If you are investing in rental properties, properly recording each expense and all income is key to effective budgeting and tracking, managing your accounts receivables, and allocating capital for further investments. You must track rental property expenses. By doing so, you’ll be able to determine the profitability of each property on a monthly basis and keep up with how your money is flowing in and out. This will help you make proactive decisions about your rental.
Tracking rental expenses can be a tedious process, but it doesn’t have to be. Here’s a short guide to help you simplify and streamline the process, so you can get started tracking expenses right away.
Why Track Rental Property Expenses?
Whether you are a landlord, a property manager, or own a rental property for investment purposes, expense tracking will inevitably come into play. Tracking your rental property expenses is an important part of the rental property management process.
It allows you to focus on bolstering your rental income and helps you rest assured that your expenses are being taken care of when it comes to payments, repairs, maintenance, and taxes.
Tracking rental property expenses helps you determine whether you made a profit or suffered a loss for the year. This is important for tax purposes. If you lost money in the current year, but made money in previous years, you may be able to use the losses to offset that income.
What Expenses Should You Track?
To track rental property expenses is one of the most basic things you can do to succeed as a landlord. But without good record-keeping, it’s also one of the easiest things to mess up.
Keep careful records of when your tenants pay rent and how much they pay. This can help protect against disputes later on if your tenant claims he or she paid more than they actually did. You should also track any deposits you receive from your tenants and whether they’ve been returned yet.
Unless you purchased your property with cash and you’re not paying a mortgage, you’ll need to keep track of all of your mortgage payments and any other loan payments related to the property. These payments are tax-deductible, so it’s important that you keep track of them throughout the year and claim them on your taxes.
When you track rental property expenses, track all expenses related to maintenance and repairs, too. These expenses will vary annually, but the IRS offers generous deductions for certain repairs on rental properties.
What Is the Best Software to Track Rental Property Expenses?
You need to be able to efficiently track your rental property expenses if you want to stay on top of your finances, and it starts by using the right software.
Both Stessa and Quickbooks are cloud-based software programs that can be utilized to track expenses. Both of them can be a good option for tracking your rental property expenses, and you’ll need to see which one is right for you.
Stessa is the all-in-one real estate investment platform that helps property investors track, manage, and optimize their rental portfolios. Created by rental investors for rental investors, Stessa makes it easy for property owners to monitor their performance and automate their bookkeeping across multiple properties in one place.
QuickBooks is a more general expense tracking software, widely used in many industries worldwide. While Stessa offers a tailored approach to expense tracking for landlords, QuickBooks is a universally-used program with many available integrations to make tracking easy.
At PayRent, we offer a unique approach to assist with expense tracking for landlords, making it possible to keep records of rental payments and the costs of using rental-related software in one convenient platform.
Is Landlord Labor Considered an Expense?
You treat certain types of labor as an expense and others as part of the cost of your investment property. The difference is whether you perform the work or whether you hire someone else to do it.
Managing repairs and maintenance is part of the cost of being a landlord, so if you do them yourself, they’re not a business expense. If you hire someone else to do the work for you, their labor is a business expense.