How Expense Tracking Can Save You Money on Your Rental Property

How Expense Tracking Can Save You Money on Your Property Rental

Managing a rental property can be a time-consuming and complicated process. It starts with finding the right property in the right location, and in Southwest Montana, you will be best served by Jenny Hershberger Bushman, so call (406) 570-5869 for a free consultation.. 

From there, business owners must be legally compliant, market their rentals, maintain the property, and manage finances. If you run a property rental business, keeping an eye on your revenue and expenditure by setting up a proper reporting system is vital. 

Property maintenance expenses

You are legally required to keep your property in good condition. This means frequent inspections and prompt repairs to any issues that arise. Both exterior and interior spaces should be well maintained and health and safety regulations must be complied with. 

Sole proprietors, business owners, and property rental managers can deduct some maintenance and repair costs from their tax bills. These can include the cost of materials, contractor labor, and property manager’s or caretaker’s salaries. Make sure to keep records of everything you spend, from receipts for materials bought to paystubs. There are a number of excellent mobile apps you can use to track expenses on the go. 

It is important to remember, though, that not all repairs are tax-deductible. It’s important, therefore, to know what qualifies as such.

Insurance and property taxes

All rental properties must be insured. You need to have insurance on the physical building and, if you rent it furnished, you should also have contents insurance. If your property is mortgaged, it is a legal requirement to have building insurance.

Every U.S. resident who owns property pays property taxes. While rates vary by state, the average American pays $2,471 in property taxes each year. If you have several properties, your tax bill can then make a significant dent in your profit line. You can deduct up to $10,000 on property taxes annually, but your home insurance is not tax-deductible. 

Marketing and advertising costs

Nothing puts a dent on your bottom line faster than a vacant property. The key to maintaining a healthy profit is to ensure maximum occupancy in all your properties. Marketing and advertising need not cost the earth, but if you do incur marketing expenses, again, track them for the tax deduction.

Marketing can be as simple as running a Facebook page, an Instagram profile, or even putting up a ‘for rent’ sign at the property. If you decide to elevate your marketing strategy, consider running ads on social media or in the local paper, placing posters on bulletin boards, or listing the property with rental agencies.

Manage finances and reporting

Property management is a business and it needs to turn a profit. The only way to make sure that your business is in good shape is to keep a keen eye on your income and expenses and run detailed reports that give you a clear picture of your profits and cash flow. Robust reporting software will streamline expenses, invoicing, estimates and more so you can better monitor your rental income and expenses, as well as manage tax payments. QuickBooks Online Advanced can easily connect to your financial accounts, as well as automatically sort expenses into categories so you are fully prepared when tax time rolls around.

Running a rental property business is expensive, but if you are smart, you can claim a lot of your expenses back. Your priority should be to keep an eye on what you are spending, as well as what’s coming in, and making sure it is all properly documented and reported on your tax returns. 

Article courtesy of Claire Wentz / http://caringfromafar.com.