I inherited a 2-family rental property when my grandparents passed away. A lovely financial opportunity complicated by the fact it is in another state with a 14-hour drive.
I have been fortunate to have someone I trust keeping an eye on it so I just have to handle the financial side of things. On paper, when the rent is paid and there are no major repairs, the obvious answer is to keep it. But sometimes there are complications.
I am currently transitioning between tenants and these circumstances are affording me the opportunity to take a good hard look at whether or not it makes sense to keep it or sell it. For now, the repairs are “small” so I am taking the risk for another year.
Keeping track of those expenses has been an interesting task. Fortunately, none meet the IRS requirements as a capital improvement and making sure that the vendor invoices, incidentals and material costs for the repairs & cosmetic updates are clearly identified, allows me to accurately track the costs for each unit.
This is where a bookkeeper might be able to be of assistance. If you own rental properties, being able to know the return on investment for each unit can go a long way in helping you decide where additional investment in those properties makes sense. I’m not talking about whether to replace a roof or keeping the properties up to code, I am thinking about whether replacing an old carpet with laminate flooring, updating the bath or kitchen cabinets or replacing appliances might allow you to increase the rent and still stay within the going rental rates for your area. Being able to run a Profit and Loss or Income Statement per unit allows you a quick overview of each rental unit.
You don’t need to invest in QuickBooks or Quicken to do this although I feel it might make things easier when handing off the information to your accountant. (I am a bookkeeper.) A quick internet search for “Excel rental property” will come up with many predesigned worksheets and templates.
The important thing is to keep track of your income and expenses to avoid surprises at tax time. – ‘cuz there are some surprises that just aren’t fun.