Since 2000, Atlanta's renter population has grown by 8%. A majority of residents in Atlanta are renters because of high housing prices.
There are a lot of opportunities for landlords and investors to make money in Atlanta through rental properties. However, it's important to have an idea of rental property accounting before jumping in.
Keep reading to learn more.
1. Different Transaction Types
To understand rental property accounting, you need to know that there are different types of income and expense transactions. Each transaction is tied to either the business, property, or tenant.
Understanding how transitions relate to certain business areas will help you maintain your accounting records. Here are some examples of transaction types:
- Tenant income: rent payments, late fees, security deposits, parking fees
- Tenant expenses: property expenses tenants must reimburse
- Property income: application fees, reserve fund, tenant rent received
- Property expenses: utility payments, maintenance expenses, property management fees
- Business income: tenant late fees, management fees
- Business expenses: legal fees, advertising, property management software, office space rental fees
Some charges are classified in multiple areas. For example, rent payment is both property income and tenant income.
2. Separate Personal and Business Accounts
You should open a separate business account for each property you own. If you take business expenses from your personal account, you might miss out on tax deductions.
Plus, commingling funds is illegal so you have to keep owner's assets separate from personal assets.
Having a checking and savings account for each property is the easiest way to separate funds. It helps you stay organized and prepare for tax season.
When you stay on top of renting accounting throughout the year, tax season is straightforward. In addition to separating accounts, utilize property management software to track income and expenses.
Good accounting practices are simple to accomplish with the right tools. Property management software is designed for:
- Property managers
The software allows these parties to complete bookkeeping tasks. When you hire a rental property management company, you have access to this software.
3. Create a Consistent System
Atlanta rental properties will benefit from creating a system for transactions. With the information above, you'll have a clear idea of what the transaction is related to.
Your system might involve devoting a portion of each Friday to ensuring transactions are properly recorded.
Equally as important as recording accurate transactions, you'll need a reconciliation plan. Reconciling your account ensures money is accurately accounted for.
This plan means your bookkeeping matches with real-life transactions. Set aside time for your plan as well. If your portfolio is complex, this process will take longer.
You should at least be reconciling your accounts each month. It's better to verify your transactions weekly.
Let Us Help With Rental Property Accounting
Property management services can help you with rental property accounting. We understand the different transaction types and have the right software to track income and expenses.
We help you separate accounts to prepare for tax season. We'll also create a consistent system for tracking and reconciling transactions.
Don't wait any longer to get your property finances in order. Contact us today to learn how we can help you.