Guidance on Accounting & Monthly Statements for Owners

How do you know what you’re earning and spending on your investment properties? 

You need accounting and record keeping processes in place if you want to know exactly where you stand financially. Accurate and detailed financial reports and documentation will help you make wise decisions about your investment property. 

But, you didn’t begin investing in real estate to become a full-time accountant. How can you manage your accounting and your bookkeeping? Working with a Southwest Washington property manager solves a lot of your accounting challenges. Your property management team will include monthly accounting statements when rent is paid, and they’ll provide financial reports. You’ll have expert bookkeeping and a documented online snapshot of your income and expenses at any given moment. 

If you’re managing on your own, however, you’ll need a good system for accounting, monthly statements, and other financial records. 

Rental Property Income and Expense Accounting 

The most basic part of your accounting plan is the tracking of rental property income and expenses. You need to know what you’re earning every month in rent. You need to know what you’re spending on vacancy, maintenance, and professional services. You’ll need this information for taxes, for audits, and for any different financing you’d like to do. When you want to sell a property, you need to know your numbers. 

Accounting for income and expenses must be clear, accurate, and transparent. 

Working with an accountant or a CPA can give you access to a great resource. But, you’re likely the one who collects rent and pays for repairs. Make sure you can clearly see what you’re earning and what you’re spending on a monthly, quarterly, and annual basis. 

Budget for Short and Long Term Expenses

Budgeting is important for any business owner, and when you’re renting out properties, you’re essentially running a business. Prepare to budget for maintenance, vacancy, and tenant turnover. We always recommend that owners set aside a maintenance reserve, which will help you prepare for large expenses. Save a portion of your monthly rent in case a new water heater is needed or the air conditioning goes out. 

Track your budget and make adjustments as necessary. For example, inflation has driven the cost of labor, materials, and supplies to new levels this year. Be prepared.

Leverage Property Management Accounting Technology

Think about how you are tracking your finances. Ideally, you’re working within an accounting system that can integrate other parts of your leasing, management, and maintenance needs. Update your accounting systems as much as you can. Invest in a software program that makes you more efficient. There are platforms for large management companies like ours and for individual landlords who are renting out one or two homes. 

Tax Time Needs Careful Documentation