Data from ATTOM shows that the median house price in Virginia reached $425,000 in June 2024, up from $399,000 in June 2023. If you want to take advantage of this growing property market, you need to get your head around the relevant finances.
Rental property accounting isn't easy, but it's incredibly important to get things right. Simple mistakes can cost you a lot of money, so accuracy is key if you want to maximize your ROI.
In this guide, we'll go over some key tips that can help you with your real estate bookkeeping. Keep reading for more.
Set up a Separate Bank Account
Staying organized is crucial, especially when it comes to property accounting. You need to keep your finances in order, so you should start by opening a separate bank account for your rental properties. Having your personal and business finances separate will help you avoid confusion.
A dedicated bank account allows you to monitor finances more easily. You can then gain better insights into how your properties are performing.
Keep Detailed Records of Income and Expenses
Alongside monitoring your finances, you should maintain clear records of all rental income and property expenses, including:
- Rent payments
- Late fees
- Mortgage payments
- Maintenance fees
- Utilities
You can use these records to gain an overview of the financial health of your properties. From this, you may be able to identify areas for improvement.
Regularly Reconcile Accounts
You can ensure your financial records are accurate by regularly reconciling your accounts. Compare your recorded transactions with bank statements to make sure everything matches up.
If you identify any discrepancies, you can figure out the cause and deal with them quickly. Reconciliation can also help with tax preparation as it ensures all accounting is correct.
Create a Budget and Financial Plan
You should have a long-term plan based on your investment goals. Create a budget with all expected income and expenses. Review and adjust this budget from time to time.
Doing this will help you maintain financial stability and prepare for unexpected costs. It will also allow you to make better-informed decisions about your investments.
Hire a Property Manager
All of this can be quite difficult, so the best approach for many real estate investors is to hire a property management company. A property manager can provide expert guidance and take on accounting duties on your behalf.
They have relevant training and experience, so they can handle your accounting effectively. They'll be less likely to make mistakes and can help you find ways to improve your overall ROI.
Rental Property Accounting Services
Staying on top of your accounts can be difficult, especially as your real estate portfolio grows. A property manager can handle all rental property accounting efficiently and accurately so you won't have to worry about the challenges that come with it.
PMI Loudoun is a full-service real estate asset management company serving clients in Ashburn and the surrounding communities. Our experienced property managers can use the latest technology and accounting software to ensure your accounts are kept in order. Take a look at our accounting and reporting page for more information.
