Chicago is one of the best cities in the country to own rental property, with nearly 55% of properties being renter-occupied.
As of November 2023, the average monthly rent in Chicago was almost $2,000, which ranks in the top 20 in the US. Chicago landlords earn plenty of income from their properties, but there are also plenty of expenses. To maximize your rental income, you need good landlord bookkeeping.
Today, we'll tell you how to manage your rental property accounting records. If you're diligent about money management, you can grow your portfolio one property at a time. Keep reading and learn how it's done.
Separate Funds
Proper rental property accounting is all about staying organized. You can keep your accounting records organized by separating your rental property funds from personal funds. Surprisingly, this is a mistake that many small-time landlords make.
If you put your rental income into your account, you'll never have a clear picture of how your property is doing. Open business accounts for each property to keep everything streamlined and organized. This helps bring clarity to each property's financial situation and helps you avoid tax woes.
Streamline Rent Collection
Successful bookkeeping for rental properties depends on how efficient your rent collection process is. It can be tricky to nail down the perfect rent collection system because there's no singular way to do it.
The best thing you can do is offer an online portal for tenants to pay rent and communicate with you. It helps to allow tenants to pay rent in a few different ways. Older tenants may prefer to pay with cheques or cash, while younger ones generally prefer contactless online payments or e-transfers.
Better Bookkeeping
Tracking rental income is fairly straightforward as long as tenants always pay rent on time. The money enters your account and it goes into the books. Depending on the rental, you may also receive parking and utility payments.
Expenses can be a little bit more varied. Things like property taxes and mortgage payments are fairly static. It's when you've got unforeseen maintenance and repair expenses that bookkeeping can be tricky.
It can be beneficial to hire a professional accountant, especially if you're dealing with multiple rental properties. At the very least, you should be making use of accounting software or spreadsheets to accurately track income and expenses.
Digitize Your Records
Make sure to digitize all of your records and receipts to keep your accounting records as organized as possible. Having everything accessible on a spreadsheet or PDF file will make your life a lot easier during tax season.
You'll also need quick access to financial records if there are any discrepancies with tenants. For example, if you're deducting from a tenant's security deposit, you'll need to provide proof of the cost of repairs.
Rental Property Accounting and Rental Management
Managing your rental property accounting records can be tedious, but it's essential to maximizing ROI on your property. Taking the accounting process seriously can provide ample opportunity to expand your portfolio in the future.
If you're finding it difficult to manage your money, hiring a property management company can help. At Chicago Style, we've helped countless Chicago landlords maximize their rental income with professional accounting tactics. Contact us today to learn more.
