In military life, "Expect the unexpected!" becomes a way of life. Just when you think you've found a great place to settle, unexpected military orders can show up.
If you decide to keep your home and list it as a rental property, you know that this business requires meticulous record-keeping skills to track expenses and stay out of the IRS’s way. As you're stepping into the role of a landlord, consider these four tips for building a foolproof system for tracking rental expenses.
Ultimately, as a rental property owner, your goal is to adhere to IRS regulations, keep your business running legally, and earn some profit beyond your mortgage payment.
Now that you know what details to collect, you’ll need a way to sift and store the information.
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Building a running record of your rental income and expenses associated with the property management business is the best way to keep your costs clear and straightforward. Creating a log also avoids overwhelming paper shuffling when tax time rolls around. It's up to you how you organize the numbers, whether it's a fancy or simple system, but many property owners start with an easy spreadsheet with categories that match their needs.
Rental Income
Monthly Expenses
You may need a more complex organization system if you have more than one rental property. Consider investing in small business accounting software like QuickBooks. It’s interactive and lets you analyze your information from the rental property data in multiple ways.
If you choose a property management app, you’ll join a subset of savvy rental home business owners. Not only do the apps keep track of your expenses, they have the power to:
U.S. News & World Reports suggests Buildium, Rent Manager, Rentec Direct, and Tenant Cloud.
If you're looking for help with tenant screening, check out RentRisk!
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If there’s ever a problem with the IRS, your receipts become crucial to defending your filing process. Regularly reviewing and reconciling receipts is essential for accuracy and compliance. Schedule time each month to update your expense log and cross-reference receipts to minimize the risk of errors.
Even though many receipts are electronically delivered, you’ll probably still run into a few paper receipts, so you’ll need a way to store them securely. Of course, you can go old school and use a file folder with descriptive tabs, like Pest Control or Repairs, but more and more, rental property owners are storing their receipts digitally—scanned copies don’t get lost or faded.
Scanning each item or taking a photo creates digital copies of the receipts to store on your computer, app, or cloud and retrieve later. Most phones have built-in scanning apps, but you can also download other options like CamScanner to help you upload and organize files.
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Use an online calendar like Google Calendar (or some of the above property management apps) to establish a structured timeline for property inspections, repairs, and maintenance tasks. If you incorporate reminders for seasonal upkeep and documenting repairs, you’ll ensure detailed coverage for tax season. Documenting a timeline of when you’ve checked on the house or made repairs also eases the concerns about small issues that could become big problems.
Property owners always need quality maintenance and repair providers. Read 3 Tips for Finding Home Maintenance Providers to help you choose quality candidates.
If you take the time to implement a system for logging expenses, receipt management, and scheduling, you’ll maximize your chances of overcoming rental property ownership challenges with ease and expertise.
So, don't reinvent the wheel if you’re a first-time rental property owner. Engage in online landlord/property management forums, attend professional workshops, and ask for help from experienced landlords so you can continually refine your management skills and enhance your effectiveness as a property manager.