If you own rental property, and especially if it's just one rental home or apartment, you may be thinking of managing the finances yourself. You might reason that it's not hard to collect rent, pay the vendor bills, and keep simple records for the property. However, rental property accounting is usually much more complicated than just collecting rent and paying bills; note a few reasons why you should consider having an account manage these finances for you.
Depreciation refers to the loss of value of a property over the years; if you don't invest in remodeling and upgrades that may increase the property's value, it's likely to become less valuable as time goes on. You need to understand how to depreciate the property because this affects the property taxes you pay.
However, you don't depreciate a property simply by subtracting the value it has lost over the years, as the tax office usually has a list of complicated rules about how to claim depreciation. For example, depreciation may apply to a rental property only for so many years after it's been built, and you may be allowed a maximum depreciation amount and no more. Rather than trying to calculate this yourself and potentially risk overlooking any depreciation you can claim on your taxes, have an accountant calculate the depreciation of your building for you.
It's vital that you understand the expenses you may incur with a rental property and that you're claiming all of them on your taxes, including the expense of fees you might face if a rent check bounces, property landscaping features, renting a video camera to make a video of the vacant property for advertising, and the like. It's not unusual for a property owner to overlook many minor expenses they face when they own a property as they may only be thinking of checks they write to vendors and maintenance crew as being their expenses. An accountant can ensure that you are not overlooking these costs, even if they're minor, when it comes to the expenses of renting a property.
When it comes to setting rental amounts and late fees for rent, you may have certain local restrictions and regulations of which you're not aware, but which you should be following. This can mean a cap on rent increases or how much you can charge for late fees if a check is late. To avoid any penalties yourself, have an accountant manage these finances so you know everything is legal according to all housing regulations in your area.
For more information on your investment property depreciation schedule, contact an accountant.