What many landlords don’t realise when they buy a rental, is that it is actually a business and requires a lot of time and effort to run effectively. Many people think they can just buy a rental and watch the money roll in but it takes a lot more than that, and one thing you really have to keep track of, if you want to be successful, is your finances.
Managing the finances for your investment property business shouldn’t be an afterthought. It should be a core part of your strategy. It is important to plan ahead and always have money set aside for unexpected expenses that may pop up. Try forecasting for 6 months and then adjust your plan if necessary.
1. Have a Separate Account
Like all businesses, you should try to keep your personal expenses separate from your business ones. It makes it much easier to organise come tax season. Open another account with your bank, or even a different bank, to ensure your finances are kept entirely separate.
2. Track Expenses
Keep a record of all your expenses relating to your rental. This can include things like: Advertising to find a tenant, repairs, maintenance, rates, insurance and hiring a property manager. You can create a simple spreadsheet for this or use an accounting software. Remember to keep all of your receipts too.
3. Manage your Income
The best way to collect rent is by automatic payment. The same amount on the same day of the week or month makes it easy to keep track of. You have a digital footprint of every dollar you receive and you know instantly if a payment is late. When you are in business, you are there to make money and owning rental properties is no different. You need to know exactly what income you have received.
4. Hire an Accountant
While you may be able to handle your finances yourself, is it always a good idea to get an accountant to look over things too. They can deal with the taxes and deducible expenses. You may be able to claim things you never even thought of. Hiring an accountant is a good idea if you have multiple income streams.
How have you organised the finances for your investment property business? What else can you add to this list?