To be successful, rental business owners must establish many different processes. These vital steps help keep businesses organized and efficient. That said, one of the most crucial processes is financial record keeping. Failing to maintain data as your portfolio grows can easily spell disaster. Rental investors face unique challenges, and therefore, finding the right bank for your business requires some research. Join us below as we help rental owners find the best banking solutions for landlords with streamlined payment collection, escrow, and invoicing.
How to Establish Efficient Banking Solutions for Landlords
Landlords have a lot of responsibilities, and protecting themselves in financial matters is an important one. Thankfully, there are many banking and technological opportunities to make a rental owner’s life easier. Let’s review some of the key factors in efficient banking solutions for landlords below.
- Finding the Best Bank or Credit Union
- Avoid Co-mingled Funds
- Itemize Expenses
- Track Expenses in Real-Time
- Establish Key Reports
- Set Up Automatic Payments
- Obtain an Escrow Account
- Reconcile Records
Finding the Best Bank or Credit Union
Nowadays, banks offer so many options and incentives for business owners. However, that can make it challenging to narrow down your choices. Ideally, rental owners must find a financial institution with an advantageous mix of customer service, technology, and features. So, to help narrow the search, check out these key questions to determine the best bank for your business.
- Do They Have Direct Rent Deposit Capability?
- What Online Banking Services Are Offered?
- Do They Offer Financing Services Tailored to Property Managers?
- What Are Their Transaction Fees?
- Are the Hours of Operation Conducive to Your Business?
- Does the Bank Have International Banking Services?
- How Would You Rate the Customer Service?
Pro Tip: Rental investors need special features that others may not. So, if you need additional advice on banking for landlords, check out our blog on how to choose the right bank for your business.
Avoid Co-mingled Funds
A successful business is an organized one. Thus, business and personal finances should be kept separate at all times to avoid unnecessary confusion. In addition, individual accounts for personal and business needs simplify tax time for landlords. Also, for owners with more than one rental, it is good to obtain separate accounts for each property. Thus, allowing owners to track expenses and profits more easily!
Effective banking solutions for landlords require meticulous recording of any incoming or outgoing transactions. That said, when you take the time to itemize expenses, tracking profits and preparing to file taxes becomes easier. After all, this is necessary for evaluating whether or not the rental property is a profitable investment. So, carefully categorizing expenses as they occur will save time as landlords prepare to file their Schedule E tax forms. Ideally, break down costs into the following categories and consult an experienced tax professional to ensure you take advantage of all deductions –
- Collected Rent
- Refunds from Tenants
- Marketing or Advertising Costs
- Travel Expenses
- General Cleaning and Maintenance
- Insurance Premiums
- Legal Fees
- Management Fees
- Mortgage Interest
- Office Expenses and Supplies
- Utilities (if paid by the landlord)
- Bank Fees
Track Expenses in Real-Time
It does not take long for administrative tasks to pile up and become overwhelming. Therefore, recording transactions as they occur, or at least daily, is vital. Thankfully, using effective property management software, or better yet, a property management company, can help minimize these daily tasks. In addition, by taking advantage of these services, it becomes easier to automate banking solutions for landlords and other tedious recording tasks.
Establish Key Reports
For investors, profitability is the key to success. Therefore, having reports and metrics to evaluate the overall health of your investment is essential. Additionally, understanding profit and loss for each property can help owners make more informed decisions. So, using property management software or programs such as QuickBooks or Excel, create key metric reports that provide a quick snapshot of expense trends and your financial summary.
Set Up Automatic Payments
With so many tasks to complete throughout the day, week, and month, landlords need to streamline wherever possible. So, get the most out of technology by automating repetitive tasks that plague property owners. For example, one way banking for landlords becomes more efficient is through automatic payments. Landlords can set up autopay for many of their everyday bills, such as the mortgage, insurance, or predictable expenses. In addition, these transactions can still be tracked through your account for simple reconciliation. While it may take a little time to initiate, this simple automation saves time in the long run.
Obtain an Escrow Account
Keeping a tenant’s security deposit separate from all other funds is required in some jurisdictions. However, even if it is not, it is a good business practice to set up a different escrow account for these funds. Escrow accounts provide a neutral place to hold security funds for the duration of the lease. However, laws may vary based on location. Nonetheless, states may require the following –
- Owners need to set up an escrow account and deposit any security funds into a financial institution.
- Out-of-state landlords need to open a local account near the rental property.
- In some locations, landlords must deposit security funds into an interest-bearing escrow account.
No matter how landlords choose to track and manage financial transactions, periodic reconciliation is necessary. When it comes to banking for landlords, this is a critical step that should be completed at least once per month. So, review invoices, receipts, reports, and bank statements to ensure all transactions are accounted for. If you find a discrepancy, be sure to address it right away.
How Rental Management Software Can Make Life Easier
Landlords face many challenges handling the avalanche of paperwork coming their way. That said, maintaining accurate and detailed records is essential to running a successful rental property business. Thankfully, technology has made a significant impact on the rental industry. Whether you own one property or 1,000, there is a software solution out there to make life easier for landlords. Check out the most popular platforms to reduce those tedious administrative tasks below.
Top Property Management Software Solutions
- AppFolio Property Manager – Leading the industry in all things property management, Appfolio provides comprehensive ways to streamline banking for landlords as well as many other tasks. Using a full-service approach to property management, this software allows owners to manage all aspects of their business from one user-friendly platform. In addition, Appfolio users can customize reports, offer online rent collection to tenants, take advantage of convenient owner/tenant portals, and track maintenance requests with ease.
- Propertyware – With an easy-to-learn platform, Propertyware offers owners a wide variety of customizable options designed with the single-family property manager in mind. Need to expand one day? Propertyware can grow as your portfolio does, and plans begin at just $1/month per unit plus a startup fee.
- Landlord Studio – Banking for landlords does not have to be an arduous task. The Landlord Studio platform takes the guesswork out of business banking for landlords. So, with its easy-to-use software, owners can import bank records and digitize receipts. Thus, allowing landlords to see real-time account information from anywhere, anytime on a convenient app.
- Buildium – Looking for an all-inclusive service? Buildium is a definite contender! This software has a wide range of convenient accounting functions, including reports to help with tax filings. Also, Buildium includes online tenant portals, a professional website, and easy-to-use tools for community management. Plus, plans start at just $50 per month.
Enjoy Effortless Rental Ownership with Professional Management
Between marketing, leasing, maintenance, customer service, and accounting, a landlord’s job never ends. So, without the right business banking and processes in place, this industry can quickly become overwhelming. Even with the latest software technology, property owners are still responsible for monitoring processes and ensuring proper reconciliation. All of these tasks take time and energy away from your friends, family, or other business ventures.
Successful rental investors know that partnering with an experienced property management company can take their business to the next level. At Bay Property Management Group, our team understands the unique challenges landlords face. Using our experience and unmatched customer service, we strive to make rental ownership the profitable and enjoyable experience it should be. If you are ready to get those day-to-day tasks off your plate while achieving maximum profit potential, give us a call today.