Essential Property Accounting Tips for Real Estate Investors

Essential Property Accounting Tips for Real Estate Investors

Around 65% of people under the age of 35 rent in the United States.

This is why the rental property market is so profitable and reliable for investors. Whether you’re looking for a rental apartment or a rental home, investment property is always a good idea.

Property accounting is one of the most important aspects of managing your property. This is because managing your finances well can streamline the management process and allow you to spot issues that you can work on in the future.

Interested in learning more about property management? Here are a few of the best accounting tips to keep in mind.

Tracking Rental Income

As a real estate investor, your primary source of revenue comes from rent. To help keep track of all your rental income, create a separate bank account for the property. This will help you track incoming rent but also lets you manage your property finances separately.

When your property finances start mixing with your personal finances, things can get complicated very quickly. Having a separate bank account with separate bank statements makes this a whole lot easier.

Property Maintenance

Maintenance is one of the most notable expenses that landlords need to account for. The best part about maintenance expenses is that they can be deducted from your rental income when it comes to tax calculations. This is why it’s so important to keep track of every cent you spend on maintaining your rental property.

Property Taxes

Depending on what state you’re in, property taxes can vary. It’s important to have a good understanding of what property taxes you need to pay every month or year. Make sure to pay these taxes on time and use your property bank account for them.

This way you can keep track of all income and expenses in a single place.

Income Statements

An income statement is essential for all businesses. This statement clearly highlights the income that you received from the property for that year along with all the expenses you had to pay. This helps you calculate your net profit, your tax liability, and your overall return for the year.

This document is incredibly helpful to see how your investment is doing, all on a single page.

Total Returns

As an investor, you want to ensure that your capital investment is providing you with a decent return. This is why you should use the income statement that you drafted to help calculate your total return for the year.

To find your actual return, take your net profit for the year and divide it by your capital investment. You can then take this number and multiply it by 100 to get your return as a percentage. The formula should look something like this:

Return Percentage = (Net Profit / Capital Invested) x 100

If your return is greater than what you would get in a savings account at the bank, you know you’ve made a great decision. When your returns are lower, it’s a clear sign that you need to increase your rent prices.

Property Account Help for Your Investment Property

With the right property accounting tips, you’ll be able to manage your property like a pro. However, property management companies also offer a wide range of services to make your life easier. This includes reliable property accounting services that can help save you time and money.

Contact us today for more information on how we can help you!

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