Some people love numbers. They live and breathe them. Unfortunately, this is only true for some people, as others despise numbers.
As a landlord, numbers matter for many reasons. One of the top reasons is for your rental property accounting records.
You might enjoy every aspect of running your rental property business except this one. Yet, keeping accurate accounting records is vital.
Here are four reasons to keep good accounting records.
1. You Need Them for Taxes
Every business must pay taxes on their income. To do this for a rental property business, you must know your rental income and expenses. The difference reveals your business's net income.
You pay taxes on your net income. Therefore, you need accurate accounting records. This is a basic principle of landlord finances.
For example, you'll pay higher taxes if your records do not include all your expenses. On the other hand, you'll risk missing some of your tax obligations if you forget to include all of your income.
Property management firms offer this service. You can hire them to handle your accounting work and other tasks.
2. You Use Them for Budgeting
Your accounting records are also vital to budgeting properly. Keeping track of your income and expenses is crucial to maintaining a positive cash flow. Cash flow helps you have enough cash on hand to cover your debts.
Recording all your income and expenses provides a running total of cash. You can record these things with accounting software. You can also use the software to record unpaid bills.
Your software can also help you track your security deposits.
3. You Use Them to Reduce Expenses
Budgeting is essential for all businesses. You can print income and expense reports when you keep accurate accounting records. Then, you can use these reports to find ways to reduce your expenses.
Reducing expenses is something all businesses aim to do. You can compare how much you spent on various categories. Next, you can make plans to reduce some of these categories.
4. You Use Them to Determine Renovations
Property bookkeeping also helps you plan for major renovations. Renovating your properties is costly. However, it can help you make more money.
Keeping up with renovations increases property values. The result is higher rent for the properties. You can also attract better tenants by offering well-maintained properties.
Your accounting records help you determine if you can afford renovation projects. They also help you determine when to complete projects based on your current cash flow.
Hire a Property Manager to Handle Your Rental Property Accounting
Is your rental property accounting a stumbling block for you? If so, you're not alone.
Many landlords enjoy making repairs, filling vacant units, and handling tenant complaints. Unfortunately, accounting work is a challenge.
We can help you with this task and others.
PMI Lake Havasu is a real estate brokerage firm that also specializes in property management services. While part of a bigger franchise, we are locally owned and operated.
Get in touch with us to learn more!
