Did you know that the median household income in Boca Raton, Florida, is $94,251? The area has a reputation for being a wealthy community, which is great for rental property owners looking to make passive income.
As a first-time landlord, you might feel in the weeds when it comes to finances. This is normal. Accounting and financial reporting get easier when you develop a strategy that works for you.
Keep reading to learn the best tips for navigating rental property accounting.
Create Business Bank Accounts
The first step of rental property accounting should always be to open a business bank account. The IRS treats rental properties like a business, so it's important to create a separate financial identity.
Avoid commingling your personal and business finances. Keeping your accounts separate provides clear and simple record-keeping so you can reconcile your income and expenses.
Make a Plan for Tracking Income and Expenses
To manage bookkeeping and property finances, decide how to track income and expenses. Stick with this plan to avoid confusion, especially if you want to reinvest your income to diversify your portfolio.
You can create a spreadsheet yourself, but the best plan of action is to use accounting software. Digitizing the accounting process reduces the chances of human error to keep your records accurate.
If you hire a property manager to handle landlord finances, they will likely have a program that they are already familiar with. Property management services will ensure good bookkeeping practices.
Establish a Budget
Tracking rental income and expenses is essential to good rental property accounting best practices. However, there is more to it than that.
It's important to establish a budget when setting up your rental business. Plan a budget with these costs in mind:
- Maintenance and repairs
- Vacancy rates
- Property management services
- Insurance
- Bank fees
- Property taxes
Planning ahead of time for capital improvements and major expenses will help with overall financial management.
Manage Your Documents
Property taxes can be complicated if you don't keep your accounting documents in order. It becomes even more of a headache if you are audited by the IRS.
You can choose where you want to store your documents. The important thing is that you know where to find them. Most landlords utilize an app or spreadsheet for document storage. Owner and tenant portals can also help.
If you want to take out a loan against your property or sell it in the future, you'll need a rent roll. Without good recordkeeping management, you might not have access to your important documents.
Rental Property Accounting Made Easy
If you believe that there is nothing easy about rental property accounting, think again! At PMI Beach Properties, we handle your accounting and reporting efforts for you.
Our full-service property management company in Boca Raton, Florida, has over 20 years of experience helping landlords like you. Our mission is to provide excellent customer service and maximize your financial potential.
We handle rent collection, financial statements, and other beneficial services to make success a reality. Contact us today to get started.
