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Rental Accounting

Should You Use Xero For Your Rental Property Accounting?

Can Xero Help with Managing your Rental Property?

An essential part of owning and managing a rental property. Keeping on top of financials and budgets allows you to better understand cash flow as well as track any tax deductibles expenses which could mean the difference between profit or loss for any fiscal year.

However, despite its importance, this is also an area which many landlords struggle with. The reason real estate investors struggle with this is simply because they don’t have adequate systems in place.

This is where property management software such as Landlord Studio, or alternatively an accounting package such as Xero or Quickbooks comes in. In this article we explore the benefits and limitations of Xero for rental property accounting compared to a property management specific software, as well as how you can get set up on Xero today.

What do Property Investors Like about Xero?

Xero is one of the top accounting softwares on the market and there’s a reason for that. They offer a comprehensive and thorough accounting package which is an accountants dream. 

  1. Connect your bank feeds so you can see and reconcile income and expenses.
  2. Set up automated rent invoices to help avoid late rent payments.
  3. Cloud accounting software so your data can be accessed anywhere you are.
  4. Grant access to multiple people so the whole team caan access and edit data.
  5. Advanced reporting.
  6. The dashboard gives a clear financial overview displaying overdue rent and cash flow.
  7. Good customer service.

However, you aren’t an accountant and a property management software such as Landlord Studio offers all of the above features in addition to property management specific features such as tenant screening, contact books and reminders.

xero accounting for rental properties

How to set up Xero for rental Property Accounting

Setting up Xero to properly track your income and expenses can be a bit of a challenge as the software itself comes with a steep learning curve when you first begin. This being said, once you’re set up and used to the software it will quickly make your accounting more efficient.

Xero offers comprehensive support with many helpful articles written up by their knowledgeable team to help you get set up. Below we outline a quick step by step guide to.

To set up Xero for tracking your rental property income and expenses follow these steps:

  1. First, you need to create your account and log in.
  2. In the Accounting menu, select Advanced.
  3. Click Tracking categories.
  4. Enter the desired name of your tracking category, for example, Rentals or Properties. There is also an option to enter each property name under this category.
  5. Once that is done hit Save.
  6. Now you can reconcile transaction and assign that income to the relevant property. You can’t however, split properties into there sub-units which is an important feature for users with HMOs.
  7. There are several easy ways to record property-related expenses. One, if you use Xero Bills you can create a new bill for these expenses and while reconciling you can match that bill against the bank payment. Another easy way is to enter the receipt details at the moment you reconcile transactions in Xero.
  8. Once income and expenses have been logged and assigned to the relevant property you can run reports as well as see important information such as cash flow on your dashboard.

Xero has a comprehensive and customizable reporting feature that allows you to adjust them to better suit your particular needs. For more information on this you’ll want to visit the Xero support centre.

The Limitations of Xero for Rental Property Accounting

Fundamentally, this software is excellent for comprehensive accounting. However, it is designed for businesses rather than real estate investors. The majority of their user base are business owners and this has a fundamental impact on the design, development, and support service.

For those willing to put the work in to become proficient using the software this weakness can absolutely be overcome. However, it’s a steep learning curve and you’ll never get the additional functionality of a property management specific software

A few of Xero’s key weaknesses for rental property accounting are:

  • It lacks full property management software functionality such as tenant screening, contacts, email and SMS templates.
  • The report centre isn’t tailored to property investors.
  • There is nowhere to upload photos and other important documents, for example, property inspection checklist with photos or lease documents.
  • The help center is aimed at regular businesses, not property investment. 
  • It can’t currently import contacts from other programmes meaning it’s entirely manual.
  • You can’t track properties on a building and Unit level which is necessary for landlords with HMOs.

Related: Should your Use Quickbooks for Rental Properties?

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Property Management Software vs. Xero

Landlord Studio is a property management software and landlord app designed by landlords for landlords. It allows you to track your income and expenses efficiently and easily and gain a clear financial overview of your portfolio. Manage your rental property accounting on the go with our app and never miss an expense deduction again.

Many of the problems experienced by landlords can be made easier (if not solved) with the improved organization and better use of available tools. This helps landlords streamline the management of their rentals.

Related: Transitioning From Spreadsheets To A Modern Property Management System

We are working hard to bring new and upgraded features to our users continuously. Some of our key features include:

Reports designed for property investors. Generate instantly and easily share with your accountant.

Set up in under 5 minutes and start tracking income expense against property

Use your phone to digitize receipts while our smart scan features auto-fills the expense details.

Connect your bank accounts to quickly and easily reconcile income and expenses.

Store important documents securely to our cloud server and access anywhere.

Screen tenants, set rent reminders, and easily manage communications.

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Ben Luxon

"Ben is an author and real estate enthusiast. His interest in all things entrepreneurial has led him to work with real estate professionals all over the world, distilling their knowledge into articles and Ebooks. His love of travelling has taken him to over 10 countries in the last year, where he has sampled the craft beer of them all."


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