You may know how overwhelming it can be trying to keep track of rent payments, late fees, convenience fees, and maintenance fees, all while scheduling showings, interviewing a new super, sifting through applications, and telling that one tenant to please keep their noise level down (for the 12th time).
As a self-managing landlord, you have to wear a lot of hats, often many all at once. And one of the most important ones- and, sometimes, most confusing and time-consuming- is Accountant.
While the thought of accounting may send you into a tailspin, fear not! There are many options out there to help you manage your properties and simplify your accounting.
Share with an Accountant
Sharing your information with an accountant is by far the most hands-off way for you to handle your accounting. An accountant, especially when you find a talented and certified one, has the time to be thorough and has the knowledge to optimize your finances. Just know that a good accountant can come with a high price tag.
If it makes sense, financially, for you to use an accountant, you will still most likely want to collect the information they need (which can help cut down some on costs). If you like using spreadsheets, you can track your payments received and should be sure to keep a thorough record of the payment details, such as payment date, amount, method, a description of payment, current tenants, street, unit, city, state, and zip code. This, in and of itself, may still seem daunting, and could lead to errors or missed information.
To simplify data collection, you can use online management software, like RentRedi, where you can track and export payments and expenses with ease. RentRedi also makes sharing information with your accountant a cinch. Your accountant can create a team account (for free!) that allows them to see the information they need (without giving them access to information they don’t) and download your payments info to Excel, Quickbooks online or Quickbooks Desktop. Pat yourself on the back, you’re done!
The Pros: Using an accountant is the least time consuming and energy draining option out there, and they may be able to look out for your finances in ways you might not think to.
The Cons: This is the most costly option. You’ll need to determine if it makes financial sense for you to spend the money needed to hire an accountant. You should also still track your information, which is half the battle.
Who is this for? Landlords who are looking to save the most time and can afford to spend the money needed to hire an accountant.
Use a Spreadsheet
Using a spreadsheet to track your payments and expenses is one of the oldest methods of record keeping (besides using pen and paper). The spreadsheet’s longevity shows that, while some newer methods may have features it doesn’t, this is a time-tested way to document data. You should track information every month, or at least quarterly, to reduce the likelihood of forgetting to add a late fee or misplacing a receipt. You can use Microsoft Excel ($129.99), Google Sheets (free), or Apple Numbers (free).
A spreadsheet can be filled in manually, or automated using RentRedi. With RentRedi, you only have to input tenant and rent payment information once ahead of time- meaning you’re set up for the tenant’s entire lease- making you less likely to find a mistake in your data tracking due to human error and eliminating the time spent manually keying in information. The data inputted into RentRedi can then easily be exported to a .csv file, which is compatible with Microsoft Excel, Google Sheets, and Apple Numbers.
One of the difficulties of using spreadsheets, manually or with the aid of an automated solution, is that you don’t have access to financial and accounting reports, such as profit and loss reports. Though these may not be mandatory for filing, they are helpful because they let you know the health of your property. If being updated on such information is not a priority for you, spreadsheets may remain your best bet.
At the end of the year, instead of giving your spreadsheet to your accountant, you can file it yourself. If you keep a good, readable, and accessible record of your payments and expenses, this can be completely doable.
The Pros: This is the most cost-effective option. Your only costs are for your spreadsheet software of choosing (some of which are completely free) and, if you want to automate collecting rent and tracking information, RentRedi ($19.95/mo).
The Cons: Manually tracking with spreadsheets, depending on the number of units or properties you have, can be overwhelming and make you vulnerable to mistakes or miscalculation if a rigid tracking system is not implemented. If you automate tracking, you do cut out a lot of the hassle and time spent manually filling in information, but you still miss out on financial and accounting reports.
Who is this for? Landlords who are looking for the lowest-cost option and don’t need financial and accounting reports.
Another option to consider is QuickBooks Online, a tool that helps you not only track payments and expenses, but also creates financial and accounting reports, automates simple bookkeeping tasks, and offers assurance of a stable, trusted and proven product. Pricing ranges from as low as $20/month for their most basic plan to $70/month for their “Plus” plan.
With the ability to import your .csv file right from RentRedi to QuickBooks Online with the click of a button, you can quickly and easily post your information to the checking account register. From there, QuickBooks will do the work to document what is necessary and create reports to help you not only track your data, but also understand what it means for your finances.
The Pros: QuickBooks Online helps you track and understand your finances, and it’s easy to import information straight from RentRedi, leaving you with a lot more time and a lot less stress.
The Cons: The pricing and features vary, so depending on what you can afford and what you want out of the product, you may find yourself having to decide between a more cost-friendly or useful option.
Who is this for? Landlords who want to keep track of their finances while reducing time spent updating spreadsheets and are open to spending a little each month.
QuickBooks Desktop Pro
An even more detailed option brought to you by Quickbooks is QuickBooks Desktop. With Quickbooks Desktop, you can import .iif files, which means you can track your profitability not just overall, but for each of your properties, units, even tenants. You can really come to understand where you are making the most- and losing the most- with the features of Quickbooks Desktop. Though this added information can be taxing to understand at first, once you figure it all out, it can be instrumental in growing your business.
As with QuickBooks Online, the pricing of Quickbooks Desktop differs, ranging from a one-time payment of $299.95 for QuickBooks Pro 2019 to $299.95 per year for their subscription to QuickBooks Pro Plus 2019 (which grants you access to 24/7 customer service support), to $1155 annually for QuickBooks Enterprise, which offers six times the capacity of other QuickBooks. Prices can vary as QuickBooks often runs promotional deals.
QuickBooks Desktop is also compatible with RentRedi, meaning you can export data from RentRedi directly to QuickBooks Desktop, eliminating time spent manually inputting information or finding lost payment details.
The Pros: QuickBooks Desktop gives you access to a ton of useful information that can help you manage your finances and find exactly where you are making and losing profit.
The Cons: With all of the extra features of QuickBooks Desktop comes more to learn about the product, and it can get overwhelming. The price of QuickBooks Desktop is more upfront, but may actually be the cheaper option of the QuickBooks choices in the long run.
Who is this for? Landlords who don’t mind a bigger learning curve, have the budget to spend (either upfront or monthly), and are looking for a ton of features to help them create very detailed reports.
There are quite a few options out there for accounting. Each has its upsides and downsides, so it’s up to you to decide what makes the most sense for you, by determining the mix of time, money, and support you are looking for.
No matter your choice, RentRedi makes renting AND accounting easy. For more information on how to get set up with RentRedi, how spreadsheets/QuickBooks and RentRedi work together seamlessly to simplify your collection and tracking experience, or to ask any questions, message us here or visit RentRedi.com.