October 11, 2021

The Landlord’s Guide to Managing Rental Expenses

Lake Norman

Image by Pexels

The Landlord’s Guide to Managing Rental Expenses

There are a lot of responsibilities that come with being a landlord, which is why many landlords like to defer rental expense duties to an accountant. However, if you can’t afford professional help, the onus likely falls on your shoulders alone. That means you’ll need to make sure you understand the ins and outs of recording and reporting if you want to avoid any legal pitfalls. So here are a few tips to help you get started, courtesy of Lake Realty.

Keeping Records

Tracking expenses is a notoriously tedious task and requires some diligence on the part of the landlord. Luckily, there are a number of useful techniques and apps available (more on that later) to help you make sense of the deluge of invoices, receipts and white papers pertaining to your property(s). Before you begin to record these, it’s worth familiarizing yourself with deductibles to be factored into your note-keeping. These include mortgage interest, property tax, operating expenses, depreciation and repairs.

You’ll need to keep a record of both your income and expenses, and to prove these are valid, you will also need to keep copies of statements and receipts. These include utility bills, invoices, mortgage loan documents and more. Once you’re comfortable with the process of collecting documentation, it’s time to compile this information on a balance sheet. This report will prove invaluable if you’re ever looking to sell the property and should include assets, liabilities and owner’s equity.

Using Apps

Uploading, monitoring, calculating and projecting is an intricate process and nobody’s perfect — meaning without the help of technology, you’re likely to make mistakes. Tracking, for example, is immediately made easier by the use of apps, as you can store unlimited information without space concerns and more easily navigate through masses of information. The right app will also create alerts and include late fee calculation and tenant tracking features.

Some apps focus more on bringing landlords, property managers, tenants and contractors together with fair-rent price meters, tenant screening and rent collection capabilities. All of these functions are of massive advantage to landlords but, before you download and start using them, make sure that you are able to export the data to your computer. Without cross-platform compatibility, a convenient app may prove to be an inconvenience in the long term.

Reporting Expenses

Tracking your expenses is the hard part, and after you’ve correctly logged your outgoings, all that’s left is to report them. The IRS requires you to disclose your full rental income – this is your gross income, including services received from a tenant in lieu of rent or bills paid by a tenant, such as utilities. Remember, rental income is taxable but this tax is subject to specific conditions. If you’re unsure, spend some time familiarizing yourself with the terms – you’ll be thankful for it later.

Handling your expenses, when done incorrectly, can prove precarious. If you’re new to the process and want to protect yourself and your assets from litigation, you may want to think about establishing a Limited Liability Company (LLC). Just remember, regulations differ based on region. If you’re unsure, a formation service can help you register your company as well as save you money on lawyer fees.

When you’re starting out as a landlord, it’s easy to get overwhelmed by the sheer volume of documentation and receipts but misreporting carries a heavy cost – including an impact on your cash flow and the risk of an audit from the IRS. To proceed safely, you’ll have to diligently work on your expenses and make sure you’re following all relevant legal regulations.

Lake Realty is a local, family-owned business with 36+ knowledgeable agents and over 30 years of experience in the Lake Norman real estate market. The people and families we serve are what’s most important to us and that’s why we are proud to have more 5 Star Google Reviews than any other firm in the Lake Norman area.

Recent Posts

Search For Lake Norman Homes

    CLICK LINK TO SEARCH FOR Lake Norman Waterfront Homes for Sale Luxury Lake Norman Waterfront Homes for Sale Lake Norman Homes for Sale Mooresville Waterfront Homes for Sale Mooresville Homes for Sale     Experience Lakeside Living: The Allure...

flowers shops

flowers shops

Flower shops are havens for floral enthusiasts, offering a plethora of vibrant blooms to cater to diverse tastes and occasions. These charming establishments boast an array of fresh blossoms, from classic roses to exotic orchids, meticulously arranged to convey...

Is It Better to Rent or Buy

You may have seen reports in the news recently saying it’s more affordable to rent right now than it is to buy a home. And while that may be true in some markets if you just look at typical monthly payments, there’s one thing that the numbers aren’t factoring in: and...

Lake Norman

October 11, 2021