Good property management accounting will maximize your ROI by helping you get a clear idea of your income, expenses, and projections. This will help you make good investment decisions going forward. You need to know what kind of profit each property in your portfolio is making, and you also need to make sure you’re taking advantage of every tax deduction.
We have a few accounting practices that we’ve put into place that help us keep our owners and their finances organized and informed. Professional Boise property management is a great way to hand the bookkeeping and accounting over to experts. If you’re managing on your own, make sure you’re paying attention to the way you handle financial statements and accounting records.
Separate Trust Accounts are Important
Unlike most other states, Idaho has no legal requirements for rental property investors and property managers to hold funds in trust or escrow accounts. There aren’t any commissions or regulatory agencies that are going to monitor or audit your real estate funds.
You’re not legally required to do it, but if you want to establish smart accounting practices, you should separate your business accounts. It doesn’t matter if you’re renting out one home or a thousand homes. Treat your investments as businesses. A separate account for each property is a great idea.
All income from that property will be deposited into the specific account, and all expenses will be paid directly from that account as well. This will make tracking your finances much easier.
Track Income and Expenses
Your ROI depends on knowing where and how you’re earning and spending money on your Boise rental properties. A detailed chart of accounts will provide insight into how money moves throughout your properties. You’ll track every transaction, including maintenance expenses, security deposits, cleaning costs, etc. For many property owners, this is simply a spreadsheet. If you’re working with a property management company, you can expect a software system that automates reports and statements.
Financial statements using this data will track how your rental properties are performing. They’re an important part of planning your long-term investment strategy, and filing taxes at the end of the year will be less of a challenge.
Invest in Property Management Technology
Rental property owners can find a number of great software programs, even if you’re only renting out a property or a handful of properties. When you invest in the innovative technology and keep everything online and digital, you can access it from anywhere in the world. That’s especially important if an emergency pops up and you’re not standing in front of your files. Choose a system that’s accessible, user-friendly, and right for what you need.
Account for Tax Deductions to Increase ROI
Tax time doesn’t have to be stressful. Whether you have a professional CPA or you’re doing your own taxes, you have a series of deductions you can take that will off-set the tax liability that comes with rental income. These available deductions include:
- Maintenance, repairs, and cleaning
- Mileage if you need to travel to and from the property
- Lease cancellation costs
- Legal, management, and professional fees
- Mortgage interest
- Advertising and marketing
There’s also depreciation to consider, which is generous by IRS standards.
We can help you manage your accounting systems better. Our technology provides accuracy, accountability, and transparency. If you’d like to hear more, please contact us at Wave Property Management.
Wave Property Management is a full-service leasing and management company serving Boise as well as nearby communities such as Meridian, Garden City, Nampa, Mountain Home, and Caldwell. We work with new rental property owners as well as established investors with growing real estate portfolios.