I’m a numbers person. I worked in commercial real estate for 20 years before starting my vacation rental business, and my days were full of them. Luckily, because of this experience, I had a solid understanding of how I wanted to run and account for my finances from the start.
Even then, I faced challenges and unexpected bumps in the road when it came to my finances. So I can only imagine the headache when numbers are not your speciality. Running an Airbnb or other vacation rental business is time-consuming enough!
Below, I’m sharing five tips based on what I’ve learned. These tips are geared toward those who are just starting out (and make your life easier if you follow them from the start), but certainly also apply to those who have been in the game for awhile.
Create a budget.
A budget is always a great idea. It’s especially smart for those who just purchased their property, but it’s never too late to get organized for the future. Not sure where to start? Ask your agent for underwriting suggestions as it relates to income and expenses and don’t forget to create a reserve for maintenance and large capital projects like renovations.
Open a dedicated, property-specific bank account (checking/savings).
Are you tearing your hair out come April 15th because you co-mingle your personal finances with those of your vacation rental or Airbnb? Stop the insanity! Create a bank account for each of your properties. Of course, this becomes trickier once you scale to several properties, but if you have just a couple, keeping them separate from each other (as well as separate from your personal finances) is the way to go. These dedicated checking and savings accounts allow you to have all of your financial history in one place for each property, which makes providing the P&L (profit and loss statement) to your account significantly easier come tax time.
Open a dedicated credit card and/or line of credit.
In this business, you never know when you’re going to have unexpected expenses, and it’s nearly impossible to continue operating if your A/C breaks, for example, or your roof is leaking and needs to be replaced. That’s where the credit card/line of credit comes in, should your savings be insufficient to cover the expense. I prefer to have a dedicated credit card for each of my properties for the reasons stated above, and set them to autopay to avoid hassle (and late fees). Look for cards that offer perks, too. I typically pick a credit card that offers miles that I can use to travel to my property, which is 2,500 miles from my home
Hire a bookkeeper.
I may get finance, but what I don’t have is the time and patience to reconcile my accounts. So I hired a bookkeeper to help me input all of my data into Quickbooks online. It doesn’t have to cost a ton. If bookkeepers in your area are pricey (I’m in the Bay Area, so I can relate!), you can turn to online marketplaces like Upwork (where I found my bookkeeper) or fiverr, where hourly rates tend to be more budget-friendly.
Invest in accounting software.
This is my top tip—and I wouldn’t be surprised if many of you are doing this already. But if you’re not, do consider investing in accounting software like Quickbooks online. Through this software, you can link all of your checking and savings accounts, credit cards, line of credit, etc., and your expenses are automatically uploaded into the software. From there, I send all of my bank statements to my bookkeeper and viola…accounting done. Distributions made.
Looking for some good reading materials? Check out the 4-Hour Workweek and Profit First. For more general budgeting and making your money work for you, try You Need a Budget, which is both a budgeting app and a book.