Bookkeeping is critical for organizing your real estate investment finances. It is the process of collecting and streamlining financial data related to the asset and maintaining a record of the profits (the positive ROI) and the losses (the negative ROI).
Bookkeeping enables you to study and compare monthly expenses and savings as in the absence of thorough records, it becomes difficult to understand where you are losing money and how you can curb rental expenditure.
Here are some bookkeeping tips for your Hampton Roads Real estate investment:
Maintain Separate Accounts for Personal and Professional Use
Keeping track of the expenses and income becomes very simple if you have separate personal and professional bank accounts, for your real estate transactions.
Having individual cards for each account also makes is easier to maintain neat books and calculate the ROI beforehand to plan for some extra cash for property repairs or renovation.
If you have a common bank account, it can get difficult to maintain separate records of personal and professional transactions. In case your file comes under scrutiny, the IRS auditors will look through both the expenses while examining your bank accounts for validating your tax claims.
Set Up Your Rental Property Book
Although most things are online these days, having a physical notebook to maintain the records of your rental property is always a good idea. It might seem like a time-consuming task initially but once you get used to it and start seeing its benefits, you will be happy to continue.
You can opt for a hardcover notebook or an excel sheet or a dedicated notebook software like Evernote or Microsoft One Note.
If you choose to have a hard copy, you can create a file where you attach all the bills and receipts as proof in the book. These include the tenant-landlord contract, the repairs, maintenance, deposit, and rent. For Excel Sheets of note-taking apps, add scanned attachments to the respective folders.
Keep track of all your expenses and income to maintain thorough records in the book. It should include purchases for repairs, renovation, maintenance receipts, other property fees, rent receipts, legal charges, travel expenditure, and management fees.
Tally Your Books with Your Bank Accounts
The best way of keeping legitimate records is to tally your books with your bank accounts. This will include the bank statements, income tax statements, credit card, debit card statements, mortgage interest statements, and insurance statements.
Errors in records can cost you significant loss of finances and time. Tallying your records with the bank accounts and checking double-entry will confirm that your documentation is error-free.
Create a Profit-Loss Report
Create monthly, quarterly, and yearly profit and loss reports. It helps in analyzing the profitability or the devaluation of your Hampton Roads rental property and also helps in estimating the ROI.
Use Rental Property Accounting Apps
Rental property accounting apps are specially designed for rental property investors. Receipt scanner, maintenance reminder, rent reminders, financial analysis, storage of files, bookkeeping, additional notes and remarks, and property damage records are some of the most useful features for managing accounts and finances.
In addition, consulting a reliable property management company in Hampton Roads can help you maintain your property records with precision.
Doud Realty Services has been an active part of the Hampton Roads real estate business for over 20 years. Our professionals can assist you with efficient and timely financial reporting without any hassles. For more information, contact us at Doud Realty Services.