On average, landlords in Denver make over $95,000 a year. That equals out to about $45 an hour. The problem is keeping your records straight so you can record these earnings.
Many first-time landlords struggle with rental property accounting tasks like rent collection and classifying their operation costs. Making a mistake with your tax documents could lead to audits and unwanted fees.
We have a few tips that will help you keep track of your financial paperwork. Continue reading to learn more.
1. Rent Collection
One of the biggest struggles in real estate is rent collection. Some tenants refuse to pay or don't pay on time. This can interrupt your cash flow and make it difficult for you to pay your operating costs.
Most types of accountants that you can hire will tell you to stop taking paper checks if you currently accept them. They have to be taken to the bank and put in your system by hand.
Once you deposit the check into your business bank account, it could take days for it to clear. This will only hurt you in the long run, especially if the tenant pays late.
Instead, invest in an online portal. Not only are they more convenient for tenants, but they have other uses like:
- Sending rent reminders
- Direct deposit
- Quick rental payments
- Easy record keeping
If you can't afford payment software, you can accept Venmo or PayPal. These apps don't have as many features, but they are just as convenient.
2. Tax Documents
Many first-time landlords become lost when it comes to filing tax documents. To make things easier on yourself at the end of the year, you'll need to keep track of all your receipts and bank statements. Filling out a 1099 is also a must.
Failing to submit all paperwork when filing taxes or giving the wrong information will result in fees and possible jail time. That's one of the benefits of hiring an accountant in Denver. They'll take care of all the complex paperwork so you can focus on running your rental.
3. Misclassifying Costs
As a landlord, you'll have a wide variety of operating costs to keep track of. This includes:
- Property management
- Property taxes
For those without accounting experience, misclassifying some of these costs isn't difficult. For example, you may be confused as to whether or not fixing a ceiling fan counts as maintenance or repairs.
The secret is to keep clear charts that can help keep you organized. You can also invest in accounting services in Denver. They have all the skills and expertise needed to manage your records.
Rental Property Accounting Mistakes to Avoid
New landlords in Denver often make simple but devastating rental property accounting mistakes. If you fail to fill out your tax paperwork properly, you could be penalized with extra fees.
You also have to avoid misclassifying your operating costs and figure out how to collect rent from your tenants.
Laureate LTD can help. We've been providing excellent customer service since 1982. Contact us to learn how we can assist you with keeping your finances in order.