More and more people are moving to Texas.
The Lone Star State's booming population makes it a great place for real estate investing. Investing in real estate offers many opportunities, but to maximize ownership success, it's essential to know your bookkeeping basics.
Your property ownership journey requires keeping close tabs on the income and expenses your property generates. This helps you keep a clear financial picture and to be ready to file your annual taxes.
Keep reading for bookkeeping tips that will help you manage your property finances.
1. Keep Business and Personal Accounts Separate
Property owners should open a separate bank account for all transactions related to their properties. This is a legal requirement if you purchased your property through an LLC.
Separate bank accounts, credit cards, and debit cards make tracking cash flow and expenses easier. This will save you time and money and allows you to maintain better bookkeeping records for your business.
If you are ever audited by the IRS, it's important to be able to present the business information separate from your personal banking info, to avoid unnecessary delays and complications.
2. Create a Filing System
Create and keep a digital filing system using your preferred software. Accounting software like Quickbooks and Excel spreadsheets help you keep track of all payments, expenses, and business transactions.
Your bank account statements and credit card statements are good ways to track your online expenses. Transfer the information onto your spreadsheets to store the information.
To get started on a filing system, include:
- Bank Statements
- Proof of expenses
- Credit Card Statements
- Tax documents
- Insurance documents
- Leases or contracts
Start a separate digital filing system at the start of each business year.
3. Keep Copies of All Receipts
When it comes to property management bookkeeping, it's important to keep all of your receipts. Keep physical copies of receipts in your business filing system. To make things easier, scan your receipts and upload them to your bookkeeping software. When scanned, it makes the receipts quickly accessible and keeps them organized.
Keep a note of which property the receipt is for and any pertinent details about the expense. This allows for easy categorization.
4. Itemize Your Income and Expenses
Property owners should keep detailed records of all income and expenses. Each transaction must be accounted for and precisely categorized. Categorizing your transactions according to the IRS itemization categories will make your tax filings easier. They are:
- Auto and travel expenses
- Cleaning and Maintenance
- Legal and professional fees
- Management fees
- Mortgage and loan interest
- Depreciation expenses
5. Choose an Account With Real Estate Experience
While keeping accurate monthly statements of your property income and financial management is important, a tax accountant offers strategies and advice that could save you a lot of money.
Working with a tax accountant ensures an accurate return and the benefit of every potential deduction. The right accountant helps you structure your real estate ventures to be profitable and efficient.
Bookkeeping Tips For Success
Now that you have these bookkeeping tips, you can keep accurate financial information about your investments. Keep and organize your records for easy money management and tax filing.
At 1st Choice, we are experts in property management. Let us help you handle, manage and care for your properties. We do the work so you don't have to. For the best property management in the Dallas-Fort Worth area, contact us today!