Maintaining a successful real estate business means ensuring your income exceeds your outflow. Thus, as a landlord, you must learn to track your business’ expenses. Keeping close tabs on your finances can help you discover bottlenecks and opportunities for excellent efficiency.
We’ve compiled a detailed guide of the top 5 rental property expenses investors should know. Also, we’ll look at some tips for tracking and recording these debts and innovative software solutions that can help.
- 1 Top 5 Rental Property Expenses Investors Should Know:
- 2 How To Plan And Track Rental Property Expenses:
- 3 Tips For Accurate Recordkeeping:
- 4 Top 5 Software Solutions for Tracking Investment Finances
- 5 Conclusion
Top 5 Rental Property Expenses Investors Should Know:
1. Maintenance and Repairs
Properties experience wear and tear as they pass through each tenant. Hence, landlords often have to budget for such expenses. There should be a cash reserve in case the garbage disposal is backed up, the toilet won’t flush, or there’s a wiring problem.
Also, regular maintenance can drastically cut down the costs of the eventual repairs you have to make. A full-service property management team can relieve some of the stress of keeping up with such matters.
2. Property Taxes and Insurance
Other operating expenses you have to deal with are property taxes and insurance. The former are levies you have to pay on your rental based on the property type and location. Since it’s a compulsory fee, it’s vital to consider it before purchasing a house.
Additionally, you have to budget for your insurance. Fire, flood, theft, and even unruly tenants can cause a lot of damage to your property. Some landlords might see it as unnecessary, but it’s handy to have coverage during a rainy day.
Depending on the arrangement in your lease, you might be responsible for all utilities or some. Examples include electricity, water, Wi-Fi, gas, sewage disposal, and garbage collection. These are day-to-day needs your tenants require, so you have to keep the lights on or violate your lease constantly.
4. Janitorial Service
If you own a vacation or any short-term rental, you’ll need to have someone come in to clean between guests. After all, a well-kept house, pool, or deck increases tenant appeal. Even long-term arrangements might need a cleaning service to freshen up the place. This cost is another expense savvy landlords need to budget.
5. Administrative Fees
Administrative fees include costs you pay to other professionals like your employees to make running your business smoother. For instance, their salaries would count here if you have an accountant or lawyer on retainer. Occasional services like real estate agents, snow removal, and supplies contribute to admin.
Related Resource: Where to Buy Investment Property: A Brief Guide
How To Plan And Track Rental Property Expenses:
1. Use a Worksheet
Experts recommend implementing an income and expense worksheet to make your job easier. This way, you can see your expenditure at a glance. It also makes it easier to fill out your tax forms when the time comes.
2. Keep the Right Records
Records are vital in tracking rental property expenses. Legal documents, receipts, copies of utility bills, and bank statements are examples of crucial financial documents. These records can help you estimate your total costs and budget for future ones.
Tips For Accurate Recordkeeping:
1. Create different accounts for each property
Mixing up your records makes it harder to know which ones perform optimally. It would be best if you had separate worksheets for each unit so you can monitor them more accurately.
2. Use accounting software
Take advantage of the latest accounting technology by using rental-specific software. This software makes tracking numbers from the previous months easier.
3. Keep up with data entry
Lastly, fill out your worksheet regularly. There’s no point in implementing a system if you don’t use it effectively. Cultivating the habit of entering your expenses as often as possible will make it less challenging to recall at a later date.
Top 5 Software Solutions for Tracking Investment Finances
Buildium is a specialized software specifically for real estate property management. Landlords can easily use it to automate most processes, including tracking rent, following vendor activities, and generating financial reports.
There’s also a free demo version, so you can check it out before committing. Although, at the moment, it doesn’t support integration with other software tools.
FreshBooks is primarily an accounting tool that makes accessibility easier. It’s built on Cloud technology, which allows you to access your books from anywhere. Additionally, you can use it to schedule reminders, communicate with agents, and see your property information at a glance.
If you have problems with decision-making, you should consider working with RealPage. It’s a digital tool that specializes in collecting data and metrics. Hence, it can be an asset when speaking with your stakeholders or deliberating significant changes.
Its user-friendly and customizable interface makes it easy to use. Unfortunately, there’s no trial version for you to test the features first.
Another ingenious software solution is Appfolio. It’s an excellent tool for landlords with more than one unit, as it can help you keep tabs on multiple properties. Some investors even use it to track the performance of their property managers. One of its best features is that it supports interoperability between devices. In other words, you can log in to your account from your laptop, phone, or tablet.
Make managing renters easier with TenantCloud. This software is a fan favorite amongst client-centric landlords that prioritize tenant relationships. Besides keeping up with property accounts, Tenantcloud lets you capture brand new clients and review their information.
That wraps up our article on the top 5 rental property expenses landlords should know. Budgeting for ongoing expenses such as utilities, taxes, and professional services is essential to maintain a positive outflow. You can utilize some software solutions to help you plan and track these expenses better.
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