Assetsoft - Blog #maintenance

The Complete Guide to Property Inspections

Mon, 01 Nov 2021 10:42:47 -0500

Property Hunting is undoubtedly a difficult task when there are so many options to choose from. But no matter how much time passes by, they’ll always be expensive. And to make a decision where you’ll be spending a lot of your money, some expert advice is needed.

Property inspections play an essential role to determine, if needful maintenance of a place is carried out. Our brief guide to property inspection will help you better understand the concept and the considerations to be taken into account while arranging for a property inspection.

Importance Of A Property Inspection Report

Before buying a house, you must get hold of a property inspection report from the seller. The purpose of this report is to allow buyers to make rational decisions regarding the purchase.

A property inspection report consists of all that you should know about a house or property. It contains vital pieces of information about the place. This report can inform you whether the property or building is in a good condition and also if it is safe to be used. A property inspection report can tell you if there is any problem with the property which needs to be resolved.

When Should Tenants Ideally Be Notified About The Inspection?

According to the laws, a landlord must give their tenants a notice of at least 24 hours if they want any property inspection carried out. But it's better to notify the tenants at least a week before the examination since the idea may seem quite daunting to them. The inspection must be conducted at a time that both the tenant and the landlord may deem fit.

In What Way Should Landlords Request Permission For A Property Inspection?

According to the legal standards, the landlord should request permission for a property inspection in writing. They may ask for a handwritten note, an email, or even a text message. The document must include the following points:

●The address of the property to be inspected

●Who will be carrying out the inspection

●Date and time of the inspection

In some tenancy agreements, clauses scheduling in-house inspections throughout the year can be found.

Can A Landlord Enter A Property Without The Permission Of Its Tenants?

A landlord can enter a property without permission in the event of an emergency only. Emergencies of this kind may include gas leaks, ruptured water pipes, and similar instances. In all other situations, entering a house or property without permission can be regarded as trespassing. If a landlord enters the property without the tenant accompanying them, they must have the tenants' permission to do so.

What Happens If A Tenant Does Not Allow The Property Inspector To Enter?

Most tenants will likely have no problem with a property inspection as long as the landlord has followed all the rules. Sometimes, however, a tenant may simply not allow either the landlord or the property inspector to enter. That is why it is important to properly understand a landlord's right to gain access to the property.

But a landlord may issue an eviction notice in the event of a complete lack of cooperation of the tenants. In this notice, a landholder formally requests the tenants to leave the property when their fixed term comes to an end. But to issue this notice correctly, some procedures have to be followed. Otherwise, the statement will be treated as invalid.

A Property Inspection Checklist For Landlords

If property inspection is conducted thoroughly, it might detect problems that might turn out to be a major issue later. But a timely detection of these problems would ensure their timely resolution, and the process will not involve a lot of expenses if detected in its earlier stages. But a landlord must be watchful enough for these problems to remain unnoticed.

To find out if every nook and cranny of the property is maintained properly and is in good condition, it is important to follow a checklist. Both the interiors and the exteriors of a house must be carefully examined to check if they need to be repaired or not.

As far as the exterior portions of a property are concerned, the landlord must ensure:

If the gutters are overflowing
If the paving slabs are loose or not
If the fencing is in a damaged condition or not
If the outdoor area is maintained or not
Whether a lot of garbage is not being left outside
If the outbuildings, like the shed doors and garages, are safe or not

For the interiors, the landlords must be on the lookout for the following:

Damp and mold
Leaky faucets or pipes
Whether smoke detectors and carbon monoxide alarms are functional or not
Conditions of items such as electrical, furniture, and so on.
Condition of permanent fixtures and fittings such as bathroom suites, carpets, flooring, and light fittings.

Normal wear and tear should, however, be expected. There might be scratches and other marks on the furniture. Carpets might appear to be shabby as well. Even some electrical items might not be working anymore and will have to be replaced.

Property inspection thus helps landlords find out if their property is in a proper condition. It also helps buyers decide if they should invest in the property or not. Therefore, property owners need to carry out an inspection of their property before they consider putting it up for sale.

If any part of the property is found to be in a bad or poorly maintained condition, necessary steps may be adopted in time to counter the problems caused by it. However, for a property inspection to be carried out expressively, the tenants’ permission must be sought in the right way following the right procedure.

Have property management needs? We can help you find the right property management software, from Yardi to MRI Software. We can also help you automate common tasks easily through robotic process automation. Talk to the Assetsoft team today.

How To Combat Late Payments Through Property Management Software?

Fri, 01 Oct 2021 08:00:00 -0500

Collecting rent is one of the most problematic parts of being a property manager. More than 20% of renters in America are nearly 4 months behind on their rent payments. That is $5600 worth of rent per delinquent tenant.

Traditional payment methods do little to solve this problem. While micromanaging rent payment is tiresome, leniency can cause too many missed rents. The final step is to carry out an eviction, which can cost up to $7000 for the property manager.

A better solution is to leverage property management technology to streamline rent collection. With the right technology, you can make sure every tenant pays you on time!

If you are unsure how, read the below tips and combat late payments effectively.

Automate tenant screening

Ensuring timely rent payment isn’t a month-end process. Instead, it starts with the beginning of the tenancy itself. A study by Harvard University found that nearly 50% of tenants couldn't afford their rent due to low income. A thorough tenant screening can help determine the affordability for each renter.

The screening process needs to verify basic requirements such as credit score, eviction history, and criminal record. Verifying income and employment should be a priority as a tenant can only pay rent when they can afford it.

According to a survey by the US Census Bureau, spending more than 30% of income on rent is considered a financial burden. While this isn’t the sole determinant of housing affordability, it is wise to choose tenants who spend around the 30% threshold.

Additionally, you can know the tenants' payment patterns through their credit scores and eviction history. In 2020, the average credit score among renters in the U.S. was 638. Credit scores show how promptly an applicant clears their dues, including rents.

A tenant with a bad credit score can potentially fail to pay rent on time. Eviction history also works similarly, by showing the behavior of an applicant during previous tenancies.

Automating tenant screening through software like Yardi ScreeningWorks Pro helps you select low-risk tenants.

Online rent payments

Online payments can help you tackle late payments simply through their convenience. New generation tenants prefer online payment methods with millennials paying 61% of their bills digitally.

Giving your tenants their most preferred payment option will automatically help them pay rent on time. There are several options like bank transfers, e-wallets, or credit cards that can be used to complete these transactions.

Mobile payment options are also an added advantage. Nowadays, almost every tenant has access to a smartphone. Through mobile apps, tenants can complete their rent payments anytime. Making payments convenient for the renters reduces the chances of late payments.

Digital payments are also convenient for property managers. You don’t have to go through your mail for payment checks or visit the bank to cash them. Funds are transferred directly to your account, which means you get real-time updates whenever someone pays their rent.

Send out payment reminders

Most tenants don’t intend to miss out on their rent payments. Sometimes people are busy or they simply tend to forget. In a Citi Bank survey, 61% of delinquent tenants blamed forgetfulness for late payments.

Setting up reminders is an excellent way to collect timely rent from forgetful tenants. But manual reminding each tenant about their due rent takes too much time and effort. A more convenient way is to use property management software to set up email or text reminders.

You can automate these reminders for the first of every month, and also carry out sending them multiple times till the rent is paid. Text and email reminders are documented, which means they can serve as evidence in case an eviction becomes inevitable.

Set recurring payment options

Setting up automatic payments is another benefit of property management software. Tenants who don’t want to go through the monthly hassle of rent payment can use these options.

Setting up recurring payments does not require extensive technical knowledge. Initially, tenants need to feed their payment details such as credit card information to the software.

Then, they can set their payment dates and choose to get transaction notices in their mail.

A recurring payment is the best way to ensure timely payments. It is not only beneficial for the property manager, but also for the tenant. Since these transactions are online, they can be easily documented as well.

Utilize tenant portals

Constant communication is important to maintain a healthy relationship with tenants. Tenants who have a good connection with their property managers are more likely to pay rent on time. Effective use of tenant portals for tenant communication can ensure that every payment reaches you on time.

The use of these portals is not limited to sending or receiving messages from tenants. They come with a wide range of features such as tenant account management, document transfer, and much more.

Property managers can keep a track of the renters’ payment history, check the frequency of late payments and send text warnings to tenants if necessary. Similarly, tenants can also check due dates, update payment methods and communicate any delay with their property managers.

For tenants, keeping up with these announcements and checking their rental agreement also becomes easier. Any incentives and penalties can be shared through these portals. By giving incentives for timely payment, you motivate more tenants to pay on time.

Make rent payments easier through Assetsoft

Leveraging technology can help reduce the number of late payments you receive. Assetsoft helps you find the right option to streamline your rent collection. We have several options such as tenant portals from Yardi and MRI, online rent collection through Zoho Books, and much more.

For more customized software, our expert team can work with you to integrate suitable features. Our support extends beyond integration with services like training, troubleshooting, and data transfer.

We can also help you streamline your business and improve your strategy through our consultation services. With Assetsoft, you will find complete tech solutions for your property management business.

To streamline your rent payments, contact Assetsoft!

Why Is Maintenance Important For Your Properties?

Wed, 25 Aug 2021 10:30:00 -0500

Everybody likes a well-maintained property. For property managers, that leads to tenant satisfaction and tenant retention. A survey by Avail states the same - 12% of tenants planned to vacate rather than renewing their term if the property was not well-maintained.

If your tenant’s service orders are met on time, and the issues are fixed, you get long-term clients and attract potential buyers.

The top 8 reasons you need good property maintenance

Here are some of the reasons why maintaining your property is important today:

1. Tenant satisfaction

Sure, maintaining a property is not easy, but current tenants may vacate and not attract new buyers if ignored or postponed. Running a property business means taking care of your property and tenants at all times.

When you care about your property, your tenants continue to reside on it for the long term. It is one way to keep tenants rather than looking for new buyers frequently. Keeping your property clean will keep your tenants happy and, in turn, lead to tenant retention. 

2. Higher sale value

Good property with clean surroundings means fewer repairs making it highly valuable while selling it. No one likes to buy a poorly maintained property and spend an extra amount repairing or renovating it. Keep your property clean without any damages to the windows or doors. You can also get it painted once to make it look visually pleasing and clear the clutter during the process.

3. Maintain rents at market rates

You can increase your rents as per the market rates if you keep it in good shape. Potential buyers will also find its value for price and turn it into long-term tenants. Finding new tenants frequently can be challenging, so you need to keep your tenants for the long term, and it can happen when you care about your property and your tenants.

4. Reduces liability insurance

One major benefit of maintaining your property is that it keeps your tenants safe. Regular maintenance can avoid major accidents such as your kids breaking your tenant’s window or the tenants getting injured after falling down the stairs.

In each of these cases, you are liable for the damage and should pay for it, but in most cases, owners will be responsible for building damages and not personal damages.

Do not delay fixing any hardware components or ignore the issues, thinking it's insignificant. You can get a document signed by the tenant that you’re not responsible for any personal injuries, and it’s mentioned in your landlord insurance policy.

5. Attract good tenant

Sometimes, tenants don’t treat the property well and damage it. You need to find tenants that take care of your property as theirs, and for that, you should keep your property clean. When you don’t bother to fix damages, your tenants don’t worry as well. If you want someone who takes care of your property, you should start.

6. Prevent major problems

Repair the broken ones and replace the rest. Visit your property occasionally and see for any fixes that are needed. Plumbing, heating, roofing problems, windows, doors, drains, pipes, and sewage issues, lost key, and electricity problems are some of the major issues that should be fixed and checked for frequent faults as part of your maintenance charges.

Do not delay fixing them as tenants may be vacant if their plumbing or electricity problems are not addressed and fixed soon. Providing the essentials and taking care of such issues can retain tenants for a long.

7. Builds trust

Having property management software helps tenants raise a ticket for the issue. You can then contact your third-party vendors and fix the problems by talking to the tenant about the right time to get it fixed. You then close the ticket once the problem is solved.

The entire process builds trust among the tenants and assures them that anytime there is a problem, it can be resolved by contacting you. When you delay it, tenants lose confidence and eventually get frustrated and vacate your property.

8. Positive impression

When you ignore maintaining your property, you forget your tenants and future buyers. Imagine you delay fixing any roofing problems in your tenant’s unit. No one wants to reside in a leaky roof, and even after requesting service orders multiple times, it goes unaddressed, the tenants vacate your property.

Your future buyers may talk to residing tenants better understand the property better and not recommend it to them due to their neglected problems.

Depending on your needs, you may go for real estate management software like Yardi or MRI. Assetsoft can help you choose the best fit for you. 

Talk to us for real estate IT consulting today!

The top tips to maintain your properties

Go for regular checks or hire property managers to oversee and manage your property. Contact local vendors who can fix issues such as plumbing regularly.

Here are some of the things that you can do to maintain your property better. 

Hire a property manager to manage your property better
Conduct regular inspections for both interior and exterior portions 
Fix issues regularly, even if it is a small one 
Fix leaks, check fire extinguishers, air filters, and water heaters

Maintain your properties with property management software

Managing maintenance and keeping track of things can be made simpler with the help of property management software like Yardi and MRI.

Manage communication with your tenants, keep track of maintenance, screen tenants and verify documents, provide better service to tenants through online rent payment methods and tenant portals to update them about the latest news about your property. 

Manage all your departments through a self-service portal. It saves time and reduces dependency on property managers.

Assetsoft can help you choose the right software for your business and implement, support, and maintain it while also train your staff to use the software. We implement project management best practices for your business.

Want a project management system for your business? Contact us today!

Busting Common Tenant Screening Myths

Mon, 16 Aug 2021 10:30:00 -0500

Renting out properties can be a tough job. From having to interview tenants, provide maintenance, manage accounts, and solve tenant problems, the list goes on. Whether it is noise complaints, damaging items, or constantly being notified about minor problems, these tenants can be a nightmare to deal with.

To avoid this, a good screening process should be implemented for all incoming tenants. This way you will be able to weed out those that have the potential to cause trouble in the future. As a landlord, a part of responsibility lies in selecting the best tenants for your property.

By doing this, you will be able to save yourself additional costs as well that come from damaged property, eviction fees, and lost rent. On average, a landlord would screen at least two applicants per vacancy before making a decision.

With so many myths about tenant screening it can be difficult to know the right from the wrong. In this post, we will be debunking some of the more common ones.

The top 4 common tenant screening myths

1. Only rent matters, nothing else

Can the tenant afford the rent on a monthly basis? Yes, this is the base criteria to determine a potential tenant and you should be running background checks, credit checks, and asking about their employment status during the initial interview.

However, there are other factors to consider that can affect both you and the other tenants in the property. It’s important that every tenant follows the rules set within your property so that problems don’t arise in the future. For this purpose, a basic screening checklist will go a long way in helping you find only the best tenants.

2. A high credit score means they are going to be a good tenant

Higher credit scores do not always translate to on-time payments, and in the same way, a low credit score does not mean that the renter will not make payments on time. Think about students, or new immigrants, or other young people who haven’t had a chance to build a good credit score yet. Don’t disqualify anyone with a low credit score. They might turn out to be a great tenant down the line

Ideally, you should request a complete credit report yourself about any potential tenants rather than allow them to hand you one of their own. While unlikely, people do use old or fake credit reports to fool landlords into renting out to them.

To automate the process of getting credit reports for each potential tenant, you can use the MRI Real Estate Software. There are on-staff investigators that will look into background and credit checks for all interviewees, saving you both time and money in the process.

3. The tenant screening cost should be covered by the property manager

Many property managers refuse to conduct tenant screenings because they believe the cost of the screening will come out of their own pockets. However, this isn’t true as landlords are able to charge the cost of the reports to the applicant as a rental application fee.

The typical application fee can cost anywhere between $25 - $75 (in the US) depending on where the property is located. Also, some points to be noted are:

Landlords cannot make a profit from these fees. They need to charge exactly the fee required for the report from the applicant.

Applicants can only be charged for screening if they are given written notice of what the screening will cover and reasons why their application could be denied.

The fee will have to be returned to the applicant if the application is rejected before the reports are run.

4. Any person without a social security number should be rejected immediately

To request a credit report, you need a social security number. However, don’t turn down an applicant if they are not able to give you one. There are people who don’t have one but still reside in the country:

Foreign employees on a work visa
Foreign students
People staying in the country for a few months

Instead, you should ask for an Individual Taxpayer Identification Number (ITIN) or any other valid form of identification which can also be used to request credit reports. Simply rejecting anyone without a social security number could lose you a good tenant.

5. It's better to have any renter rather than a vacant property

Having a small pool of applicants can be worrisome and you might be tempted to fill the vacancy as quickly as possible. However, you need to consider the implications of having a problematic tenant.

A vacancy for a few months will mean potentially lower rent payments each month, but it comes with no extra cost to you. Whereas, if you are forced to evict a bad tenant, you will have to pay over $3,000 on average (in the US).

The costs include:

Lost rent payments – The eviction process can take anywhere between 1 – 3 months to finalize. You will lose out on these payments if the tenant decides not to pay.
Complaint filing costs
Notice to the police
Miscellaneous fees
Attorney fees

Property clearance fees
Storage fees

6. Only one tenant reference is satisfactory

To gain further insight into a tenant’s background, it is recommended to contact their references. However, simply checking with one reference is not enough as the information provided cannot be 100% verified. Ideally, you should contact both their past employers and landlords to get the full picture.

The employer can tell you about the tenant’s behavior and personality at work, as well as any past problems (if any) they were involved in. The landlord can tell you about their rental payments and behavior around neighbors.

To help with this, Assetsoft can help you find automated solutions to screen all your applicants before you decide. With software such as Yardi and MRI, you can select low-risk and easy-to-manage tenants easily. To know more, talk to us today.

The Top Lease Agreement Terms You Need To Include

Wed, 30 Jun 2021 12:00:00 -0500

As a property manager, making lease agreements can be a complex task. It includes many clauses and terms that can make you wonder--why signing a lease agreement is necessary.

Lease agreements are legal documents that offer protection to both the tenant and property manager. Even if you have the best relationships with your tenants, verbal agreements cannot be relied upon. That is why most property managers prefer clarifying the terms in writing.

Lease agreements can appear complicated. They include many clauses and sentences which can make you confused. Even if a legal professional manages your lease agreement, as a property manager, you need to understand the terms included in it.

The top lease agreements property managers should know

Our list of top property management lease terms will help you choose the right terms for your company. Stay away from legal hassles by including these terms in your contract.

Occupancy limits

Every apartment has a capacity for the number of people that live there. This is called occupancy limit. This aims to provide comfortable living conditions to every occupant.

As a general rule, two renters are assigned one bedroom. But this is only to determine the maximum occupancy. You need to consider other factors such as the size of the room, number of bathrooms, and other amenities.

The Department of Housing and Urban Development’s standard of occupancy is a really helpful guide. It states that:

Every apartment should have a minimum area of 150 sq. ft. meant for the first tenant.
Every other tenant requires an extra 100 sq. ft.

A single-occupant bedroom should have at least 70 sq. ft. of floor area and a double occupant should have 50 sq. ft. per occupant.

Abiding by the laws, you can have your own occupancy limits. Make sure you clearly state this in your lease agreement.

Name of tenants

Many property managers make the mistake of including only one person in their lease agreement. Even if a single person signs the document, you need to include the names of all the adults living there. In the case of a commercial property, you need to include the names of all business partners.

As a property manager, this gives you two benefits:

If one tenant cannot pay the rent, you have the right to collect the whole amount from other tenants.

If one tenant breaks the rules, you have the right to terminate the agreement for all the tenants.

When you include all the occupants in the lease agreement, they are collectively responsible for fulfilling the terms, This includes rent, deposits, and maintenance. It also makes the apartment available only to the adults and their minor children in the lease.

Length of tenancy

The length of tenancy is the duration for which the lease is valid. Typically, a lease agreement starts from the 1st of the month. You can decide to have a one-month, three-month, or yearly agreement. Usually, a 11-month lease agreement is signed to save on stamp duty and other charges.

For short-term tenancies, a month-to-month agreement works the best. These agreements usually renew themselves until termination. This gives flexibility to both the landlord and the tenant. However, year-to-year leases are more convenient. They provide more stability in occupancy. They also help cut down on additional expenses for making the apartment ready for a new tenant.

Rent stipulations

Your lease agreement needs to clearly state the details of rent payment. This not only means the rent amount, but also the frequency and method of collection. You can look at the price of rental properties around you, before determining your rent amount.

Usually, property managers collect rent at the start of the month. The agreement should also state other details such as grace period, late payment fees, and other charges.

You also need to be clear about the acceptable payment methods. You can ask them to mail checks at a particular address. Or, you can give them an option of digital payments, which is popular among millennials. You can also state the number of late payments before a renter gets evicted.

Many property managers report difficulty in rent collection. Using clear lease terms and property management software, you can easily solve your rent collection problems.

Security deposits

Security deposits provide financial backup in case a tenant breaks the lease agreement. In the contract, you need to state the exact amount of deposit collected and the rules for a refund.

While the deposit is meant to pay for maintenance and repairs, most states have restrictions on where you can use the deposit.

You need to cover all details of the security deposit in your lease agreement. For example, if you hold the deposit in a bank account, you need to specify the interest it will earn in the duration.

Some states require you to hold the deposit in a separate account or trust. Check with the state rules to understand how you can utilize the deposit and where you can hold it.

Utilities and services

Your property might have certain utilities and services that are included in the rent. Some other services might need extra payment as per use. You need to specify the included services in your lease agreement. Some utilities like electricity, gas, and cable can be paid for by either the tenant or the landlord. Clearly state which amenities are covered by you and which the tenant needs to pay for.

House rules

House rules prevent any future problems during the tenancy. A lease agreement should carry all the rules, whether they are simple or legal requirements.

For example, if you have ‘noise-free hours’ at certain times a day, you need to state the duration, details, and repercussions of breaking the rules. You can also include a standard procedure if a tenant wants to raise an issue.

You need to also include your restrictions on illegal activities.

Pet policy

Include your pet policy in your lease agreement. State clearly if you do not allow pets. If you do allow them, include details like the number, size, and type of pets. Also mention general pet rules such as cleaning the litter and areas where pets aren’t allowed. Also make the tenant aware of any house rules that the pet might breach, such as constant barking during noise-free hours.

Tenant insurance policy

Most property insurances require tenants to have their own insurance. That’s why it's important to have tenant insurance mentioned in your lease agreement. It provides financial protection to renters in case something happens to their property.

Right to entry terms

Every tenant has the right to privacy. That said, as a property manager, you can enter the property in some conditions. Include situations in which you can enter the apartment such as routine inspections and checks. Also, state the period of advance notice you will provide to the tenant.

Any breach of rules allows the tenant to claim a violation of privacy.

Maintenance and repairs

Both tenants and property managers can be responsible for the maintenance of the property. The lease agreement should clarify who is responsible for what repairs. Are you paying for electric appliance repairs? Is the tenant going to handle repainting the apartment? Specify which party pays for the different maintenance issues.

Also, clarify what home alterations are acceptable. Repainting, wall hanging and other permanent changes should be clearly discussed in the agreement.

Allow your tenant to inspect the property before handing over the keys. This allows your tenant to see any damages and helps avoid confusion later on.

Common area maintenance

If you rent multiple properties that share a common area, you need to include the maintenance terms in your lease agreement. If you collect maintenance fees from all tenants, you should include details such as what services are they used for, and how much each tenant pays.

You need to also consider the scenario where a tenant damages something in common areas. Are they the only ones paying? Or will you pay from the maintenance fund? Include answers to these questions in the contract.

Notice periods

If a tenant wants to leave the apartment, they have to serve a notice period. This can be anywhere from 1 month to 6 months. Your rental agreement should include the required notice periods for vacating a property. It should also include details like security deposit refunds, house repairs, and inspections.

Many of the lease terms can be easily maintained by opting for property management software. These simplify all your property management tasks such as managing, marketing, and much more.

Make property management easier with Assetsoft

While you handle the lease agreement, leave your software requirements to us! At Assetsoft, we build robots and tools to help property managers run their businesses smoothly. We can provide strategy, advise on technology and also implement it for you.

Our popular software choices are Yardi and MRI, both of which are excellent property management platforms. Our expert team can help you get the most out of the software. We integrate various tools to bring the best out of all platforms.

Facing difficulty in implementation? Want more features? Book your consultations now at Assetsoft!

Top Bookkeeping Essentials For Property Accounting

Thu, 10 Jun 2021 11:00:00 -0500

Bookkeeping can be a tedious task in the real estate industry because of the large number of transactions. A majority of Americans live in rental accommodation, with 41% of them renting single-family homes.

As a property manager, accounting for the client’s property will be your responsibility. If you have just started with property accounting, getting your bookkeeping fundamentals right can set a strong base for you.

Here are the top bookkeeping essentials to get you started.

1. Know the Guidelines

Every state has specific rules that serve as guidelines for property accounting.

For example, most states in the US have set a limit on the security deposit amounts that can be collected from tenants. Keeping up-to-date with the property accounting guidelines of your state can save you, your tenants, and your clients from legal hassles later on.

If you find administrative guidelines hard to understand, you can seek the help of a professional who specializes in real estate accounting.

2. Choose an Accounting Method

As a property manager, you can choose between two accounting methods to keep your books: cash-basis and accrual.

Cash-basis accounting is popular for its simplicity. It accounts for the cash as it is received or paid. The accrual method, on the other hand, records the revenue and expenses when they are generated.

A major disadvantage of cash-basis accounting is that it does not consider the accounts payable and receivable. It can show a profit for the company on the books when in reality, the company still has a large sum to pay.

The accrual method can be complex but is also more accurate. It records every anticipated transaction, which is a better way to gauge the financial health of the firm.

3. Choose A Bookkeeping Method

After accounting, you need to choose a bookkeeping method. There are two ways to do this: single entry method and double-entry method.

In the single entry method, you record each transaction only once, as income or expense. You can either use a single column or split it into two columns for both entries. This method is suitable for simple businesses.

If you own or manage several properties, you should go for the double-entry system. Here, you enter each transaction twice--one as debit and the other as credit. It can be more work, but it is better than maintaining several ledgers for different properties.

4. Organize Your Entries

Most property managers opt for accounting software to organize their transactions. Unlike spreadsheets, accounting software is designed to simplify the process of recording financial transactions.

Cloud-based software like Yardi Voyager combines property management and property accounting into a single platform. You can access and modify the financial data from anywhere if you have a connectible device.

5. Set Up Your Chart of Accounts

Setting up a chart of accounts helps you organize your financial entries by categorizing the transactions. You can use it to generate reports, measure performance, and go through past entries.

Depending on your business needs, the chart of accounts can be divided into as many divisions as you want. For example, you may have different accounts for “maintenance,” “insurance,” and “advertising.” Basically, it is a list of all your assets, liabilities, income, and expense accounts. A chart of accounts contains a few columns.

Every time a transaction is made, you enter it in the chart. Include an additional column to write in any details about the transaction. Make sure that every transaction is recorded in the chart.

You can use something as simple as an Excel sheet to create a chart of accounts. But, a more efficient way is to use accounting software. For example, ZohoBooks is an excellent software to keep track of your transactions. It manages your finances by automating business workflow across departments so you can access all the financial information with ease.

6. Separate Your Personal and Business Accounts

You should separate all your real estate transactions from your personal account. This helps to keep all your business transactions in one place. You can quickly go through the account history to know about processed and pending transactions.

If you mix it up with your personal account, it will be difficult to separate business transactions from personal ones. This can lead to poorly managed cash flow and disorganized books. Experts say that mixing your personal and business accounts is an early mistake that could add tax costs.

Having a separate business account makes you more professional from the client’s perspective. Clients prefer issuing checks in the name of your business, which increases your credibility as a property manager.

Other than a business account, it is good to have separate accounts for security deposits as well. Many state laws demand that a landlord or property manager hold the security deposits in separate escrow accounts. This makes the funds readily accessible when a tenant decides to move out.

If your state allows it, you can also hold the security deposit in a trust. That way, you can keep track of the income and expenses generated per client.

7. Organize Documents

Organizing your documents to support your accounting books can help you solve discrepancies later on. Some of the documents that you should keep are:

Bank Statements
Invoices and Receipts
Insurance documents

Tax returns
Contracts and Leases

You can keep a physical copy of the documents or store them online. But if you choose to keep them digitally, make sure to use a secure platform. Storing them digitally can help you maintain and track them easily, even a few years down the line.

8. Keep Track of the Collections

Keeping track of the collections can be difficult and time-consuming. But by following a few simple steps, you can easily complete this process.

The first step is to improve the terms of your invoice. If you use effective invoice terms, your payments will get quicker. Use these tips to make better invoices:

Include the contact information, due date, and the amount to be paid.
Keep track of your payments by numbering the invoices.
Accept multiple smaller payments to clear a large bill.

Next, you can collect payments through online platforms. Automating payments is the best way to make sure you receive them on time. It can send automated reminders to clients, enable online payment collection and alert you on missed payments. It also ensures transparency and security, as all the financial details of the client are encrypted.

9. Prepare for Unexpected Expenses

One business mistake that most property managers make is thinking that their properties will always be rented. Cash flow in real estate is not stable. Say three out of your ten properties aren’t rented for a few months. That’s a 30% reduction in your revenue. If you have to pay the mortgage for those few months from your personal account, you are not doing it right.

A CNBC study says that nearly 20% of American renters are behind on their payments. If you encounter expenses due to late rent payments, repairs, and unexpected maintenance, then your emergency fund can save the day.

You can also be better prepared by analyzing the expense reports of previous years. Also, consider worst-case scenarios such as a tenant breaking the lease or an unexpected leak in the property. Calculate the numbers to decide how much you should save in the emergency fund.

10. Regularly Reconcile Your Bank Accounts

Keeping track of your collection can be worth nothing if they aren’t reflected in your bank account. Regular reconciliation of accounts can help detect missed transactions, incorrect numbers, and duplicate entries.

You should reconcile the accounts at least once a month to ensure accuracy. The process includes identifying bank errors, time delays, and other mistakes and rectifying them using relevant documents.

Many property managers put off reconciliation as it can be time-consuming. A simple solution is using software like Zoho Books to initiate the reconciliation of your bank accounts. You can choose to do it at the end of every month or a period of your choice.

11. Save on Tax Deductions

If your records are up-to-date and accurate, it’s easier to save money on tax deductions. You can claim the cost of education, travel, and professional services you hired for your businesses.

Given the Covid-19 pandemic, tax laws have been changing from time to time. Keep track of the current tax code to build an effective tax strategy.

Good accounting practices can spare you a lot of liabilities and make your business flourish. It is not enough to just update your knowledge. Instead, you should implement it in your business strategy. Sparing few minutes a day to manage finances can go a long way.

Having a solid grasp of bookkeeping fundamentals, along with proper software, can make bookkeeping an easier task.

If you have difficulties finding the right software for bookkeeping, we have the right solutions for you.

At Assetsoft, we ensure seamless implementation of all the necessary tools to build automation software that fits your requirements. We provide complete solutions to all your software needs through multiple systems like Yardi, Uipath, and Zoho, among others.

Talk to us to know more about how we can help you with your back office accounting needs. Outsource your bookkeeping and focus on what’s more important. Contact us today!