When it comes to real estate property you must know how to keep good records and managing your rental property at all times. If you buy one property, you might be able to get by with stuffing receipts and cancelled checks in a shoe box, but if you own multiple properties, you’ll need a better way to organize your finances or you will lost a lot of accounting.
No matter how little money you earn through rental income, you need to keep track of it for tax purposes. If you have only a handful of rental properties, you could probably track your rental income using a computer software program.
If you have an abundance of properties, you’ll probably be better off hiring an accountant. An accountant can not only free your time but also advise you on the best way to save on taxes and keep track of rental expenses.
Create a rent roll, listing the name of each tenant, the amount of rent paid , and the date when it was received. A rent roll enables you to keep track of your monthly rental income.
Set up a folder for each rental apartment or house you own. In this folder, put leases, correspondence with your tenants, and a maintenance log that shows when repairs were made, how much did the repairs cost, and when the repairs were completed.
By keeping such a setup, you can quickly track down documents as evidence in case you need to settle a dispute in court between you and a tenant.
Set up a separate checking account related to your rental properties. When you receive your rental checks, deposit them into this checking account. When you pay repair or maintenance bills related the the rental property, write a check from your rental checking account.
Now when you pay yourself, write a check to yourself from this checking account. By using a separate checking account, you can easily track the cash coming in and expenses rolling out. Then you can see how much money you’re making from your rental property. A separate checking account tracks your income and expenses for tax purposes also.
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