What's the hardest thing about being a landlord? Is it the responsibility of communicating with your tenants? Maybe it's the struggle of scheduling your routine inspections of the property.
Or, if you're like most other landlords, maybe you struggle most with bookkeeping. Rental property accounting is a stressful, dull experience that many people would rather avoid.
Because of this, many landlords fall into harmful rental property accounting mistakes. These mistakes make life more difficult for you and risk causing trouble for your tenants.
Fortunately, we're here to help you avoid these mistakes! In this article, we explain the five most common mistakes that affect bookkeeping for landlords.
1. Landlord Bookkeeping Tips: Check Your Books Monthly
One of the most frequent mistakes landlords make is procrastinating in their accounting. This problem is one of the most understandable; most landlords hate accounting, so they put it off for as long as possible.
This method hurts you by letting paperwork pile up, becoming ever more tedious to manage. If you handle your rental property accounting monthly, you save yourself a lot of trouble.
2. Keep Your Rental Property Accounting Separate
Many rental owners make the mistake of using their personal bank account for rental accounting. This mistake not only costs time but also costs money.
Separating business and personal expenses from a single bank account is immensely time-consuming. You will need to separate them, too. The IRS loves nothing more than when people mix the two accounts.
This mixing gives the IRS access to examine all of your personal spending in addition to business spending. Save yourself the trouble and keep the two separate from the start.
3. Don't Store All Information In One Place
One of the best rental property accounting tips you can get is to organize your information. Don't dump all of your documents into one file and call it a day.
Instead, keep a minimum of three files. One file can manage tax codes and filing proof, while another file can register your capital expenses to offset a capital gains tax. The final file should be your complete set of business bank statements.
4. Not Digitizing As Much As Possible
You may be someone who prefers face-to-face meetings and analog records. If so, that's fine! However, you can save a lot of time if you digitize your record keeping.
Digitizing doesn't necessarily entail getting rid of your physical records. Instead, it provides a neat, automated system that saves you time and gives you a backup set of records.
5. Not Using Property Management Software
Lastly, don't try to handle your records alone. While some people can do it, most benefit from having professional help. Property management software can provide that help for you.
With this software, you can enlist the aid of licensed professionals to help settle your rental property accounting.
Try Our Honolulu Services
If you're a landlord in Honolulu, you must avoid these mistakes. Rental property accounting is a significant business in Hawaii. To stay afloat, you need to organize your data well.
To that end, try out our Honolulu property management services! They're guaranteed to make your life easier, so contact us today to learn more.