More than 3.2 million people live in Iowa, and many need apartment rentals. As a landlord, you aim to keep your units occupied. After all, you rely on rental income to pay your bills.
Rental income and expenses are the two primary aspects of rental property accounting. Of course, keeping good records is essential.
Are you struggling with this aspect of your rental property business? If so, it's essential that you start figuring it out.
Keep reading to learn the importance of effective rental property accounting.
Accurate Records Reveal Your Financial Health
What are some ways you can judge your business's success? There are many ways, but the primary method is reviewing your financials.
Rental property management requires accurately recording your:
- Rental income
- Property expenses
The difference is your net income. However, there are many ways to evaluate your financial health beyond net income.
For example, accurate records help you see where you spend money. Your records should include expense categories. You can compare the categories monthly or yearly to see the changes.
You can print monthly reports to see where you stand financially.
It Helps You Budget and Plan for Projects
You need accurate accounting records to budget. Budgeting is not a glamorous event. Yet, it's necessary for a rental property business.
You budget to ensure you can pay all the immediate, short-term expenses. Your budget also considers long-term expenses.
Additionally, you use your budget to determine when to handle projects. For example, does a building need new siding or brick? This project is costly, so you must budget for it in advance.
You'll also have other expenses, such as property taxes.
Creating a tenant portal can help you with your rental accounting records. Tenants use it to pay their rent electronically. You receive electronic records of all these payments, making them easier to track.
Budgeting also helps you manage other expenses. For example, your accounting records should track security deposits. When tenants move out, you may need to reimburse them for their security deposits.
Without proper bookkeeping methods, you might think you have enough money for these expenses. Unfortunately, you might discover you don't.
You Need It for Taxes
Tracking your accounting in real time helps you prepare for tax season. Your business must file taxes every year. Without good records, this will be challenging.
Tracking all your income throughout the year gives you the revenue you record on your taxes. Recording all the expenses during the year gives you a list of your write-offs.
When tax time comes around, you can complete your tax return quickly and without feeling stressed.
Get Professional Help With Your Rental Property Accounting
Rental property accounting is key to your success as a landlord, but it is a function many landlords struggle with. We can help if crunching those numbers is becoming a little tougher.
PMI of the Midlands is a reputable property management company. We have over 20 years of experience managing rental properties. We can help with accounting and other tasks.
Are you ready to get help? Reach out to us today to learn more!