You have an ongoing list of tasks to complete for your rental properties. You might feel tired and worn out after completing them and not have time for the extras.
Rental property accounting is one duty you might consider an extra. It's one of those tasks you know you must do but aren't looking forward to. Unfortunately, rental property accounting is a critical duty for rental property owners, and it's something you have to do.
Here are some tips to help you with this task.
Choose the Cash or Accrual Accounting Method
Accounting is the process of recording a business's financial transactions. You must open a separate rental property banking account and spend time handling the activities. You'll also need to choose between the cash and accrual accounting methods for recording the transactions.
The cash method records transactions when you receive or spend money. The accrual method records transactions when they occur, not when you exchange money.
Create Accounts
Next, create accounts to record the information. This is called a chart of accounts.
Start with a rental property income account. This account is where you will record all the money you earn from rental income.
You'll also need expense accounts to record your rental property expenses into categories. Categorizing them helps you see where you spent your money.
Record Everything on Paper or With Software
Accounting also requires a system. Some people still record their financial details on paper, while other business owners use rental property accounting software.
Software simplifies the process once you understand how to use it. It also stores and analyzes the information. You can use it to print financial statements, such as income statements, as well as for your rental property taxes and other purposes.
Analyze the Information
The first step of handling your accounting is recording the income and expenses. This step is vital, but the second step is also important.
The next step is to learn how to analyze the information you record. You can do this in several ways. For example, review the amounts you spend on different expense categories. By analyzing these details, you might find ways to cut your costs.
Another example is comparing your rental income each month. If your income decreases, look for ways to decrease vacancy rates. Decreasing vacancy helps you increase income.
Also, use the information to make major decisions. For example, do you need help managing your stress levels? If so, hire a property manager to handle some of your business duties.
Seek Help With Rental Property Accounting
Your rental property accounting records are useful and critical. You use them for budgeting, forecasting, and tax preparation. Therefore, tracking them well is vital for your rental property business. The good news is you can get help with this duty by hiring a property management firm in Marietta, GA.
PMI Cobb has a team of experts that can help. We have over 30 years of experience in the real estate industry and focus on providing excellent services to residential and commercial property owners. Get in touch with us to learn how we can help.
