A landlord's list of things to do is long:
- Perform routine maintenance
- Collect rent
- Respond to emails
- Fix the leaky faucet in unit 102
These are just a few tasks, but there are many others, including rental property accounting. Accounting is daunting to many people, and you might also feel this way, but it's vital.
As a landlord, you'll need to handle your rental property accounting. Here are some of the reasons your accounting is so crucial.
Tracking Income and Expenses
The basic principles of rental property accounting involve recording your rental income and expenses. Your income is the money you collect from your tenants for rent, and you must record every penny.
Your rental expenses include various costs of operating your business, including utility bills, repairs, and marketing. You can write these off to save money on your taxes.
You can use a tenant portal to help you improve your rent collection process and hire a property management firm to reduce your workload.
Tax Compliance
Recording your accounting records helps you stay tax-compliant. You must record your income and expenses for tax purposes, as you are required to pay income taxes.
Fortunately, your expenses can reduce your taxable income. You can also add additional expenses to your tax returns, such as property depreciation.
Cash Flow Management
Failing to collect rent can impede your business's cash flow. This happens when you have delinquent tenants you must evict, and from having vacant apartments.
Tracking your accounting records helps you avoid cash flow issues. You can use the records to predict and avoid potential problems.
Cash flow is something every landlord thinks about. It tells you if you have enough cash coming in to cover your financial responsibilities.
Budgeting and Forecasting
Your accounting records also help you create accurate budgets. A budget is vital, as it tells you how much money you expect to collect and how much money you expect to spend on your expenses.
You use this information to make important financial decisions. For example, you can use it to determine when to update your rental properties.
Identifying Inefficiencies
Finally, your accounting records help you spot problems in your business. These records help you spot categories where spending is too high. You can use the records to make decisions about cutting expenses.
You might also use them to make outsourcing decisions. You might realize you need professional help to improve your company's finances. You can get this help by hiring a property manager.
Rental Property Accounting Is Key to Managing Your Finances
Rental property accounting isn't a glamorous task, but it is essential. You need it for budgeting, tracking expenses, staying tax-compliant, and much more.
The good news is you don't have to do it alone. You can hire it out.
PMI Jacksonville is a full-service property management firm that can handle your rental property accounting. However, accounting isn't our only specialty.
We handle every aspect of property management for rental property owners like you. Our friendly and prompt services can provide the boost your company needs.
Get in touch with us today to learn more about our services.
