The average landlord in the U.S. earns about $70,000 a year in rental income. The biggest earners pull in a lot more, depending on the number of properties.
If you're like the average landlord, you're always trying to find ways to increase your rental income. You can implement as many strategies as you want, but it all comes down to one thing: rental property accounting.
If you're not good at bookkeeping, maximizing your rental income is hard. Keep reading this article to learn a few tips and tricks for staying on top of your landlord finances.
Open an Account for Your Property
Some landlords use their personal accounts to manage property finances. It's understandable if you don't see the need to operate separate accounts, especially if the property is in your name, not a holding company (LLC).
However, mixing personal and business finances is a big mistake for several reasons.
One, it's difficult to keep track of property expenses and revenues. If tenants are paying rent into your personal bank account, for example, you'll have to filter through the transaction to find out how much rental income you earned in a specific period.
Two, landlords are entitled to several tax deductions, but you aren't going to make the most of them when your property finances are mixed up.
With a separate account for your rental, all the money coming in and going out will be in one place. A simple bank account statement will give you a clear breakdown of the property's cash flow.
Keep a Reserve Fund
Saving for a rainy day doesn't just apply to your personal finances. It also applies to your landlord finances!
Emergencies will strike without warning. An electrical fault can ruin the property's equipment, and you have to replace them as soon as possible. Or a tenant can fall behind on their rent, leaving you looking for money to settle the property's recurrent bills as you pursue an eviction.
With a reserve fund, you won't worry about such emergencies catching you off-guard. You'll simply dig into the fund and settle the emergency bill.
Use a Bookkeeper (for Multiple Properties)
Staying on top of property finances isn't hard if you own one or two properties and are keen on the task. However, when you have multiple properties, the numbers can quickly overwhelm you.
You can use bookkeeping software to stay on top of things, but the best solution is to hire a bookkeeper. Some companies provide outsourced bookkeeping services at competitive rates.
Rental Property Accounting Shouldn't Be a Headache
Rental property accounting is an important part of your job as a landlord. If you want to be successful, you have to keep an eye on those financial numbers. These tips will give you a head start, but smart landlords go a step further and hire a property management company.
At PMI Triangle, we're passionate about helping landlords in Raleigh, North Carolina maximize returns from their investments. Our company is locally owned and operated, though we're part of a property management network that's been in the business for over 20 years.
Get in touch with us to speak to a licensed property manager.
