Buying, owning, and managing rental properties is a great way to generate a long-term passive income stream. To ensure you're taking advantage of all of the tax benefits associated with business cost deductions, it's important to develop a system for tracking expenses related to renting and maintaining your properties. Here's some advice from True Vision By Knowledge to help you get started.
The Necessity of Expense Tracking
It's important to track your finances with a rental property, not only for tax purposes but for overall financial solvency. Understanding how much it costs to own, operate, and maintain your rental business properties will allow you to budget wisely - an act that's critical to running your business, making a profit, and creating a sustainable passive income stream. It should also help you with short- and long-term business planning, especially around issues like how much rent to charge, the deposits you ask for, and how much you invest in outside help and support services.
Calculating Rent
One important decision you'll have to make is deciding how much rent to charge. This can be tricky and there are a number of factors that come into play, so make sure you're charging the right amount of rent by calculating your expenses and researching the competition. For instance, there are 66 properties for rent in the Springfield area. By examining the cost versus the size and amenities, as well as factoring in your own expenses, you'll arrive at the appropriate figure.
Maintenance and Upkeep
Rental properties require upkeep, some of which you may put on tenants to handle, others you may cover yourself as part of the lease agreement. Common maintenance costs that can be tracked include painting and cleaning, repair calls, and maintaining appliances and major systems, including plumbing, electrical, heating, and cooling.
You may also track expenses related to landscaping, pool cleaning, snow removal, or gutter cleaning. Investment properties sometimes need a little extra TLC, whether that's replacing older appliances, putting in new carpet, or even making larger-scale structural repairs. Any investment you make in this area should be a tracked expense. Take into account not only the materials themselves but also fees related to delivery and installation.
Administrative Fees
There's a lot that goes into property management, and all associated fees should be tracked. This includes advertising for tenants, paying for screening services, producing rental agreements, making keys, cleaning properties on move-out, and providing service calls or hiring a vendor for this purpose.
If you use a bookkeeper or accountant for handling fees, or you utilize a property management company, all of these expenses can be tracked, as well - as can insurance costs, trash removal, and the costs of hiring and paying staff, including any benefits, bonuses, or perks you may opt to offer.
According to Edgepoint Learning, training staff is also critical to your operation's success, and the costs associated with training represent another trackable business expense.
Accounting and Bookkeeping
Good record-keeping is essential to business solvency. In addition to having a system for how you complete leases and contract agreements, vendor invoices, and service agreements, you'll also want to manage payroll for any staff you hire. Luckily, from payroll to social media advertising, there are plenty of great technologies and apps that can help you succeed in your business.
Rental properties can be a great financial investment, particularly if you're in an area with good appreciation and low vacancy rates. Carefully managing the financial aspects of your business will help ensure long-term prosperity, as well as better position you to continue expanding operations with the addition of new properties.
True Vision By Knowledge is in the business of community value and overseeing its growth. Our goal is to create a city of booming successful business men and women. Call (269) 261-0628.
Photo by Pixabay
Comments