Self Managing property Tax implications

[Viktor Singh]

Hi all,

I want to manage my investment property myself and wanted to know how to handle taxes. In the past, I have the used a property manager, and gotten a W9, but how should i do it myself ? Do i need to use some software ? Deposit rental checks in a separate checking account ? I am newbie. Thanks !

Best,

[Bill Brandt]

Quicken is overkill for your first 20 properties. It will auto import all your credit card charges, and checking account deposits and withdrawals.

But it sounds like you might be better off with a PM right now. Do you understand that your entire mortgage payment isn’t an expense? Do you know the local and state laws regarding days notices for renewals, rent increases, notice to enter? Do you know the fair housing laws and what is considered discrimination? Does the tenant’s security deposit have to be in a separate account? Do you have to pay interest on it? How long do you have to return it? How much is market rent? How do you know that? Where should you advertise your property. Etc etc. 

You’re currently in the don’t know what you don’t know stage. Don’t cost yourself more in fees/fines/taxes/vacancies/etc than the PM might cost you. 

Good luck

[Nathan Gesner]

Quote from @Viktor Singh:

If you own the property in your personal name, there's nothing you need to do different. You could keep the money in your primary checking account, mixed in with personal money. I don't recommend it, but you could.

I recommend two accounts: checking and savings. 

Checking: collect all income here, then use it to pay bills. Pay the mortgage. Pay for maintenance. If you are setting aside funds for capex, taxes, insurance, or other expenses that don't occur monthly, transfer those funds to Savings each month and hold them there until it's time to spend them. You will receive the security deposit in Checking but then transfer it to Savings.

Savings: Hold the deposit here so it's separate from operating funds. You can also hold money for maintenance, capex, taxes, insurance, or other projected expenses. When a tenant moves out, transfer the deposit back to Checking so it's ready to apply towards expenses or to refund to the Tenant.

If you end up with excess funds in the Checking account, I recommend you transfer it to a third account that is specifically designated for future investments. That ensures you don't spend it on other things and that you know exactly how much you have available to spend on the next purchase. If it's mixed in with your deposits and reserve funds, you may accidentally spend money you shouldn't have.

[Nathan Gesner]

I forgot to mention, you will also still file one tax return. All the rental income/expenses reflect on your return as personal. You may want to contact a CPA to help file, at least the first year.

[Basit Siddiqi]

You have to report your rental income and expenses onto your return.

Softwares can help you properly track your income / expenses.

[Mike Hern]

Quote from @Viktor Singh:

Hi all,

I want to manage my investment property myself and wanted to know how to handle taxes. In the past, I have the used a property manager, and gotten a W9, but how should i do it myself ? Do i need to use some software ? Deposit rental checks in a separate checking account ? I am newbie. Thanks !

Best,

You might want to Join AZREIA.org where you will get all of those questions answered on a local basis and find people doing exactly what you want to do.

[Viktor Singh]

Thank you Mike !

[Viktor Singh]

Quote from @Basit Siddiqi:

You have to report your rental income and expenses onto your return.

Softwares can help you properly track your income / expenses.

 Is it reported as ordinary income ? Also do you need to pay property taxes if you are managing it yourself ?