The best accounting software for rental properties depends on a few key factors. In this post, we’ll go over these features and some software options that we think fit the bill. We’ll also talk about choosing the best one for your needs, and some challenges you might face.
Key Features to Look for in Accounting Software for Rental Properties
Property-Specific Income and Expense Tracking
Tenant Management
This area is specifically for property management. The best accounting software for rental properties helps you with rent collection and lease renewals. Similar to bookkeeping for landlords, it handles tracking rent payments and late fees for each tenant.
Top-notch software also evaluates tenants to see if renewing their leases is a good idea. Then, you get accurate and detailed financial reports to show investors. Professional reports with complete information help you build trust and confidence by demonstrating responsible property management.
Profitability Analysis
Look for tools that allow you to track income and expenses at the property level. You need this to be able to assess the profitability of different properties and make comparisons. This is how you know which properties are underperforming and can improve.
Accurate Reporting
Standard accounting software for property management will always allow you to accurately track income and expenses. You need pristine financial reporting to make sure you’re compliant with tax regulations and financial reporting standards.
Tax Optimization
Accurate records help you avoid penalties and fines. Your software should help you identify deductible expenses to minimize your tax liability. It should also help you take advantage of available credits.
Risk Management
A good accounting tool will monitor income and expenses to identify potential problems like increasing maintenance costs and declining occupancy rates. These calculations are important so you can take proactive measures to protect your investment.
Look for tools that can also handle return on investment (ROI)calculations for individual properties. This will guide you in making informed decisions about what to sell or renovate, and potential profitable property purchases in the future.
Tenant Management and Lease Tracking
Below are some specific elements of tenant management that the best accounting software for rental properties can handle.
Rent and Security Deposits
- Automatically calculate and track late fees.
- Schedule and send automated reminders for rent due and late payment penalties.
- Enable secure online payment options for easier payment collection.
- Track security deposit payments and manage secure handling.
- Manage compliant refund processing when tenants move out.
Lease Management and Tenant Rights
- Record lease terms and expiration dates to track and trigger automated reminders for renewal or termination activities.
- Keep electronic copies of lease agreements in cloud storage for easy access and reference.
- Track and manage rental increases in line with lease terms and local regulations.
- Help keep leases compliant with local rental laws and regulations on terms, rent increases, and security deposits.
- Maintain accurate records to protect tenant rights and avoid legal disputes.
Tenant Profiles and Communication
- Store relevant tenant information, including emergency contacts, and records of all communication.
- Keep a record of all maintenance requests and complaints.
Automated Rent Collection and Late Fee Calculation
Below are some specific elements around rent and fees that the best accounting software for rental properties can help with.
Time and Accuracy
- Greatly reduce manual labor to save time and effort and improve accuracy in timely rent collection and record-keeping.
- Efficiently process rent payments, send reminders, and calculate late fees.
- Make correct calculations and maintain accurate records around rent payments, late fees, and tenant balances.
Cash Flow
- Encourage earlier payments and faster processing through convenient online payment options.
- Reduce late payments and fees by automating the calculation and collection process, including sending reminders. This also improves tenant experience and satisfaction.
Legal Compliance
- Ensure the consistent application of all rental terms to comply with local regulations and avoid issues.
- Keep accurate records of all agreements, payments, communications, etc., in case of legal disputes.
Multi-Property Financial Reporting
Below are some specific elements affecting financial reporting for multiple properties that the best accounting software for rental properties can manage.
Portfolio Overview and Analysis
- Organize and consolidate financial data to provide a real-time view of the overall performance of your entire property portfolio.
- Generate reports to compare the financial performance of individual properties and analyze the impact of diversification on risk and return.
- Benchmark individual properties against industry standards and similar properties in the same or similar markets.
Financial Planning and Investments
- Create and track budgets for each property and the portfolio as a whole.
- Create financial performance forecasts using accurate historical data and market trends.
- Calculate and analyze ROI for each property and your overall portfolio.
- Evaluate the performance of each of your investment strategies and property types.
Investor Reporting
- Create detailed financial reports for investors on each property and the entire portfolio.
- Keep clean records to demonstrate responsible property management and build trust and confidence with investors.
Tax Optimization
- Keep complete and accurate records of each property and the entire portfolio to identify all possible tax deductions and credits.
- Ensure compliance with tax regulations through proper record-keeping to avoid penalties and audits.
Integration with Other Property Management Tools
Below are some specific property management tool integration benefits that make the best accounting software even better.
Automation
- Leverage automatic synchronization of data between your accounting software and property management tools for real-time updates, accuracy and consistency.
- Nearly eliminate manual data entry errors and save time, improving overall efficiency and reducing administrative overhead.
- Enjoy automated bookkeeping in areas like rent collection, lease renewals, and maintenance requests in addition to traditional income and expense tracking.
Comprehensive Property Management
- Keep everything in a centralized platform for convenient access to all property management functions and data.
- Get a more comprehensive and accurate view of your rental properties’ performance so you can implement better oversight.
Improved Tenant Experience
- Enable tenants to log into a portal that provides access to information on their payments, and the ability to submit and follow up on maintenance requests.
- Enhance communication between tenants and property managers to improve tenant satisfaction and on-time payments.
Top Accounting Software Options for Rental Properties
Most property management software is cloud-based and offers a suite of features. You will usually find robust accounting capabilities for rental property owners and managers, specifically. It usually provides a centralized platform, too, for tracking income, expenses, and financial performance.
Buildium
Buildium offers comprehensive features, strong tenant management, and robust financial reporting. It’s best for large portfolios with complex financial needs.
AppFolio
AppFolio has a user-friendly interface, automation capabilities, and excellent customer support. It’s best for mid-sized rental portfolios and managers who prefer a balance of features and ease of use.
Rentec Direct
Rentec Direct boasts affordable pricing while it offers customizable features and strong integration capabilities. It’s best for small to medium-sized portfolios and budget-conscious managers.
QuickBooks Online
With the right property management add-ons, QuickBooks Online offers versatile features and integration with other QuickBooks products. It’s best for smaller operations with simple accounting needs.
Propertyware
Propertyware provides a comprehensive feature set, customizability, mobile accessibility, and multiple integrations. It’s best for larger property management companies and more complex property portfolios.
How to Choose the Best Accounting Software for Your Rental Properties
Assessing the Size and Needs of Your Property Portfolio
The best accounting software for rental properties is the one that can seamlessly manage the number of properties involved. You should also consider the complexity of your operations.
Even if you manage fewer properties, note that they might have multiple units with multiple tenants, commercial spaces, or complex lease agreements. This usually requires software that can handle more complex financial transactions and reporting.
If you also need to track a lot of tenant information, communication, rent payments, security deposits, look for robust tenant management features.
Comparing Costs and Subscription Models
Weigh all the different costs involved in using software from initial setup to subscriptions to add-on features and scalability. Beware of hidden charges and additional fees, like support and training costs.
Evaluate the features and benefits of each option against your needs to see if the cost is justified. Don’t be afraid to negotiate with the provider for a custom quote, especially if you have multiple properties.
Evaluating Ease of Use and Support
The best accounting software for rental properties should always be easy to use. Look for an intuitive interface, customization options, a comprehensive knowledge base and responsive customer support. Mobile accessibility is a bonus.
Ask for a free trial or a demo so you can really see how it works before you commit. Read reviews, too, and ask as many questions as you need.
Considering Scalability for Future Growth
Make sure that the tool can handle as many properties and users as you have, factoring in business and team growth. Look for large and secure data storage capabilities and room for new feature and functionality integration.
Common Challenges in Using Accounting Software for Rental Properties
Data Security and Tenant Privacy
Cybersecurity threats are a major concern because rental property data is valuable to hackers. You need robust security features to secure sensitive financial data and tenant and property information.
Even within your own team, you must ensure compliance with various data protection regulations. If you don’t secure unauthorized access to tenant data, it could lead to misuse or discrimination.
Always get explicit, written, consent from tenants to collect and process their data for specific uses. Monitor your systems on a schedule and develop a good incident response plan in case of any security incidents.
Transitioning from Manual Processes to Software
Even the best accounting software for rental properties still needs to be set up. Make sure you have a clean set of records before you sync it with the new tool. Be aware of any issues involved in converting data.
Give yourself enough time to test integrations with sample data sets and transactions before you fully trust the software. You might face temporary disruptions in operations and need to make adjustments before everything works smoothly.
Managing Multiple User Access
You need some kind of role-based access control to avoid potentially dangerous issues. Privacy and security regulations require proper permission management and strong data encryption. You also need to accurately track user activity and identify potential breaches.
Require strong passwords and two-factor authentication, and regularly review user permissions. Consider cloud-based software for better user management and security.
Keeping Up with Software Updates and Maintenance
Focus on updates that address security vulnerabilities or performance issues. However, know that updates are never optional when you’re dealing with sensitive data.
Schedule time for updates, and always run tests afterwards. Note that updates can sometimes cause compatibility issues with other software or hardware. Test everything.
Make sure you keep regular backups of all data in separate storage to protect against data loss.
Customizing Software to Fit Unique Business Needs
The best accounting software for rental properties can be customized because no two situations are exactly the same. Note that customization increases complexity, though. Make sure you use only the ones you need, and that they don’t cause issues with other features or integrations.
Customizations usually cost more, and require special maintenance. Be careful of the increased risk involved, and learn how to manage it.
Frequently Asked Questions
What is the best accounting software for small rental property portfolios?
Cloud-based accounting solutions with add-ons for property management are good. However, we think the best accounting software for rental properties is actually property management software with accounting features.
Can I use general accounting software like QuickBooks without property management features?
General accounting software without property management features works, but you’ll do more manual work without the specialized functionalities of rental property tools. Consider the benefits of investing in a dedicated property management software with built-in accounting capabilities.
How do I manage accounting for properties in different locations using the same software?
- Create a separate chart of accounts for each property.
- Create tenant profiles.
- Automate income and expense tracking
- Integrate accounting and property management software.
What are the potential drawbacks of using free property management software?
Free software versions often have limited features and capabilities along with hidden costs. They lack proper support and may not have the best security. Free tools also don’t usually scale well, and you may not be able to sync your data to a different tool later.
How do I ensure my accounting software complies with local tax laws for rental properties?
The best accounting software for rental properties will always help you comply with different tax categories and settings. However, you must set it up correctly by knowing what laws and regulations apply to you.
What Is AccountsBalance?
AccountsBalance is a monthly bookkeeping service specialized for agencies & SAAS companies.
We take monthly bookkeeping off your plate and deliver you your financial statements by the 15th or 20th of each month.
You’ll have your Profit and Loss Statement, Balance Sheet, and Cash Flow Statement ready for analysis each month so you and your business partners can make better business decisions.
Interested in learning more? Schedule a call with our CEO, Nathan Hirsch.
And here’s some free resources:
In Summary
The best accounting software for rental properties will always depend on your specific needs and preferences. Carefully consider the factors above so you can choose the tool or combination of systems that best suits your business.
