Track each property separately
Even if you own only two units, tag every transaction to a property. In QuickBooks Online that can be done with locations or classes, or you can use a separate sub-account structure. The goal is a profit and loss report for each address so you can see which one is losing money and why.
Rather have it handled? Landlord-tenant notices and filings in New Jersey, or process serving with an affidavit of service.
Rent, late fees and security deposits
Record rent as income when received, or when due if you use accrual accounting. Late fees are income as well. Security deposits are different. They belong to the tenant until you apply them to damage or unpaid rent, so they are a liability. Many states require deposits to be held in a particular type of account and returned within a set time, so confirm the rule that applies to your property with the state or a local attorney.
Mortgage payments need to be split
Your lender statement divides each payment into interest, principal, and often escrow for taxes and insurance. Only the interest is an expense. Principal reduces a loan liability. Escrow amounts are paid out to the tax authority and insurer, and are expenses when those bills are paid. Record from the lender's annual statement and monthly statements, not from the bank withdrawal alone.
Repairs versus improvements
A repair keeps the property in its working condition, such as patching a leak or replacing a broken window. An improvement adds value, extends life or adapts the property, such as a new roof or a kitchen remodel. Improvements are typically capitalized and depreciated rather than deducted all at once. The line can be fine, so keep invoices and describe the work, and ask a CPA before you decide on larger projects.
Also keep your closing statement from each purchase. Your cost basis and the land and building split matter for depreciation, and you will need it again when you sell.
Keep it clean for tax time
Use a dedicated bank account for each property or at least for the whole portfolio. Pay owner draws to yourself rather than paying personal bills from the rental account. Save receipts for repairs, property management fees, insurance, utilities you cover, and advertising for vacancies. If you hire contractors, collect their W-9 forms. A year-end packet with the profit and loss for each property, the depreciation schedule and the lender interest statements gives your tax preparer what is needed.
Property managers, vacancies and turnover
If you pay a management company, ask for monthly owner statements showing rent collected, fees taken and repairs paid. Record those figures in your books by line, not as one net deposit. The same applies if the manager pays vendors on your behalf. Reconcile their statement to your bank deposits every month.
Turnover costs deserve their own tracking. Cleaning, paint, small repairs, listing fees and the lost rent during a vacancy tell you a lot about whether a unit is worth keeping. A unit with constant turnover can look fine on a yearly total yet quietly underperform.
Common questions
Do I record the full mortgage payment as an expense?
No. Only the interest portion is an expense. Principal reduces the loan balance and escrow is recorded when taxes and insurance are paid.
How do I handle a tenant who pays by app?
Treat it like any rent payment, but match the app's payout to the rent charged, since fees and timing differ.
This guide is general information, not tax, legal or accounting advice. Rules, fees and due dates change; check with the IRS, the NJ Division of Taxation or a licensed professional for your situation.
