The Biggest Benefits of Using Rental Property Accounting Software

As a real estate investor with a growing business, you may find yourself drowning in financial documents across your units. It’s a major task to keep track of rent payments from each tenant in addition to maintenance costs, tax payments, and mortgage expenses — a task made more difficult when done manually. But is there an easier way to manage the accounting of your investments?

In recent years, rental accounting has been revolutionized. Rental property accounting software, often part of comprehensive property management tools, has been designed for this very purpose. It’s built to help landlords go paperless with their accounting, centralize their documents, and enhance workflow efficiency by automating tasks such as rent collection. We’re here to share how real estate accounting software can benefit you in ways that manual accounting won’t.

What is Rental Property Accounting Software?

Rental property accounting software is a specialized online method of accounting made for landlords, real estate investors, and property managers. It eases the burden of keeping track of income, expenses, and transactions to mitigate stress and maximize your time as a landlord. This software typically includes features to track individual unit payments as well as overall, also offering profit and loss reporting and help with Schedule E tax documents.

Often, landlord accounting software can be integrated with property management software to connect every aspect of running your rental business and enhance convenience for both landlords and tenants. You can track specific properties’ online rent payments, late fees, or security deposits alongside their maintenance requests and lease information.

5 Benefits of Using Rental Property Accounting Software

If you’ve been bookkeeping by hand, accounting software can make a significant change in your day-to-day accounting tasks. There are many benefits to switching from manual to online accounting, but today we’ll be walking you through five of the most important ones.

#1 Centralize Financial Information

Manual accounting involves organizing a lot of paper and a lot of storage space. Not only are you responsible for tracking revenue or expenses for each of your units, but you’re also responsible for tracking more general income and expenses, such as paid advertisements, travel (if you’re an out-of-state landlord), or general upkeep across your rentals. If your space is unorganized, chances are your books are, too.

This is where rental accounting software can help. Because this software allows you to go paperless, all your financial documents are organized in one centralized location. You’ll never lose track of a transaction again — especially with information organized by property and tenant!

#2 Minimize Manual Calculations

Gone are the days of estimating profits and losses on paper or by calculator. Landlord accounting software streamlines the process for all your important calculations so you don’t have to spend valuable time adding together your expenses for the month, quarter, or year. By inputting transactions, income, and expenses, rental property accounting software does the financial work for you to generate information and metrics about your profits and losses, tax information, and more.

Bookkeeping tasks that may take you hours to compute by hand take rental property accounting software just minutes to complete. The list of other tasks you can complete in that time is endless and represents another reason to consider implementing landlord accounting software into your business.

#3 Create Reports

Rental accounting software is good at a variety of tasks, among them being report creation. Most rental property accounting software platforms can generate a profit and loss (P&L) report, which is a record of income and expenses that calculates your total net income over a specific period of time. A profit and loss report is an essential part of analyzing the health of your business, so it’s valuable to use software that can crunch the numbers for you.

Additionally, landlord accounting software offers Schedule E report generation. Schedule E is a tax document filed alongside your Form 1040 that reports several categories of income and expenses, including those from rental businesses. Since rental accounting software has your income and expense information stored all in one place, it can generate this report for you, saving you time and stress when filing taxes.

#4 Maintain Accuracy

As you track your cash flow with rental accounting software, it gets an accurate picture of your business’ financial success which can save you time and money in the long run. Some rental accounting software platforms even allow you to connect your bank account, ensuring that every transaction is accounted for and on your books.

Accuracy is key when it comes to rental accounting since expenses can be claimed on your taxes, preventing you from overpaying taxes when the time comes around. Inaccurate books lead to further losses, so rental accounting software acts as a helping hand that’s designed specifically to handle these tasks for you.

#5 Promote Efficiency

Above all else, using software for your rental accounting needs is a major time-saver, especially if your business is growing larger. Instead of sifting through papers and spending hours manually adding and subtracting your income and expenses, software will do the heavy lifting of managing your finances for you. This efficiency saves you from spending extra time and effort so you can focus your energy elsewhere and be the landlord you strive to be.

Choosing the Right Accounting Software

With numerous accounting software options available, choosing the right one can be overwhelming. To make an informed decision, real estate investors should consider the following key features:

Key Features to Consider

1. Income and Expense Tracking: The ability to accurately track income and expenses is essential for real estate investors. Look for software that offers automated income and expense tracking, customizable charts of accounts, and the ability to categorize transactions.
2. Property Management: If you manage multiple rental properties, look for software that offers or integrates with property management features such as lease and document management, tenant screening, and online rent collection.
3. Cash Flow Management: Effective cash flow management is critical for real estate investors. Look for software that offers real-time financial reporting, customizable dashboards, and automated alerts for low cash balances.
4. Tax Preparation: Tax preparation is a critical aspect of real estate investing. Look for software that offers integration with tax preparation software, generates accurate financial reports, and tracks depreciation.
5. Security and Compliance: Ensure the software you choose is secure and compliant with industry standards. Look for software that offers multi-layer encryption, two-factor authentication, and regular security updates.
6. Scalability: As your real estate portfolio grows, your accounting software should be able to scale with you. Look for software that offers flexible pricing plans, customizable features, and the ability to add new users and properties.
7. Customer Support: Finally, look for software that offers excellent customer support. Ensure the software provider offers multiple support channels, such as phone, email, and live chat, and has a comprehensive knowledge base and user community.

By considering these features, real estate investors can select the accounting software that best meets their needs, ensuring efficient and effective financial management for their rental properties.

Conclusion

Unlike other accounting software real estate accounting software is built with real estate investors and landlords in mind, offering an experience personalized to your needs. Utilizing rental property accounting software is the first of many steps in optimizing your business, so consider these benefits to save yourself valuable time and energy.