Getting your property accounting system up and running pays huge dividends in the long run. It will make tracking your financials easier, help you determine profit and losses on individual properties, and save you time when it comes to preparing your taxes.
First, make sure you’re using the correct accounting method for your property management business. There are several options, including cash basis and accrual.
How to Get Your Property Accounting System Up and Running
Establish a dedicated bank account for each property and set up the software to connect with it. This will ensure that your transactions are accurately recorded and reconciled at regular intervals.
Keep an emergency fund in case any unexpected expenses arise. This will prevent you from using your primary business account for unforeseen costs.
Use a chart of Property Accountant in your property accounting spreadsheet or tab to track rental income and expenses. This can be a great way to get a more detailed view of your profits and losses, so you can see where you need to improve.
Taxes & Forms: You should stay on top of your taxes as a landlord and make sure you’re submitting accurate forms to protect yourself from audit risk. This will also allow you to take advantage of any available tax deductions and maximize your profit.
IRS 1031 Exchanges: If you own investment properties, you should be aware of the benefits of an IRS 1031 exchange. This allows you to defer capital gains taxes while exchanging investment properties.
Whether you’re an experienced property manager or just starting out, the most important step to take in ensuring your business is set up for success is setting up a solid accounting system. The following guide will show you how to do just that, so your property accounting and bookkeeping can be more efficient and effective for the future of your real estate business.