Your accounting process is an important part of successful rental property investing in Idaho Falls. You likely have a detailed leasing process in place and a consistent system for managing maintenance and renewals, but what about your financial reporting? Are you carefully tracking income and expenses? Preparing yourself for tax time?
Whether you’re trying to determine what your expenses are likely to be before you invest in a property or you’re tracking what you spend on existing investments, there are a few things that require your attention.
Good documentation will help you have a better and more profitable investment experience.
Be detailed and accurate, and seek help from a professional Idaho Falls property management company if you don’t have the tools or resources required to create accounting statements and financial reports.
Income and Expenses for Idaho Rental Properties
Good rental property accounting starts with two things: a separate bank account so your private funds aren’t mingling with your business funds, and a platform on which you can track and analyze your monthly income and expenses.
There are many ways to generate income and expense reports. Several software programs exist, even for independent landlords, and you can also use an app or a system that you’ve designed yourself that keeps everything transparent and well-organized. The goal is to show how much money was earned on your rental property in a given time period and how much was spent.
When it’s time to file your taxes, the IRS will require documentation that demonstrates what you earned on your rental property and how much you spent maintaining it.
This has to be clear, accurate, and transparent. Even if you work with an accountant or a CPA, you’re likely the one who will be collecting the rent and paying for repairs. Make sure you’re saving and logging receipts.
Idaho Falls Investment Property Budgeting and Forecasting
Budgeting is an important part of your investing process. Before you buy a rental property and as you move through the leasing and management process, you’ll want to know how much it’s going to cost to lease, manage, and maintain the investment.
This is especially important when it comes to variable expenses like vacancy and maintenance. You know exactly what your mortgage payment and insurance will cost each month, but it’s more difficult to project what you’ll spend on repairs.
WE recommend that you set aside a maintenance reserve if you can. Put a small portion of the monthly rent you collect into a reserve fund so you’re prepared when you have to replace an appliance or pay for a plumber.
Set up a budget for recurring expenses you can plan on, such as landscaping, property management fees, and pest control. Forecast when you’ll have to make big expenditures. Plan for your new roof, for example, even if you won’t have to worry about it for five or ten years. Estimate the lifespan of your air conditioning unit, your flooring, and your appliances.
Invest in Rental Property Accounting Technology
Professional property managers in Idaho Falls invest in accounting software that allows for the best possible financial reporting. Statements are easy to create and access. If you’re managing on your own, the options may be limited, but they’re still out there.
Look for programs and platforms that are accessible, user-friendly, and transparent. If you find yourself having to go to court, for example, you’ll want to be able to share an accounting breakdown for a tenant you’re evicting for nonpayment of rent.
Account for Tax Deductions to Increase ROI
Tax time doesn’t have to be stressful. Whether you have a professional CPA or you’re doing your own taxes, you have a series of deductions you can take that will offset the tax liability that comes with rental income. These available deductions include:
- Maintenance, repairs, and cleaning
- Mileage if you need to travel to and from the property
- Lease cancellation costs
- Legal, management, and professional fees
- Mortgage interest
- Advertising and marketing
We can help you manage your financial records better and produce accounting statements that keep you on track. If you’d like some Idaho Falls property management help, please don’t hesitate to contact us at Jacob Grant Property Management.