5 Tips for Tracking Rental Property Expenses
If you own and oversee multiple investment properties, you are responsible for managing several income streams and allocating funds for various necessities. For instance, you might pay for cleaning services from Complete Care Maintenance, hire a handyman to handle repairs, and cover the costs to install new appliances. Failing to track your expenses properly can result in financial hardship down the road. Here’s how to stay on top of your investment property expenses to make the right financial decisions for your business.
Form an LLC
Forming a limited liability company for your rental property business will make it easier to manage your finances. Plus, this business structure will grant you all kinds of benefits. For instance, you can protect your personal assets from litigation with this status. In order to file for an LLC in New Jersey, you can work with a lawyer, but this requires considerable fees. Instead, you can file through an affordable online formation service in order to save money.
Expenses to Track
Which expenses should you be tracking? Naturally, you’ll need to keep track of expenditures for maintenance, repairs, landscaping, and property management cleaning services. Regular maintenance and cleaning will keep your tenants happy! You will also need to record fixed costs, such as your mortgage, property taxes, and any insurance policies you have taken out on the property. Finally, if you pay for web hosting for your rental business or pay to place online ads for your properties, don’t forget to include figures for these costs. In real estate, even minor expenses can add up over time.
You don’t need to track your expenses by jotting notes down with pen and paper. Instead, you can use different software programs to automatically record your income and expenses. For instance, you can purchase comprehensive property management software. Rentrax suggests looking for property management software that offers features like profit and expense tracking, document management support, tenant screenings, and maintenance scheduling. In addition, bookkeeping software that includes an invoicing function makes it easier to pay your contractors and prepare tax statements.
Ideally, you’ll be able to find a software program that allows you to automatically create various financial statements. This can be very useful when it’s time to report your income and pay your taxes. Bigger Pockets recommends creating documents like rental owner statements, income expense reports, cash flow statements, and balance sheets.
Creating clear financial documents will help you determine how much money you’re actually making off of your investment properties. You’ll be able to see areas where you should reduce costs, and you can also figure out whether or not you have the funds available to renovate your current properties in order to increase rent or even invest in additional properties.
Filing your taxes on your own can be complicated. While it might be tempting to use software that allows you to file taxes by yourself, you might have complex questions that only a specialist will be able to answer. Therefore, it’s a good idea to work with an accountant who specializes in real estate businesses. You’ll enjoy peace of mind knowing that you’re working with an industry expert. You will need to report all of the income you received from your investment properties, and you may also be able to deduct certain expenses.
Real estate income from investment properties is anything but passive! In order to maximize the return on your investment, you need to be financially savvy. With these tips, you’ll be able to track every penny of your expenses so that you can budget accurately and maintain a sustainable source of income for years to come.
Need a cleaning service for your commercial or residential properties? Complete Care Maintenance can get the job done! Call us today at 609-275-8227 to book our services.
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