Managing properties is much more than fixing and repairing a few things here and there for your renters. When it comes to rental properties, it is vital to take the time to create a strong accounting system to prevent missing payments and late rental deposits. Managing your finances effectively will aid in preventing problems when there are issues related to your tenants’ needs such as repairing broken appliances or renovating the property. Here are some tips to help you with rental property accounting.
Tip # 1 – Use an Effective Software Program
Tracking your finances is important to ensure you know where your money is going. There are multiple accounting programs to consider, especially if you have more than one or two properties. Spreadsheets like Excel can provide effective ways to track a few properties by auto-calculating totals from spending categories, allowing you to see your gross income, net income, and expenses. However, modern tracking systems like QuickBooks allow you to easily manage your income and expenses from your rental properties.
One of the benefits of using software programs is how easy it is to manage rental transactions. The software allows you to set up properties with multiple sub-customers as tenants. There are classes to track transaction types along with easy invoicing options allowing tenants to pay online or set up automatic ACH withdrawal.
Property management firms normally have internal accounting programs and methods designed to streamline business tasks and effectively manage rental properties. Working with a property management firm is a smart decision if you are overwhelmed by the amount of work that needs to be done to manage the finances of your rental property.
Tip # 2 – Create a Spending Management Method
One area that tends to cause issues for property managers is when they are spending more than they can afford. Creating a spend management program prevents you from losing your finances to overspending. If you have employees, use a spending management method to ensure expenses are entered correctly. Keeping a tighter control over the spending can allow you to make smarter buying decisions.
Create a list of preferred vendors and products so you know exactly how much everything costs and you work with companies or individuals that can help to provide you with quality products and services. Staying prepared for purchases can help to avoid expensive investments in new appliances or other things that may cost more than you initially expect.
Tip # 3 – Set up Automatic Payments
One of the largest challenges facing landlords is when they need to collect rent. While some tenants are great about paying on time, there are several that will not pay on time or pay the full amount due. It is important to discuss automatic payments with your tenants and set them up on an automatic ACH withdrawal if possible. Creating automatic payments makes it much easier for landlords to ensure money is in the account. It is easier for landlords to know which tenants to have conversations with if they do miss their payment, or fail to pay the full amount. Online payments need to be secured to prevent sensitive financial data from being compromised. Failure to protect your accounts and your tenants personal and financial information can leave you vulnerable to lawsuits and other issues.
Tip # 4 – Use a Forecasting Method
It is vital to forecast expenses to prevent expensive purchases from draining your accounts. A forecasting method is an essential aspect of being a quality landlord as it allows you to mitigate risk. Watch your current expenses and use them as a guideline to help you predict when you will need to make larger purchases like new appliances or remodeling.
Tip # 5 – Prepare for Weather
Utah weather is typically hot, but it has a cold, long winter each year. Provo is one area that you need to be careful about with snow as the roadways can back up quickly and accidents occur. Your tenants deserve to have a home where they can drive into and out of the area easily and safely. Do you have a company or individuals hired to help with snow removal and other weather-related issues? Always have a budget to pay for weather issues if you want to keep your tenants happy, and keep your bank account in the green.
or additional rental property accounting tips, call Keyrenter today!