When you are running property management accounts for a rental property portfolio, it’s really important to stay organised and ensure your processes are streamlined and efficient.
What factors do you have to consider when dealing with property management accounts and how can online accounting software help you stay on track?
This article will offer you advice to help you stay on top of your financials while you manage the day-to-day requirements of your business.
Different types of property management
There are different types of property management, each with different considerations when it comes to the accounts.
- Residential – such as student flats or family homes.
- Commercial – such as serviced office space or industrial units.
- Holiday properties – such as cottages and apartments.
For residential and commercial properties, you will have lots of legal requirements to keep on top of. But for holiday properties, you have increased admin and transactions because there is such a high turnover of people leasing your property.
What are the financials you have to think about?
Renting out a property means rental income, which means you need to deal with tax.
As a private landlord, you need to notify HMRC and register to fill out a self-assessment tax return each year.
You will also need to pay Class 2 National Insurance if being a landlord is your main job, you rent out more than one property and you’re buying new properties to rent out.
If you have a rental property business, then you will be paying the likes of corporation tax, VAT, PAYE, and National Insurance for your staff.
As your property business grows, you will have to expand your sales team. Once you have good people working for you, you want to hang on to them.
Make sure you have good employment contracts in place, attractive commission terms so they don’t join the competition, and pay them the correct amount, on time each month. Using payroll software can help you to stay on top of this.
There is going to be a lot of this to keep on top of, and you’ll find yourself repeating the same tasks as tenants move in and out of each of your properties.
Get templates in place for all paperwork relating to the financials:
- Rent schedules
- Checking in/out documents
- Floor plans
Collecting the rent
If you don’t get efficient processes in place here, you will soon go out of business. You won’t be able to afford to pay the bills or keep up with repairs and maintenance.
If you rely on the income from your rental properties, you won’t be able to pay your staff or your own tax bill.
As a letting agent, your landlords will become unhappy pretty quickly if you are not passing on their rental payment on time.
Paying the bills
Direct debits are your friend here, helping you keep on top of multiple bills for multiple properties.
It’s important to keep clear records of meter readings and to see if you are using the most competitive provider. A simple switch to a different gas or electricity provider could save you money across all your properties.
It is a UK government requirement that all tenants’ deposits are protected in a government-approved tenancy deposit scheme.
From finding the initial deposit for a buy-to-let mortgage to having enough money put aside for fixing a broken washing machine or toilet, you need plenty of money in the pot.
You need to be able to access this money quickly, rather than having it tied up in assets.
You need to create legally binding tenancy agreements and make sure you have the right landlord insurances in place.
Don’t forget health and safety requirements; you must ensure all gas and electrical equipment is safely installed and maintained, and follow fire safety regulations.
You will also need to provide an Energy Performance Certificate for the property.
Importance of staying organised
Some people are happy just privately renting out one property. But many have an eye on growing their property portfolio – maybe this is a set of hot-desking offices in a large city, a chain of boutique B&Bs or a number of student flats in the same terraced street.
Key to this is staying organised and getting efficient processes embedded from day one. Online accounting software can help you do this.
Checklist: What should you look for in online accounting software?
1. Cloud-based flexibility
Expect to receive calls from your tenants out of hours. They’ve lost their key and had to break in – can you afford a locksmith? The lights have gone out – has the electricity bill actually been paid?
Just as online banking means you can check your bank wherever and whenever you want, cloud-based online accounting means you can keep on top of your accounts at all times of day and night.
2. Multi-user options
If you have a large property portfolio with complex setups – for example, a managed office with lots of individual leases in one building – you may want your different teams to have access to the accounts.
Look out for the option for multiple companies and multiple users, with individual logins.
3. Easy access for your accountant
If you can afford it, it’s worth getting professional support when you’re managing the finances for lots of different properties – someone to look after the paperwork while you look after the tenants.
Give you accountant or bookkeeper access to your online accounts and you can work together in real time.
4. Option to speed up your payments
Look for the option to add a “pay now” button to invoices or to take card payments online or over the phone.
You should be able to hook up to your bank too, so you can automatically import all your receipts and payments, and keep HMRC happy by paying your VAT bill, PAYE and National Insurance on time.
You will also want to easily generate customised invoices that you can email directly to your clients or export to PDF.
5. Opportunity to keep records to and stay compliant
All businesses have a responsibility to pay the correct amount of tax to HMRC. You can receive a routine check at any time, and using software to manage the accounts for your rental properties means you can show details of all invoices, receipts and expenses, and run off reports in an instant.
Because online accounting software keeps a record of every transaction and lets you run cash flow forecasts, it is easy to look back at previous accounts activity and to get a snapshot of the coming months.
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