You don’t have to be an experienced investor to understand what impacts your ROI. You need a well-maintained home. You need to avoid vacancy and turnover. You need to leverage your rental income and retain tenants.
You also need to pay attention to your accounting practices and financial reports.
These aren’t things you likely associate with earnings, but when it comes to increasing the returns you earn on your Boston investment property, accounting makes a big difference.
To be effective, you need the right accounting tools and software. When you have these processes in place and you’re utilizing all of the technology that’s available to you, it’s possible to increase what you earn and decrease what you spend.
Do you know for certain what each asset is worth? What about your portfolio as a whole? Knowing your numbers helps you to leverage your value.
Sound accounting practices can increase ROI and reduce the risk of major losses. Rental property accounting isn’t complicated, but it can be time consuming. Make sure you have the right tools to succeed, including good software, a good accountant, and a good Boston property manager.
Establish Your Boston Real Estate Portfolio ROI
Before you can put those systems into place and boost the accounting practices you’re currently using, you need to understand what you’re tracking. The goal of a good accounting and financial reporting process is to increase your ROI. That means you have to know your rental income. You need to estimate the appreciation on your investment. Consider the capital gains you may earn from a sale and figure what you’ll save on tax write-offs.
Get your expenses organized, too. You’ll need to budget for maintenance, repairs, and vacancy. There may be property damage that requires additional funds. You’ll always have taxes and insurance payments. There may be HOA payments, too. Prepare for any variable expenses you can’t quantify with precision.
Document Everything with Boston Rental Property
Organization is essential. For example, you’ll need accurate tax records. As you take advantage of tax deductions and write-offs, you’ll need to demonstrate you’ve spent what you said you spent. Keep good records that are accurate, detailed, and transparent.
Digital files will help you access your records and receipts from anywhere. Your Boston property managers should have a platform ready to capture these invoices, receipts, and records. If you’re managing on your own, you can use an online app.
Rent collection must be documented. Late fees must be identified. Security deposits must be accounted for. These are just the basics. You’ll need to document everything you spend on your properties as well.
This type of documentation and electronic tracking will assist with ROI because it helps you understand your metrics. A good accounting system will provide benchmarks that demonstrate the strengths and weaknesses in a particular property or the portfolio as a whole.
Supporting documents also provide evidence if there’s an audit or questions about tax returns. The IRS may demand proof that the income and expenses being reported are accurate. With a solid and digital system, these records can be accessed and documentation provided at a moment’s notice.
Prioritize Your Banking Relationships
You probably already know that you have to keep business and personal accounts separate. This is just good business. You want to keep personal and real estate income and expenses separate, otherwise a mistake is easy to make and it could cost a lot of time and money to untangle those errors.
If you want to really keep things separate, you can set up different accounts for each rental property. This is a good way to stay organized, especially when you want to know exactly what you’re spending and earning on each property.
Developing a good relationship with a local banker is a good way to maximize ROI because a strong professional network always yields great results. Brokers can also help. Investors are always looking for funding, refinancing opportunities, and other financial products that can help earn more and spend less. Get to know professional brokers who have their own relationships with banks and lenders.
Higher ROI Requires a Deep Dive into Profit and Loss
Establishing your accounts and your system for tracking all the information you’ll need is a great start. Next, you’ll need to focus on analyzing the documentation you gather, generating reports, and using that data to make some decisions about how to be more profitable with your investment properties. Getting to know your profit and loss in intimate detail is going to increase your ROI now and in the future.
Every investor needs to run ongoing accounting reports. These financial statements can serve as an easy guide in understanding how much is being earned and spent. It helps you identify properties that aren’t performing as well as they should and it also helps to create new benchmarks and goals.
Some investors like to run a monthly report to review in detail and others are fine with a quarterly look at where things stand. Knowing where things stand financially should be a priority.
Profit and loss statements are pretty standard for all businesses. This is a careful tracking of all profits and losses, and these reports will provide a snapshot of operating earnings, which is the money that’s earned on an investment before rental income and tax. With data that’s gathered from these numbers, investors can get creative and make digital displays and graphs that make it easier to understand where things are going well and where improvements are needed.
It won’t take you long to notice trends in where your money is going. You will quickly see which properties are losing the most on maintenance or turnover, for example. You’ll be able to see where your rental increases are the strongest.
This will help with future budgeting and forecasting. Having such knowledge directly impacts ROI and rental income. It can help investors make smart decisions about which properties to hold, which to sell, and when to engage in creative endeavors such as a 1031 exchange.
Rental Property Accounting Technology and ROI
Property management technology has come a long way in the last 10 or 15 years. Investors and owners now have access to fantastic accounting software that can help with banking, bookkeeping, documentation, and reporting. There are plenty of software options out there, even for individual investors who may only be renting out one or two properties. Appfolio and Buildium are two of the brands with the most name recognition. Yardi and Property Matrix are other good options. Individual investors have had good luck with Quickbooks, FreshBooks, and similar platforms.
The best programs and platforms are accessible, user-friendly, and transparent. Anytime there’s an audit, a court action, or even a complaint or dispute from an HOA or a resident or a lender, having the documentation easily available will help.
There are so many tools out there that can help you be better at rental property accounting. Some are designed specifically for real estate accounting, some are not. Here’s a quick list of some of the rental property accounting apps that will help you improve your tracking and automation on the financial side of your business.
Boston Property Management Helps with Accounting
Boston property management companies can help with the technology and the accounting. Instead of investing in all this extra technology and software on your own, you can partner with a property management team and let them take care of all that work for you. It’s only one of the many benefits to working with professional property managers.
We can help you with every step of the investment process, including the rental property accounting. When you partner with our team, you don’t have to worry about tracking income and expenses. We’re doing it for you. We can customize the accounting that you need, creating personalized financial reports and statements that focus on the areas most important to you. Maybe it’s turnover. Or upgraded maintenance. Perhaps it’s rental value or appreciation.
We’re ready. As a client of Platinum Realty Group, you’re not worried about accounting, reporting, or the documentation. There’s no need for our investors to buy any software or download any new apps. We take care of all that ourselves, providing the required information and reports when necessary. We help your ROI climb higher because of our careful accounting and our attention to financial details.
Even for investors who are not ready to talk about full-service Boston property management, a local professional can provide recommendations and insight about the systems that might work best. A good property manager will also make some referrals to accounting professionals and CPAs if that will help.
A comprehensive real estate investing partner who has experience with every facet of the process is always the best and safest bet. When you’re choosing a Boston real estate asset management company, work with a team that’s ready to put your best interests first. To hear more about how our work can increase your ROI, contact us at Platinum Realty Group. We’re your best investment resource.