Seattle landlords have a lot to manage. There’s the leasing process and tenant screening and rent collection and maintenance. There are move-in and move-out inspections and compliance with the ever-changing rental laws and rules in Seattle and neighboring communities like Tacoma, Burien, Normandy Park, Des Moines, and Federal Way.
In addition, landlords also need to factor in the matter of accounting. While a CPA or a tax advisor is great for helping to maximize the tax benefits of your rental property, they may not be fully up-to-date with the rules and regulations related to Property Management trust accounting. They will likely also not be the most cost effective professional to manage accounting for your Seattle rental property, or the day-to-day tracking of your money.
In this article, we talk about what you need to pay attention to when you’re managing your accounts or hiring a professional to handle the accounting for you.
Tracking Income and Expenses
You need to know what your investments are earning and keeping a carefully documented report of rental earnings is essential for good rental property accounting. This is essential for so many reasons: You must track when rent is paid, if/when it is late, how much is paid, and whether any late fees or additional charges are incurred every month.
You will need to keep separate accounting ledgers for your income and expenses as the property owner/landlord and the tenant’s rent payments and charges. In addition, tenant security deposits, prepaid last month or monthly rents need to be held in a trust account and not commingled with an owner’s funds.
Create a clean and detailed report to easily see what was spent and when. Do not add vague entries in your books.
Tax Deductions You Need to Know
Detailed records about the money you spend on your rental property, including routine expenses such as office supplies, travel to and from the rental home, and repairs are required for your CPA or tax advisor to evaluate what can be deducted to save you money on taxes. Well developed and kept accounting records can also ensure you’re taking advantage of things like depreciation, maintenance deductions, and deductions for services you paid fees for such as property management, insurance, legal fees, and other expenses. This will reduce your tax liability when you’re reporting rental income, and ultimately increase the return on your investment.
Investing in Accounting Technology
Years ago when cash/check rent payments directly to a landlord who could provide a hardcopy receipt and the landlord was personally handling most maintenance issues, a simple spreadsheet was enough. However, with tenant’s demanding the endless types of more convenient payments options (cash, check, venmo, online, ACH, zelle, etc. ) and a significant increase in regulatory burdens of trust accounting, limited timeframes to respond and/or refund security deposits, tracking utility expenses usage, limitations to move-in costs, and especially if you own multiple properties, you should consider investing in a accounting software designed for individual landlords or working with a professional manager, like ACRES Property Management.
By keeping your digital accounting records accessible, clear, and transparent, you can access them from anywhere in the world, which can be helpful during emergencies. For instance, if you find yourself having to go to court, to evict a tenant for nonpayment of rent, a spreadsheet can be easier to manage than paper ledgers and files.
Property Management and Accounting
Hiring a professional property manager for your rental accounting is in many circumstances more cost effective and beneficial as they keep track of all your income, expenses, and reporting. You can trust a good property manager with all the financial information and expect them to provide high quality rental property accounting.
Experienced property managers, like us, have extensive training and experience with trust accounting and have detailed systems to comply with the burdensome regulations that apply to our industry and your property. We eliminate the risk and make the accounting process efficient and easy to understand.
If you’d like to talk more about how to get a handle on property management accounting, contact us at ACRES Property Management. We provide residential management to owners and investors in Seattle as well as Tacoma, Burien, Normandy Park, Des Moines, Federal Way, and surrounding areas.