If you are one of the 50% of all American landlords who manage their own properties, you'll already know the importance of proper rental property accounting.
Accurate, timely accounting will ensure you can balance your books, track expenses, and manage your property tax liabilities. However, keeping on top of your accounting records is easier said than done. It's all too easy to fall behind, especially if you manage multiple properties.
If you want to avoid nasty surprises and get the most out of your investment property, make sure to avoid these costly property accounting mistakes.
Not Using Automation
In a world full of robust accounting software and automation, you should not be doing things the old-fashioned way. You can use a range of free and paid software for automatic expense tracking, bill payments, and even tax reporting.
By paying your bills manually and one at a time, you run the risk of missing payments and undermining your financial standing and credit. The technology is out there, so use it.
Leaving It Too Late
Oftentimes, people only take action when it's too late. Perhaps you have received an angry letter from the IRS regarding your investment property.
Perhaps you just received a late notice on a maintenance bill. While it is essential to take immediate action when these things happen, being reactive with your accounting is a recipe for disaster.
The most important thing you can do is to be organized and always balance your books and gather records ahead of time. This way, you won't be caught off-guard when you are hit with these routine requests.
Yes, it's important to remember that you can deduct expenses from your rental income tax. However, you need to do this the right way.
State law always lays out very clear guidance on which landlord expenses are actually tax deductible, and by how much. It is very common for rookie landlords to try and deduct everything they consider to be an expense and hope for the best.
However, incorrect or even misleading deductions can lead to huge tax bills, fines, and even legal action from the IRS. Always be very careful about what you choose to write off.
Proper rental accounting depends on robust record-keeping. You should always assume that one day you will need to provide every shred of evidence from your entire career as a landlord.
This means that all of your rent payments, tax payments, bills, and receipts should be accessible and organized.
Failure to produce the required documentation will make it much more difficult to deal with the IRS and keep on top of your own finances. Remember, documentation is everything.
Professional Rental Property Accounting Made Easy
Rental property accounting is stressful. You need to keep track of a million different things; always be proactive and never lose sight of a single penny.
However, it doesn't have to be this way. By relying on professional rental accounting services, you can take the stress out of your hands completely
A Harland Property Management, we can take your investment and make it work for you, taking care of all of the financial admin in the process. You can click here to find out exactly how we help San Deigo landlords just like you.