Managing expenses as a Lancaster property manager takes a commitment to organization. Not tracking your rental income and expenses can turn into a nightmare come tax time. So, avoid the headaches by following these helpful tips below for lowering costs as a Lancaster property manager.
Tracking Expenses for Rental Properties
If you have one property or several, maintaining clear records is vital to success. At any given time, you should be able to evaluate the health of your investment by reviewing expenses versus income. Keep these tips below in mind to help you create a healthy financial plan of accountability.
- Save Receipts and Track Expenses – Landlords have many options for tracking expenses, and technology helps. Utilize online software designed for capturing the in and outflow of your rental investments. Additionally, if invoices or receipts are not already digital, be sure to scan them for safekeeping and future reference.
- Do Not Commingle Funds – A business or rental property should have its account that is separate from any personal accounts you may have. In addition, this includes the use of different debit or credit cards for expenses as well. Separate accounts ensures you are not deciphering between personal and business expenses. Open additional accounts as needed to hold security deposits, set aside emergency funds, or save for taxes/fees. Therefore, if you have multiple properties, open different accounts for each. Again, this will help you maintain clear and precise records.
- Make Technology Work for You – Digital records are more convenient and secure than paper records. Whether you are scanning receipts, applications, invoices, or tax forms, digital files create an optimal way to organize documents. Also, landlords can use technology to set reminders or auto-payments, which can save time in the long run.
Accounting Decisions All Landlords Must Make
- Cash or Accrual – To maintain consistency in tracking, landlords must decide to follow a cash or accrual method of expense tracking. However, this all comes down to preference and volume. Individuals or landlords with a small number of properties might use the cash method. This means you are recording expenses as they hit the property account, therefore showing exactly how much cash is available at any time. Accrual focuses on tracking expenses as they happen and not necessarily as they are paid. Whichever works best for your situation is fine; just remember to be consistent!
- Evaluate Past Financial Records – Take time to review past financial records for your rental properties. Look for any areas of discrepancy and consider what areas you might want to improve. Depending on market trends, unexpected expenses, or time of year, you may need to adjust your financial plan. With that said, use these records to help you plan for potential future costs.
- Tax Forms and Filings – Taxes can quickly become overwhelming, especially for a business. As a landlord, knowledge of requirements for your business is essential to avoiding hassle or penalties from the IRS. Did you know a W-9 or 1099 is required for every employee? Helpful software such as QuickBooks is worth the investment. Yet, for more extensive portfolios, it may be in your best interest to hire a professional accountant.
How Can a Landlord Cut Costs and Save Money?
Owning investment properties can be a profitable venture if appropriately managed. Vacancies and unexpected circumstances surrounding COVID-19 have changed processes across the rental industry. As tenants face financial challenges, landlords are left wondering how to cut costs. If you have not set aside enough emergency funds to carry through the pandemic, cutting costs is one small way to stay afloat. Read on to some quick tips for reducing expenditure.
5 Ways Landlords Can Cut Costs
- Stay on Top of Regular Property Maintenance – Regular maintenance helps identify more significant issues before they escalate. Consistent maintenance also keeps your investment in tip-top shape. Yet, even though landlords have to put out money for regular maintenance, the benefits outweigh the cost.
- Don’t Be Afraid of a Little Elbow Grease – If you are able, consider performing minor repairs yourself. Labor and travel costs for a repairman can add up quickly. By putting in some work yourself, savings in inevitable. For more significant or skilled repairs, be sure to hire a trained professional.
- Thoroughly Screen Potential Tenants – Good tenants that pay on time are key to success as a landlord. Fair Housing Laws dictate all applicants must be subject to the same verification requirements. Establish a clear set of guidelines to include credit and background checks, rental history verification, and minimum income requirements. Additionally, sticking to this process will aid in choosing the right fit for your property.
- Re-evaluate Your Mortgage – Mortgage payments will be a large chunk of monthly expenses as a landlord. However, depending on the individual situation, refinancing or lowering interest rates could make an impact. In addition, specific lenders are offering programs related to COVID-19 assisting individuals struggling with their mortgage.
- Communication is Key – Be open to dialogue with your tenants. The COVID-19 pandemic has created an unprecedented situation on all sides. Besides, the last thing a landlord needs during this time is a vacancy and turnover costs. Always respond promptly to maintenance concerns and let them know you care not only about your investment property but their happiness in your home as well. A happy tenant is a long term tenant.
The Bottom Line
Managing rental properties is not easy. Between maintenance calls, marketing, tenant screening, paperwork, and accounting functions, it is easy to become overwhelmed. Are you a Lancaster property manager or a landlord in need of some added support? Let Bay Property Management Group Lancaster County step in and take all the stress away. Our dedicated team of professionals handles all aspects of property management while providing comprehensive reporting and transparent fees. Contact a Lancaster property management company today to find out what we can do for you.