Tipsand Tricks for Rental Property Accounting

Effectively handling your rental income and expenditures including precisely accounting for and tracking your funds is a vital part of rental property management. Both property managers and landlords are required to craft a well-defined accounting system to help them stay organized. Property managers of services like Lake Elsinore Property Management are also tasked with sticking to trust account guidelines and effectively handling owner funds. Let us have a look at the top tips for rental accounting that can help you stay organized and keep your financial reports well maintained: 

Understand the types of transactions concerned with your rentals 

There are multiple kinds of income and expenditure transactions and all these can be linked to your business, property or tenant. Comprehending how each transaction relates to the distinct areas of your business will help you in effectively maintaining your records of accounting. 

• Tenant income can comprise of rent payments, late fees, deposits, parking fee. 
• Tenant expenditures can include property expenditures for things that a tenant has to reimburse like clogged toilet or broken window. 
• Property income includes reserve fund, tenant rent received, application fees and other fees collected. 
• Property expenses can include vendor or maintenance expenses, property management fees, property utility payments, etc.
• Business income includes management fees, tenant late fees, etc.
• Business expenditures might include legal fees, property management software payments.

Certain charges can be classified in distinct manners and come up on multiple ledgers, for example, rent payment can be both property income as well as tenant income.

Keep personal and business accounts separate 

It does not matter if you own one property or multiple properties, you need to open distinct business savings and checking accounts for your rental property investment. This will help you in keeping your funds separate from your personal accounts till you are ready to pay yourself. It is also the easiest method to stay organized and ease up your reconciliation tasks. Property managers of services like Winchester Property Management make sure that they have a separate bank account for business and are familiar with handling trust accounts. 

Craft a system for recording transactions 

Create a system or process for how, why and when you will consistently post transactions concerned with your rentals. You need to have a good understanding of who the transaction is related to. Make sure that you have a process for regularly recording your transactions. 

Have a plan for reconciliation 

Reconciling your accounts to make sure that your money is properly accounted for is as vital as consistently recording transactions. Reconciliation implies agreement i.e. seeing if your bookkeeping ledgers are in agreement with what happened in real life, the bank statement. Your plan for reconciliation needs to include setting aside some time to the process. The complex the property portfolio and management business, the more time you are required to devote. Property managers of Wildomar Property Management services ensure that their reconciliation plan includes saving the data for state reporting compliance, to have it ready for the accountant or in the event of an audit and for any necessary future references.