Simple template for rental property accounting?

Include the utility bill paid by the tenant and any amount received as a rent payment in your rental income. The most obvious approach to rental property accounting is to take the reins and do the work yourself. This option is viable if you have the time, energy, and expertise to record transactions, maintain documents, and comply with tax duties.

The latest real estate investing content delivered straight to your inbox. In deciding the best approach, first and foremost consider your financial situation, goals, and needs. Parents often say, I’m leaving the house to my kids, but I don’t care what they do with it. Assume, for example, that an individual died ‘house poor’ with virtually no liquid assets and a multi-million dollar home.

Learn more about Finance Management

While it’s certainly possible to keep track of rental property expenses by hand in a general ledger, there’s really no reason to do so. Zillow has a free rental income and expense worksheet that works with Microsoft Excel that you can customize to suit your specific needs. Create a bank account for each individual rental property, along with a debit card or credit card. This makes it easier to track transactions by property and avoids the risk of commingling your personal expenses with your business expenses.

Stay current with the changes in tax code that will impact what you can and should deduct. And remember that your tax strategy needs to be intertwined with your business strategy. A knowledgeable CPA and advisor is your best friend, but you can also stay up to date by checking out Buildium’s 2022 Tax Guide for Property Managers. Keeping accurate, up-to-date books affords you the opportunity to look over all of your finances at once to find opportunities to save money.

The Benefits of a Savings Account

Plus, if your tenants pay rent and other fees online, you may be able to automate the recording of these payments so you don’t have to input them manually. With a few simple systems in place, you can be sure you are accounting for all your income and expenses and can be confident in your financial analysis. Finally, we investigated each company’s history in the market and their reputation for customer service and reliability. Stessa is perfect for landlords and investors who want to manage their assets and track their finances by focusing on key metrics. However, it has a limited amount of features and is not fit for professional or enterprise-level users.

• Check with your accountant for the best practice, then be consistent with how you treat the expense each year you file Schedule E on your 1040 tax return.
• It comes with Core and Plus plans to match the budget and complexity needs of varying users, earning our rating as the best overall accounting software for landlords.
• QUICKEN for RENTAL was written by very young programmers without any adult supervision.
• Having a good accounting system in place reduces the risk that you’ll forget to report income, or over-report expenses, two mistakes that can get you in trouble with the IRS.

It’s capable of managing complex accounting processes, minimizing workload, and eliminating the need for third-party accounting software. Our choice for best overall, AppFolio, comes with basic and advanced features, making it accessible to landlords who do their own accounting and to beginner and advanced accountants and bookkeepers alike. Depending on the size of your property and the number of tenants that you have, running a real estate rental could amount to a full-time job.

Track and Categorize Expenses Regularly

If you can link your accounting software to the bank account for each entity, it will make the monthly cycle at least 240% easier. Instead of laboring to enter in each line of the statement, you rental property bookkeeping can just verify that the imported transactions are applied to the right accounts. You recognize revenue for all rents received and expenses for maintenance, landscaping, and other cash outflows.

• In cash-basis accounting, transactions are recorded when money is received or paid.
• And, of course, you need to know your way around accounting software and how to analyze financial information.
• An accountant is valuable if you run a large rental property business or need specialized services and advice during the year.
• Online rent collection is fast, secure, and reduces the chance of late and missed rent payments.
• It enables you to maximize your rental income, keep your expenses in check, and keep your tax bill low.