Landlord income expense tracking is an important task. One benefit of tracking such information is that the data can be used to create helpful reports. When used correctly, reports gauge the health of the rental property business and to assist accountants at tax time.
Landlord Income Expense Tracking Report #1: P&L
The profit and loss statement is a report that summarizes revenues received and expenses incurred with managing rental property. It shows how well or poorly the business is doing by its net income or loss. As a result of using this report, landlords can identify areas to reduce expenses or make improvements to strengthen the business.
Report #2: Schedule E Helper
The schedule E helper report is useful at tax time. This report is unique to RentalIncomeExpense.com. RentalIncomeExpense.com is free landlord accounting software. Landlords file schedule E with form 1040 at tax time. The schedule E helper report follows the same income and expense categories as those on schedule E, and it generates a report to help accountants at tax time.
Landlord accounting software makes it a snap to generate reports. In contrast, using a spreadsheet alone to generate reports is much more challenging. In conclusion, by using a good system for reports and data, landlords can quickly determine how their business is doing.
Starting a business is not easy. Managing the day to day activity while trying to grow the business is not easy either. With today’s modern technology and innovative minds, there are many helpful tools for small businesses to make their lives easier. Here are a few to mention:
Keeping track of income and expenses is important for two primary reasons. First, you need this information to complete income taxes every year. Second, this information will give you an idea of how well your business is doing – Do you have profits? Are you growing? There is a variety of accounting tools available for small businesses. Some are free and focus on a target market like RentalIncomeExpense.com, which caters to landlords and rental property. Some are expensive but applicable to any business like QuickBooks. Whatever accounting tool you choose, know that this tool is pretty important and helpful, especially if you can run reports that summarize how your business is operating.
Communicating with customers and employees is important. How you communicate and the ease in which you communicate can make running your business easier. Email is pretty standard and in many respects becoming more popular than telephone. Similar to accounting tools, there is a lot of choice with email providers. One of the most popular email providers is Google’s Gmail. For businesses, Google Workspace consolidates a number of tools, such as email and storage, enabling you to better manage operating your business.
Similar to email, electronic signatures are another paperless communication tool that can streamline your business. Whether you need signatures from employees or from customers, using electronic signature software will save everyone time. There are some esignature tools that charge a low flat fee like eSignToday and some that charge a recurring monthly fee like DocuSign.
The tools available make running a small business easier. Some are free and some are well worth the cost. Nevertheless, there is a lot of choice, and finding those that best fits your needs will put you on the road to running a successful business.
Landlording is a business, so organizing receipts for landlords becomes important. Businesses need to keep records of their activities, including receipts for purchases made. Receipts come in handy if you want to return an item. They especially come in handy if landlords are audited, as receipts show proof of purchase including prices paid. So what is the best way to organize receipts?
The best way of organizing receipts for landlords is the one which is easy and accessible. For example, you can keep receipts in a shoebox, file them in a three-ring binder, or take photos of them and store them in an online folder. Another tip is to organize them by date. If you file receipts away as you make purchases, they will automatically be organized by date making them easier and faster to retrieve. Landlords who track income and expenses using software like RentalIncomeExpense.com can get into a groove of recording the purchase in the software and then immediately filing away the receipt. The software will track the date of activity. When you need to pull a receipt, you just need to find it by date. Organize receipts by date, and you’ll spend little time on the hunt! Recordkeeping and organization make life easier!
Landlords are in the business of providing housing in exchange for rent. Renting to tenants with pets has its pros and cons, but in the end, it can be a win win for both landlords and tenants.
Attract More Tenants with Pets
Those who own pets view their furry friends like children – important members of the family. Landlords who are willing to permit pets to reside in their rental property expand the size of their customer base. And having a larger customer base increases the number of potential tenants and thus strengthens the chance that your rental property will not remain vacant for long.
Increase Rental Income
Landlords can increase rental income by renting to tenants with pets. Due to the potential for additional damage to the property because of the pet, landlords can increase the rent amount or charge a pet deposit. Recording this additional income is easy, especially if landlords are using RentalIncomeExpense.com, which is free landlord rental income expense tracking software.
If pet owners are willing to pay a premium for their home, and landlords are willing to rent to tenants with pets, both are satisfied and a win win is for all!
For a new real estate investor, the term ‘cap rate’ can be intimidating. Fear not! This term is easy to understand and we’ll explain how to use it.
Cap Rate is the Yield of a Property
Do you understand what the interest rate on a bank account or CD means? Do you understand what the dividend yield on a stock is? If so, you already understand what cap rates are. They are the yield (in percentages) or investment return of a property.
Here it is as a formula:
Cap Rate = (All income minus expenses / Property Market Value)
Let’s look at an example. If a property’s value is $100,000 and, for a given year, after all expenses are subtracted from all rental income, there is a net income of $10,000, then the cap rate of that property is 10% ($10,000/$100,000).
How Is This Used?
Investors compare cap rates when evaluating different properties on the market. Generally, higher cap rates are more desirable. However, just as a higher return can be a signal of risk, properties with high cap rates can often be more risky. For example, an investment may have only a single tenant paying all the rent or is located an area with declining economic prospects.
That’s it! Easy Peasy, right?
Now you know what cap rates are, how to calculate them, and how they are used as a comparison tool.
If you are looking to sell a property that you already own, it is important to track your income and expenses so that you can properly calculate your property’s cap rate. There are many tools to do this. RentalIncomeExpense.com is one such free online landlord software tool that tracks rental property income and expenses.
At RentalIncomeExpense.com, we are all about free ways to improve landlording. After all, our rental income expense tracking service is free for all landlords and property managers. So, given that, what are the best free ways advertise vacancies?
If your rental market is pretty strong, you might not want to pay to advertise on Zillow when your property can be rented using other, free sites.
Free Rental Property Listing Websites
Fortunately, there are many ways to list your rental property for free. Here are three of the best:
Facebook Marketplace: Using your Facebook account, go to “Facebook Marketplace”. From there, go to a category called “Property Rentals.” There, you can easily create a new listing for your rental property. Facebook Marketplace is widely used. Best of all, Facebook Marketplace does not charge any listing fees.
Nextdoor: Using your Nextdoor account, go to “For Sale & Free”. From there, click the “Post a Listing” button. Finally, choose the category of “Property Rentals”. Nextdoor is increasingly popular. And, just like Facebook, Nextdoor does not charge a listing fee.
As you can see, when you need to list your rental property, there are some great free listing services out there. And, once your rental property is leased, don’t forget to track your rental property income and expenses with the free RentalIncomeExpense.com service!
As we’ve already discussed, landlord income expense tracking is an important yet time consuming task for landlords. With all of the options available from a worksheet to landlord accounting software, each one has its pros and cons. We are going to highlight two major pros for landlords using RentalIncomeExpense.com – automatic recording of information and price.
Automatic Landlord Bookkeeping
If landlords want to save some time on tracking rental income and expenses when using RentalIncomeExpense.com, then they should use ClearNow for online rent payment. Rent collected via ClearNow is automatically recorded as income in RentalIncomeExpense.com. Furthermore, fees paid to ClearNow to collect rent online are also automatically recorded in RentalIncomeExpense.com. So just by using ClearNow, landlords eliminate the need to manually record rental income and the associated expense and thus save time.
Free Income Expense Tracking
RentalIncomeExpense.com is free rental property software. It’s hard to beat free. Many will ask, “What’s the catch”, when something so valuable is free. Believe it or not, there is no catch. Designed for landlords, RentalIncomeExpense.com is simple yet powerful landlord accounting software. Because it is free, landlords lose little when trying it out before taking out their wallets and purchasing software for their rental property needs. Beyond free, it also provides reports, like profit and loss, that tell landlords how well business is doing.
Information is powerful. A free tool like RentalIncomeExpense.com makes the mundane task of landlord bookkeeping all the more valuable.
If I use an accountant for tax preparation, should I still use landlord accounting software? We think so. The two primary benefits are information and speed.
Information from Accounting Software
If you own property and rent it to receive income, then you are running a business. Anyone running a business should track income and expenses to understand how well or poorly the business is doing. Landlording is no exception. There are a variety of ways landlords can track rental property income and expenses. We recommend using landlord accounting software because of the powerful information it can provide for you through reports that tell you how your business is doing. For example, a profit and loss statement is a great financial review of the business’ revenues and expenses over a period of time. You may be deterred to pay for landlord accounting software when you are already paying an accountant. Do not fret because there are some excellent and free landlord income and expense tracking software such as RentalIncomeExpense.com and Avail.
Speed from Accounting Software
Maintaining good accounting records makes tax time easier. The reports you can generate from your rental property software will make your accountant’s work that much easier. You don’t have to give your accountant a shoebox full of random pieces of paper to sift through and figure out (which takes time!!). Instead, hand over a few reports that provide the details your accountant needs. For example, with RentalIncomeExpense.com, you can generate a Schedule E Helper report that mimics the Schedule E you will have to file with your taxes. And if your accountant charges by the hour, then by simply using free landlord accounting software to generate reports will save you more money because of the time savings!
The information and speed you will achieve when using landlord accounting software will complement the work your accountant does. You will make your accountant’s life easier, and they will likely thank you!
Landlord-specific accounting software is easier to use
Fortunately, there is a lot of landlord accounting software available as alternatives to Quickbooks. Just as a handyman has many tools in their toolbox (hammer, screwdrivers, wrenches) to fix problems, the right sized landlord software can make your life so much easier.
For landlords who just need a few reports and simple income and expense tracking, RentalIncomeExpense.com is an easy-to-use and free alternative to Quickbooks. For large property managers with complex needs, there are property management accounting services such as Appfolio and Buildium.
As one example of the benefits of using a dedicated tool like RentalIncomeExpense.com, a landlord can quickly create an IRS Schedule E helper report with just a click of a button. This report contains all categories on the IRS form that their accountant will need at tax time. Try doing that with Quickbooks!
Woah! The term “20% pass through tax break” can be confusing. What does this mean?
From 2018 through 2026 (when this tax break is scheduled to end), this tax break may allow landlords to only be taxed on 80% of rental net income; hence the “20% deduction”. This deduction is only for “pass-through entities” – these are landlords who run their rental business as a sole proprietor, LLC owner, partner or S corp shareholder. A “pass-through entity” is a common business type where individuals pay their profits on their individual taxpayer rates.
Separate books and records must be maintained to reflect the income and expenses for each rental real estate enterprise.
At least 250 hours of rental services must be performed each year with respect to each rental real estate enterprise. The safe harbor provides a list of rental services that qualify for this requirement.
Records must be kept regarding the hours of all services performed, description of all services performed, who performed the services, and when the services were performed.
Additionally, there are income qualifications. The full 20% is available if your taxable income is less than $157,500 as a single filer or $315,000 if married filing jointly. If your income is higher, a complicated calculation by your CPA or tax software will calculate the amount that can be deducted.
To qualify for the “20% pass through tax deduction”, keep good records!
Good landlords keep track of income and expenses. It helps you understand what kind of profit or loss you are making, and is invaluable at tax time. The “20% pass through tax break” for landlords – and the important “safe harbor” provisions to qualify – reinforce the importance of good recordkeeping.
Fortunately, for the first safe harbor provision, there are great online tools that can help you track rental income and expenses. One of them, RentalIncomeExpense.com, is even free!