Rental Property Accounting & Bookkeeping 101: Landlord’s Guide


If the contraction is prolonged, you may be faced with ongoing mortgage, maintenance, and utility payments without any offsetting rental payments. Ongoing income from real estate, as well as gains from the sale of a property, are all subject to federal and state income taxes – which can be substantial. There are situations where gains from the sale of a property are not immediately taxable, as noted earlier. Ongoing increases in inflation tend to cut into the earnings generated from most forms of investment. This has historically not been the case for real estate, which tends to appreciate at a rate faster than inflation. Part of the reason for this is that investors see real estate as a hedge against inflation, and so are more likely to bid up its price when inflation is high.

  • Bookkeeping and accounting in real estate describe two different things.
  • If you have no experience, you are likely to need software with more live customer support options and a lower learning curve as expressed in user reviews.
  • If you do choose to work with an accountant, hire someone familiar with commercial real estate investing.
  • Your real estate business might have to pay taxes on tools, equipment, and vehicles that it owns, or perhaps even on any furniture you’ve placed in rental homes.
  • It estimates depreciation as a percentage of the depreciated value.

What you will find is that there are most likely numerous areas that you are overreal estate accountinging in out of convenience or habit. Maybe you have used the same oil company or marketing service for years and never really checked the bill. Have the quarterly water or sewer bills at your rental properties increased sharply over the last few years? Did the price of the dumpsters you use for your demos go up since you last looked?

Included in project costs

Easily track affordable housing investments for better decision making. Maximize your asset value by optimizing rents while consistently reducing vacancies. Ability to interpret accounting standard changes and summarize the impact to the company. Researching accounting and regulatory updates, determining applicability, and managing implementation.

As a resource to investors, Roofstock may provide contact information or links to lending, insurance, property management, or other financial or professional service providers. In providing this information, Roofstock does not recommend or endorse any third-party provider nor guarantee their services. Roofstock may receive compensation or other financial benefits from service providers that market on this site, as authorized by law. A chart of accounts for a rental property usually contains categories for assets, liabilities, equity, revenue, and expenses. Simply sign up for a free account, enter your rental property address, connect your bank accounts quickly and securely, and see your real estate portfolio stats come to life.

The loan agreement

Deductions for interest on mortgages and loans for rental properties are limited to the interest on the rental property. Similarly, if you take a loan to buy a property that is utilized for both rental and personal purposes, only the rental interest is deductible. For example, securing your investment property loan with your home does not affect the interest tax deduction. However, the tax deduction is only possible if the borrowed funds are utilized to pay rent. If the funds were used for personal and business purposes, the tax-deductible amount would need to be apportioned.