In the US, the peak moving season for renters is between mid-May and mid-September. And with short-term vacation rentals in high demand, summer is a busy time for rental property owners. With all the hubbub, letting some areas of your business slide is easy. Those small decisions can have big consequences, though. Today, we’ll look at six common issues investment property owners face during the peak rental season.
Issue 1: Keeping Interest on Security Deposits
High turnover in the summer means collecting and returning deposits—one of the most troublesome tasks for rental property owners. Make sure you’re keeping up with local ordinances and laws affecting security deposits.
In some areas, rental property owners must credit interest on each security deposit yearly. Supporting documentation for security deposits may also be required. So remember to check on laws for interest related to deposits. Ask your tax adviser, lawyer, or property manager about the requirements in your area.
Issue 2: Using Fixed Rent Rates
Peak rental season is when property owners can charge higher rents. If you own short- or midterm rental units, make the most of this opportunity and adjust your rates in between bookings. It takes time to compare local comps and determine the fair rate, but maximizing your income during the peak season helps carry you through the off season.
For long-term rentals, once your tenants have moved out, reevaluate your unit. Is it time for new appliances or a remodel? Compare your unit with similar listings in the area. If the rents for comps near you have risen, adjust your rates accordingly. Remember to update your budget with the new income projections!
Pro tip: Remember to refresh your rental listings! Include descriptions and photos that showcase the best features of your rental. Use a catchy listing title to attract prospective tenants.
Issue 3: Mixing Personal and Business Assets
Setting up an LLC or S corp for your rental property separates your business and personal assets and provides you liability protection. However, if you run business transactions through your personal accounts, or vice versa, you create a legal loophole in that protection.
Commingled accounts like this are one of the most common issues we see with rental property accounting. But this issue goes deeper.
For example, let’s say you’ve purchased a business vehicle. But you also use the vehicle to run personal errands. If you’re not reimbursing the business for nonbusiness mileage, that personal use presents a problem.
If someone were to sue your LLC or S corp, the court may check for commingled accounts or personal use of business assets. Courts may use these as reasons to disregard the separation between your personal and business assets. This is called piercing the veil. This situation can make you personally liable for business debts.
Issue 4: Putting off Maintenance
Every season comes with a new maintenance checklist for rental property owners. Summer is no exception. But being busy with new or departing tenants is no excuse to skip regular maintenance.
When you tackle routine seasonal maintenance promptly, you prevent small repairs from becoming major problems—or expensive emergencies. Plus, well-maintained units keep your tenants happy, so don’t procrastinate on this to-do list.
- Checking insulation
- Clearing dryer vents
- Keeping up with pest control
- Servicing HVAC units
- Testing smoke alarms and carbon monoxide monitors
And when you’re ready to record your expenditures related to these tasks, remember to record them as repairs, not improvements.
Issue 5: Skipping Maintenance Logs
Recording the details of your maintenance work on your properties is a hassle. Summertime is busy, with vacation plans and tenants moving in and out. You might be tempted to skip updating those maintenance logs.
Don’t ignore your logbook, though. A detailed, complete maintenance log is a key supporting document for your tax return. Without it, you may have trouble defending your deductions related to maintenance costs during an audit.
And if a dispute arises with your tenants, your logbook can serve as evidence to help settle the suit.
Issue 6: Ignoring Your Bookkeeping
Everyone needs a break now and then. In the flurry of vacation preparations and playing catch-up when you get home, we understand how easy it is to let your bookkeeping slide. But out-of-date books can cause problems because they don’t give an accurate picture of your accounts and cash position.
Before you go on vacation, block off time on your calendar for your account books. That way, when you get home, the time is already set aside, and the appointment reminder will help keep you accountable.
Use this checklist to help you get back into bookkeeping mode:
- Go through your mail and inbox.
- Import and record your financial transactions.
- Deposit all cash and checks.
- Schedule bill payments.
- Pay your estimated taxes (due June 17 and September 16, 2024).
- File your receipts and paperwork.
- Reconcile your accounts.
- Review and update your budget.
Need some help to streamline your bookkeeping? Sign up for REI Hub’s 30-day free trial! Our accounting software has comprehensive financial reporting, fixed asset tracking, linked accounts, and rental-specific templates—all customized for rental property owners like you.
Takeaways
Summer is peak season for both tenants and rental property owners. Although letting things slide during the busy season may seem harmless, these small choices may have big impacts. Lawsuits, audits, personal liability, loss of potential income, and emergency repairs are all avoidable. By staying on top of these six common issues for rental property owners, you’re protecting both your properties and your business.
