Have you recently bought a rental property in Chattanooga, TN? If so, one of the first things you'll need to do is get your accounting in order.
There are several reasons why accurate bookkeeping is crucial for a profitable portfolio. For starters, it helps you understand your rental's performance and ROI. It also makes it easier to identify eligible expenses come tax time.
Don't have much experience with rental property accounting? Fear not -- here are some tips that will help you get started on the right foot!
Invest in the Right Software
One of the best property accounting tips in TN we can give you is to set up your books right from the start. To do that, invest in accounting software that fits your needs. At the very least, your software should allow you to:
- Track income and expenses at the unit and organizational level
- Store and organize receipts and supporting documents
- Create expense categories to line up with tax requirements
Keep Accounts Separate
Tennessee law doesn't require you to have a separate bank account for business transactions, but you should still do so. This is particularly important if you're an LLC, as it helps with liability protection.
Even if you're not an LLC, having separate accounts can make rental records organization much easier. At the end of the year, you won't need to go through hundreds of irrelevant personal transactions.
Track Expenses Regularly
As far as financial management for landlords goes, most of it is about tracking expenses regularly. Doing so will simplify your Chattanooga property bookkeeping, as you'll only need to send a report to your accountant.
Generating weekly or monthly reports also allows you to maximize end-of-year tax deductions. You can use Schedule E (Form 1040) to report:
- Repairs and maintenance
- Legal and management fees
- Advertising
- Insurance
Separate Repairs From Improvements
If you look at the last tip, you'll see we didn't mention capital improvements. There's a simple reason for this: improvements don't count as tax deductions. Instead, they have to be depreciated over time.
So, how do you differentiate between repairs and improvements? In general, repairs will only bring your property back to being useful. An improvement will prolong the property's useful life or increase its value.
Streamline Rent Collection
Not all property accounting tips in TN are about tracking expenses. Your income is just as important, especially rent. With the right tools, you can automate most of your rent collection process and avoid manual errors.
If you want to hire a property manager, look into the online portal they're offering. A good online portal should have the following:
- Auto-pay options
- Ability to block partial payments
- Automated rent reminders
- Simple income tracking
More on Rental Property Accounting in Chattanooga
Rental property accounting may not be exciting, but it will help you stay compliant with landlord tax obligations. If you need help with maintaining your books, consider hiring a property manager.
Our specialized staff at PMI Chattanooga can help you minimize your expenses and maximize your income! Our Chattanooga rental management services include:
- Rent collection and recording
- Monthly owner statements
- Tax statements and 1099s
- Paying vendor bills
If you're not happy with our work, you can cancel your agreement without penalties. Contact us here to learn more about our services!
