The US Bureau of Labor Statistics recently reported that rent in DC is almost 40% higher than the national average. Such high returns demand more precise accounting to manage such a high income level, especially with local regulations requiring detailed compliance.
Failure to maintain proper accounting can lead to severe penalties, so how can you best organize your rental property accounting to avoid such costly mistakes?
The following rental accounting tips offer actionable steps you can take to ensure you don't miss anything. So read on for record-keeping strategies to ensure you comply with DC's unique laws and avoid the fines that come with failing to meet requirements.
Organize Your Accounting System
It is crucial to have a well-organized method of handling your accounts. These can help you discover opportunities such as significant tax refunds or reductions.
At the same time, a well-organized system makes it easy to comply with Washington, DC rental property regulations and respond quickly should a mistake occur. You won't need to dig through documents to find the necessary details. With the right software, you can even automate things like:
- Rent tracking
- Maintenance expenses
- Tenant communication
- Security deposits
With all this information available, your property management accounting is also much more likely to be accurate.
Tracking Rent Payments Meticulously
Accurate bookkeeping for landlords includes recording all your income receipts. You can then confirm that you adhere to the Rental Housing Act of 1985, which limits how much you can increase rent annually. Transparent audits prevent confusion regarding how much you have received.
Make sure you are not only accurate with rent, too. To ensure transparency, you will need to document any other sources of income, such as parking fees or utilities. It is also good to reconcile your records regularly to ensure no discrepancies exist, or to hire someone to perform this step if it is too complex for you to complete.
Comply With Security Deposit Laws
DC requires that you maintain escrow accounts for tenant security deposits and record annual interest for these. Doing this ensures the tenant's deposit remains secure, which you should then return within 45 days as mandated by the district. If you do not, you are likely to face significant fines that could include:
- Double the security deposit paid in damages
- Transfer of all the security deposit's interest
- Additional legal action, as instigated by the tenant
- The tenant reporting your actions to DC's authorities
Not paying with security deposits can have serious repercussions, so prioritize its return as soon as you can.
Simplify Your Rental Property Accounting With PMI D.C. Metro
You can ensure you keep high-quality records by tailoring how you organize your finances to account for Washington, DC's unique laws. However, complying with rent control, tax regulations, and security deposit laws can take a lot of effort. If this is already too much, you may need to look into real estate accounting services to help you handle the above.
PMI D.C. Metro can offer comprehensive property management services that protect your investment by leveraging our local expertise and long legacy of professional support. Contact us to discuss making your rental property accounting easier today.
