A Beginner’s Guide to Rental Property Bookkeeping

rental property bookkeeping

Bringing an outside specialist onto your team will not only bring a fresh set of eyes but will also add an experienced tax professional who will get up to speed on your finances and avoid costly mistakes. There are a million apps and tools out there to help you digitize receipts and keep your documents in order. That’s true in life, and also true when it comes to real estate investing.

rental property bookkeeping

The Stessa Cash Management Visa® Debit Card is issued by Blue Ridge Bank, N.A., pursuant to a license from Visa U.S.A. Inc., and may be used everywhere Visa debit cards are accepted. Your funds are FDIC insured up to $250,000 through Blue Ridge Bank; Member FDIC. Having a CPA or accountant file your annual tax returns can be worth the cost. They’ll know how to use different depreciation schedules and can make sure you’re not overlooking deductions that can decrease your tax bill. When it comes to rental expenses, there are a few different ways you can categorize them.

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If you prefer to record income and expenses as they occur, you should use the accrual method regardless of when the cash is received or paid. Managing rental properties can be complex, but using the resources available to you can make that job a lot easier. If you have invested in rentals and are finding the financial aspects of being a landlord burdensome, let us help. Our financial management services are tailored to your needs to streamline your workflow and make sure your bookkeeping, accounting, and taxes are all in order so you can focus on making the most of your investment. You’ll use Form 1040 for your individual income tax return, but you’ll also need to report income and expenses for your rental properties. The form you’ll use to do this will depend on whether your rental properties are considered personal or real estate property rentals.

AppFolio has developed software with a suite of features a landlord would need to operate and grow their business remotely. 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. Download this rental property expense spreadsheet template to help you set up your rental property bookkeeping today. Learning what basic tax forms are used for what purposes will help your onboarding and bookkeeping processes run more smoothly. For now, a basic overview of W-9 and 1099 forms will be helpful, but be prepared to learn more about these requirements as you run your business. These forms will be necessary come tax time, and the penalties for not filing correctly are expensive.

AppFolio Property Manager

This article breaks down the basic principles of setting up an accounting system and automating it so that you can focus on what’s most important to you – generating income from your property. You’ll be light years ahead of the average investor who couldn’t even tell you if they’re turning a profit with their rental property! You certainly don’t have to become a full-time bookkeeper to keep things running smoothly. Once we had several properties under our belts (and multiple other streams of income), we switched over to Quickbooks. It has been great to keep everything in one place and is extremely powerful in allowing me to separate our different income streams, categorize expenses, and run hundreds of different reports.

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FreshBooks software also offers friendly customer service and excellent support when it comes to technical questions. According to FreshBooks’ website, utilizing the software saves an average of 16 hours every month. Now you know because you have accurate numbers to tell you what accounts are paid and how much money you are bringing in. FreshBooks gives useful financial insights to help you make important business decisions, including how much to charge in rent or when to invest in property upgrades. Imagine not having to send rent reminders or deposit rent checks anymore. Let Stessa onboard your tenants, send reminders when rent is due, give you real-time updates when rent is paid, while avoiding the hassles of third-party apps.

Related Property Management Software

Many real estate investors use a free online system like Stessa to automate income and expense tracking and generate personalized financial reports. We’ll start with the fun stuff first, which is the money that we bring in from our rental properties known as income. Rental property income can come in many forms, the most common being rent payments and prepaid or prorated rent payments.

  • This form will be used to calculate your owed taxes for that tax year.
  • On the flip side, you will also incur expenses when operating a rental property.
  • If you already have a Tenant Turner account, all you need to do is create an API key in Rentec Direct that you share with your support team at Tenant Turner.
  • Property management business owners likely view accounting as the least favorite part of their job.
  • You also need to keep track of any repairs or maintenance that needs to be done.

With this practice, every transaction is entered twice, once as a debit and once as a credit. A chart of accounts is a list of all assets, liabilities, equity, income, and expense accounts. Good property management accounting fundamentals, he says, ensures your books are balanced and you’ve rental property bookkeeping accounted for money tied to every single property you have. Cash basis accounting allows you to record earnings on the income statement when the money arrives. We share how to encourage on-time rent payments, streamline the rent collection process, and how to handle late payments.

Property Matrix surpasses other software programs due to its advanced features and customization muscle. It’s capable of managing complex accounting processes, minimizing workload, and eliminating the need for third-party accounting software. Besides the accounting features, Buildium also offers a lot of advanced features with easy-to-understand tutorials. Consulting specialized professionals in areas outside your expertise is the only surefire way to safeguard your business.