How Landlords Can Easily And Accurately Track Their Rental Property Expenses

Careful tracking of incomes & expenses is what every financially diligent person has to do in their life. Not only this is about the correct definition of cash flows they have but also about taxes correctness & calculation of real available resources to plan their life & further business process.

Why & how to track expenses?

When you track rental income, you stay organized, which is crucial for a smart real estate investor. By doing so diligently, legally & continuously, you can reach such goals:

• avoid vagueness in thine tax deductions, which won’t draw unnecessary attention of IRS to you, with their “taking-all-guts-out” audits
• you prove the legitimacy of thine income, also being able to fence off a personal income from a business one (especially you must do so by opening a dedicated bank account for thine business-connected cash flows)
• keeping track of what’s getting in & going out to have a picture of monthly cash flows, profits & ROI of thine assets & business in general
• reduction of risk of tax overpayment, staying within minimal legally allowed taxes.

Below, we’re considering what exactly you have to keep track of.

What records do you need as a landlord to track income & expenses

Keeping track is made based on financial & other types of documents, which prove both incomes & outflows. Here are some examples of what you should keep (preferably, during 5-7 years):

• Documents connected to the purchased property – escrow reports, inspection docs, settlements
• Tenant-related documents: questionnaires, copies of their IDs, requests, payment receipts, eviction or late payment notices, tenant screenings
• All proofs of rental payments: receipts from thine bank & cash-receiving quittances
• Copies of all utility bills, which could include casual expenses for water, gas, electricity, heating (if centralized), fixing & repairs; trash, snow & ice removal; sewer, pest control, cleaning; cable, Internet & TV services…
• Copies of all thine general (asset) expenses, which could include advertising, licensing, mortgage interest payments, insurance, travel & car expenses; finishing, updates & renovations; office supply; property management; telephony, technology & software…
• Invoices & contracts with professional providers: lawyers, plumbers, property mgmt companies
• Copies of property & income tax payments & tax returns – federal, state & local.

What software you could use for rental property record keeping

When it comes to writing down all sums, the choice is vast. Some landlords, less organized, do the entire work to run rental spreadsheets for property managers on paper. But that could only be nice if you’re over 80 years old & principally hate computers. In the rest of the cases, you should be helped by one of the solutions offered below.

1. Regular MS Excel. It is a very powerful tool, which can embrace all thine numbers, make graphs & tables, run macros & do serious calculations of cash flows, ROI, taxes & more. The biggest drawback of Excel, however, is that you actually have to KNOW how to build all these by formulas, graphs’ conditions creation & applying other skills. To be honest, not so many people actually know how to do that. So, we could leave it to the most advanced users only. Although, over half of all below-mentioned tools are built on Excel (but they are designed for people NOT in the know, which is such tools’ biggest advantage so far).
2. Stessa. It’s a free-of-charge tool, which is not just for a computer/laptop but also offers an app for iOS & Android. Using Stessa, you can build powerful graphs, charts & various analytical tables, which you really don’t need to know how to build by formulas or programming in Excel or elsewhere. This app is number two after Excel in power & #1 in usability & ease as of today – among all other tools. It allows including & tracking into thine datasheets an unlimited number of properties. You can see & personify a dashboard with loads of extremely useful data, upload & store documents, do the automated tracking of multiple indices & timelines, create many reports from operative to global, work through the Internet, collaborate with other users & access the latest news, which Stessa also provides for landlords. With it, you’ll be able to have a view of thine business from all perspectives of time, cash flow & data layers.
3. Zillow. Another free & downloadable software, which is a powerful add-on to Excel in its nature, allowing working in it with the strength to those users who aren’t Excel-advanced.
4. Quicken. Paid software, which is of roughly the same power as Stessa. It is workable for Windows & Mac, which is designed to offer a more visual part than plain numbers. Here, you will have all finances in one place & the ability to do all graphs & reports to reach various financial goals.
5. Turbotax. This is about automation & the improvement of thine tax process. In this tool, you’re offered to do everything from calculation & deduction to payment & filing. Basically, you shall consider it as a rental property tax deductions worksheet, not as a manager for cash flows.
6. Tiller. This is another “Excel add-on”, which does various comprehensible graphs, calculations & reports based on the data you enter.

Eventually, with some of these powerful tools in your hands, thine data management & reporting can be fully automated, which is way farther than you’d have with paper & pen. In the overwhelming number of cases, automated tracking of all such things is able to find you ways to save & improve an end financial result even without extra effort from you.