outstanding payments, and keep track of late-payment penalties.
There are other reasons to do meticulous income tracking though. One is that you must report accurate rental income for tax purposes. It also ensures you have enough funds to pay mortgages or other loans, keeping you in good standing with lenders.
Finally, accurate income tracking lets you evaluate the performance of distinct real estate investments. It can help you make better decisions about managing assets.
Understand Your Tax Obligations
Understanding the tax obligations of your rental property is crucial for several reasons. Failing to do so could impact the profitability of your business.
First, you must comply with legal requirements. Failure to abide by federal or state tax laws on rental income can result in penalties, fines, and interest on unpaid taxes.
Maximizing tax credits and deductions is another important part of real estate accounting. You should be writing off mortgage interest, property depreciation, maintenance, repairs, and other expenses every year. This will lower your taxable income.
Tax obligations should also inform investment planning. Understanding the tax implications of buying, selling, or renovating properties can help you plan better. The same goes for capital gains and property transfers.
Tenant Communication
Tenant communication can be an important part of rental property accounting. Consistent and professional communication with renters ensures they are aware of their financial obligations. This includes things like when rent or other payments are due, as well as any changes, such as rent increases.
Good tenant communication can also keep them informed about maintenance schedules. For instance, it ensures that contractors or pest control technicians can access the property when they need to.
Failing to do so could lead to wasted service call fees, not to mention time rescheduling needed repairs or services. This may seem like a small thing, but these expenses can start to add up over time.
Use Accounting Software
Accounting software has many benefits. One is that it makes tracking income and expenses seamless. It also gives you real-time updates on transactions, ensuring you always have the most up-to-date information.
It also lets you simplify tax reporting. Some programs can identify deductions, tracking them throughout the year. This too can help ensure compliance with federal and state regulations.
Another benefit of accounting software is that many programs include automated rent collection. This eliminates the need for manual collection, which is a huge convenience for landlords and tenants alike. You can also use it to send invoices to renters.
Most programs will also integrate with banking and customer relational management programs. It is easy to see how all this can save you lots of time.
Hire a Professional
If you feel overwhelmed by rental property accounting, consider turning to professionals. A property management company well-versed in real estate accounting can offer specialized expertise. They can limit the potential for errors, so you have accurate, consistent financial reporting.
Experienced companies will also have access to the latest technology. This gives you access to the most innovative programs for better financial tracking. It can also help with reporting and analytics.
This can save you time and eliminate stress associated with staying on top of accounting. It frees you up to focus on more important aspects of running your business.
Find Rental Property Accounting Services Near You
Now that you have some rental property accounting tips, you can put policies and plans in place. Meticulous property management accounting can go a long way toward ensuring the financial success of your real estate business.
Platinum Property Management Services provides comprehensive residential management in the Atlanta area. We pride ourselves on offering the highest quality resources to landlords, investors, and tenants.
Reach out to us today to schedule a free consultation.
