As a landlord, you need to be able to track the monetary success of your rental property business just like you would with any other business. Your accounting system should make it as easy as possible for you to keep an accurate and up to date record of all the income and expenses related to your rental business.
Having these detailed records of your financials is essential for several reasons. First, it is necessary for tax time, secondly, it will help you secure additional funding in order to scale your portfolio, and finally, accurate financial data will enable you to identify weaknesses so that you can effectively improve your overall cash flow and profitability.
There are a few ways that landlords keep track of their income and expenses, including spreadsheets, accounting software like QuickBooks, or property management software such as Landlord Studio. In this article, we take a look at what you need to know in order to choose the right rental accounting solution for your business.
Can you use QuickBooks for rental property accounting?
QuickBooks is often the very first software that people think about when they hear the word accounting. To use QuickBooks for your rental property set up your properties as customers, your tenants as sub customers, and use classes to track transaction types.
However, despite the fact that QuickBooks is the leading accounting solution for small businesses, it does have limitations for managing rentals.QuickBooks is difficult to set up, for rental tracking and easy to make a mess of. This is especially true for landlords with larger portfolios. Real estate investors do need to track their income expenses on a property by property or even unit by unit basis, and the more properties that you have, the more difficult it can be to do this with software such as QuickBooks.
Additionally, it lacks some of the important time saving automation and property management features that industry specific solutions like Landlord Studio have. For example, as well as general accounting you need a good system for rent collection, you need to be able to generate industry specific reports, screen tenants, store important documents, such as the rental agreement, and manage and track your property leases.
QuickBooks is great for general accounting, but it is missing the tools that will make you that will help you build a professional and scalable property management business.
Why should you use property management software for rental accounting?
There are a few key issues that real estate investors face when it comes to managing their properties which property management software can help with. The first is the amount of time taken for routine admins such as income and expense tracking, rent collection, rental listings, etc. The second is keeping accurate up to date accounts throughout the year. The third is keeping everything organized.
You need to make sure that you are staying compliant with landlord tenant laws and local legislation and should the worst come to worst and you need to go through an eviction everything needs to be properly documented.
Key features to look for in a property management system
You need to be able to track your income and expenses in an easy and scalable way and the software you choose should enable you to run a professional operation, stay compliant, and keep your tenants happy. Features to look for include:
A mobile app
Instead of having a large admin task to build up at the end of the month, quarter or even year track and record income and expenses on the go.
A receipt scanner
Digitise your receipts at the point of sale and store them securely attached to the expenses for your records.
Important documents to keep track of include safety certificates, property deeds, leases and more.
Connect your bank account
The ability to connect your bank account will allow you to view and reconcile transactions in real-time. Removing the need for manual data entry saves you time and reduces errors.
Your income and expense tracking are only as good as your reports. A good property management system will have industry specific reports tailored to your needs, including for example a general profit and loss statement, a Schedule E Report, a rent ledger, occupancy reports, net worth reports, and more.
Rental listings and tenant applications
One of the most consuming parts of being a landlord is finding new tenants. With property management software you get not only the accounting tools that are necessary to run a professional operation but also property management tools such as rental listings.
Online rent collection
Bring your rent collection process into the 21st century. Online rent collection is fast, secure, and reduces the chance of late and missed rent payments.
Most property management software like Landlord Studio will allow you to export your reports and share them directly with your accountant or even import data into a general accounting platform like QuickBooks if you find your business needs more advanced functionality. They will enable you to keep accurate, up to date books throughout the year so that you can maximise your claimable expenses and minimise your tax liability whilst running a profit. The additional features will help you run a professional and scalable rental business.