It is that time of the year again where we will either owe the tax man some money or you are waiting for your check to arrive. I am hoping this year to get a refund buts let’s wait and see how that pans out.
At this time of the year I am always preparing my own investment property files, this has many advantages
- You get to see the cash flow and expenses for the year.
- You get to ensure that you have all of the paperwork required for the accountant
- By getting everything organised and possibly even putting the information into a spreadsheet for the accountant you are completing some of the work that they would normally do for you. Your hourly rate is cheaper than theirs!
- You will notice if anything else is missing. (I was just looking through one of my properties and noticed that the receipt for the new dishwasher was missing, I had filed it away for the warranty)
As an investor I really like to track the performance of my properties and completing these small tasks ensures that I know exactly what is happening or not happening with my properties. I actually enjoy doing this – what can I say, I am a numbers man!
What is the best way to keep track of your investment income / expenses? My method is very straight forward.
- Start an investment property spreadsheet – have a tab for each property
- On the 1st July – note the rental income. Whenever this amount changes make sure you note the date in your spreadsheet. This will help at the end of the financial year. Even if you have property managers it is still a good idea to keep you own records. At the end of the tax year your property manager will send you a statement which covers the years total income.
- Record any drives / flights to and from your investment properties in your spreadsheet
- All your invoices for investment property expenses keep in a folder – clearly label which property they below to. Note the amounts in your spreadsheet. If the invoice is for an item such as a dishwasher make sure you scan the receipt so you have easy access in case you need the warranty.
- What type of expenses can you claim?
- Landlord insurance
- Property maintenance
- Property management fees
- Rates / Water
- Bank fees
- Loan interest (which is one of the reasons why the correct loan structure is so important)
- Plus much more. Please talk to your accountant for more info
- At the end of the tax year you can give the spreadsheet to your account with all of your invoices and their job will be a lot easier.
One last quick note on tax time for investment properties – If you have a new property or have completed some renovations before tax time it is advisable to get a depreciation schedule completed.
Now it’s time for me to practice what I preach and go complete my own spreadsheet for this tax year!
PS – if you would like a sample spreadsheet to get you started give me a buzz 0401-158-896