Rental Property Accounting 101: What Landlords Should Know

• You can create a new checking account (or business account if you have an LLC) to have all your rental income deposited and to use to cover operating expenses.
• After a customer pays their balance, it can typically take up to 10 days to actually receive your money using other payment vendors.
• You should track income on the property based on class tracking for real estate.
• While rental income technically qualifies as passive income, it requires considerable time investment on your side.

We’re going to go out on a limb and assume that tasks like tracking your income and expenses, and paying business taxes, aren’t your favorite parts of real estate investing. In fact, it’s probably safe to say no business owner is exactly wild about these things. Rental property accounting, when done correctly, brings about valuable benefits for any business owner. Advantages include safeguarding your business against debt or fraud, forecasting future expenses, and saving time and resources during tax season. Rental property owners can use bookkeeping to their advantage to track the financial flows for each property so that they can fine-tune their operations. Everything from automatic payments and withdrawals to reminders can be automated.

How to establish rental property bookkeeping and accounting:

However, setting up a strong rental property accounting system is a must to run a well-oiled real estate business and make sure you get the most out of your investments. Furthermore, learning accounting basics and setting up an efficient accounting system early on will give you the time to focus on profit-making activities. The rent roll lists all of the tenants in a rental property and their respective rental amounts and payment due dates.

With accurate transactions and categories, you won’t forget to report any income (which could create trouble with the IRS), or expenses (which will cost you tax savings). Baselane rental property accounting software is available on mobile devices. Bookkeeping processes have come a long way since the days where everything had to be done on paper. Fortunately, now there are plenty of digital tools that can help make bookkeeping much more efficient.