Owning a rental property in San Jose comes with multiple responsibilities, and accounting is arguably the most important. At the end of the day, every landlord wants to get paid. Without a keen eye on your books of accounts, your investment may not be as profitable as you'd expected, and can even fail.
Rental property accounting, however, requires a level of expertise and commitment that a significant number of San Jose landlords don't have. After investing in a property, it's essential to get familiar with what it means to be a bookkeeper.
In this article, we're sharing a handful of tips that will help you get a hang of property management accounting.
Separate Personal from Business Funds
You may have bought the rental property using your personal funds, but that doesn't mean you should mix up your finances going forward. If your tenants are making rent payments into your account just because you want to first recoup the money you used to pay for the property, you're making a major rental income management mistake.
Mixing up personal and business finances makes it difficult to keep track of your rental income. And if you keep paying for the property's operating expenses from the same account, you won't easily know how much money the property is consuming.
Separating personal and business funds is a bookkeeping best practice. Besides helping you to better monitor the asset's cash flow, managing the rental income from a separate account makes it easier to file taxes and make the most of the deductions landlords are entitled to.
Maintain Accurate Records
Purchasing a property involves a lot of paperwork, but that's nothing compared to the number of records you'll handle as a landlord. Rent payment receipts, maintenance and repair invoices, and expense reports are just a few of what you'll be dealing with every month.
Maintaining accurate records is important for two main reasons: makes verifying income and expenses a breeze, and you'll have physical proof when you need to claim tax deductions.
Plus, should you want to sell the property later on, you might need to provide these records to prospective buyers during the negotiation process.
Use Accounting Software
Real estate bookkeeping is a full-time job. That's why many businesses have in-house accountants. So, as a landlord, you might not have enough time to keep your books of accounts.
Before you think of hiring a bookkeeper, though, you can use accounting software for landlords to simplify and even automate most of your tasks. Good software can do the following tasks:
- Rent collection
- Sending reminders and billing late fees
- Automated bank feeds
- Generating invoices and statements
- Mileage tracking.
Do plenty of research and find software that meets your accounting needs.
Rental Property Accounting Simplified!
Don't let rental property accounting make your life miserable. With these quick tips, you're ready to start tackling your tasks like a pro.
However, if you're still struggling with it or don't feel you're well-equipped to take on bookkeeping tasks, why not outsource the job to a local property management company? Fireside Property Management has been serving San Jose landlords for over two decades. Our services also include tenant screening, property maintenance, rent collection, marketing, and eviction.
Get in touch with us to start enjoying our services!
