How To Track Short-Term Rental Expenses And Income

Expenses management and income tracking are crucial in the fast-paced industry of short-term rentals. From renting out a spare room to keeping a dozen properties running, these financial actions determine your profit and compliance with tax laws.

This article aims to explain the importance of tracking expenses when performing business in the short-term rental industry. We will cover the primary types of expenses, give essential tips, walk you through things you can and can’t deduct from your taxes, and explain how Hospiria's rental property expense tracker can simplify the process of maximizing your profit and minimizing inconvenience.

Why is expense tracking for your short-term rental important?

Expense tracking is highly relevant for monitoring the financial health and potential success of short-term rentals. It offers an opportunity to understand the overall operational costs and, therefore, make more informed decisions and develop an adequate strategy. Expense tracking may also reveal overspending and inefficiencies, allowing people to take action and save operational costs.

Money tracking also ensures that hosts do not pay more taxes than necessary since operating expenses can be deducted. Eventually, a well-thought and organized – and detailed expense tracking system helps individuals to run a successful short-term rental business.

What are the main short-term rental expenses?

The general short-term rental expenses depend on the location, type of property, and the amenities offered. The most common short-term rental expenses that hosts have to spend money on are as follows:

• Property maintenance and repairs – regular maintenance that ensures that the property remains in top condition and meets the guests’ expectations.
• Utilities – electricity, water, gas, internet, and other utilities that the guests use while on the property or during the period of rental.
• Property management fees – fees imposed by the property management companies or hosts for the management of listings, communication with guests or cleaning companies, etc.
• Cleaning and housekeeping – cleaning service fee for cleaning the property before and after each guest or cleaning materials if the host cleans on his/her own.
• Insurance – the annual premiums for short-term rental insurance used by the hosts to cover the property from damage, liability, or other unexpected and unforeseen threats.
• Furnishings and amenities – the expenses of filling the properties with furniture, appliances, linens, toiletries, equipment, etc.
• Marketing and advertising – the costs of advertising and promotion through the online platforms, social media, photographs, etc.
• Taxes and licensing fees – occupancy, local tax, permit fees, etc.
• Mortgage or rent – expenses that occupy the larger portion of the budget, including monthly mortgage payments. Others might be rent, etc.
• Guest amenities and services – additional amenities offered to the guests with the aim of spoiling them into leaving high-rated reviews.

Tracking your short-term rental expenses: 6 key tips

Here are six key tips for tracking your short-term rental expenses effectively:

Establish a dedicated system

Establishing a dedicated system for tracking short-term rental expenses is crucial to ensuring the utmost financial clarity and organization. For instance, you can start by creating special accounts or digital folders for expense-related transactions. 

You might also want to consider utilizing accounting software or apps specific to rental management, to automate record-keeping. You should ensure that they categorize expenses such as maintenance, utilities, and supplies quickly, accurately, and consistently. 

It is also important to establish a routine reconciliation system to track financial records and easily detect any discrepancies. You should keep all receipts and invoices in a physical folder or digitally stored, making them quick to access during tax season. Consider discussing further options with a financial advisor to optimize this process.

Categorize expenses

Appropriate categorization is essential for the effective tracking of short-term rental expenses. To do that, you should develop clear categories, such as maintenance, utilities, cleaning materials, or advertising costs, among others. Each category needs to have subcategories to provide a detailed breakdown. 

Use accounting programs, spreadsheets, or something similar, to compile and monitor the costs. Regularly determine the categories and make adjustments as appropriate and necessary. Maintain the receipts and bills in individual bags or folders labelled with their expenses to easily compare sources. 

It’s also a good idea to assign each expense a separate number or letter to simplify and facilitate cross-referencing. Proper and accurate categorization of expenses will help establish financial clarity and enable more informed decisions.

Automate where possible

In order to streamline expense tracking for your short-term rental, it's crucial to automate tasks wherever feasible. Rental management platforms offer valuable automation capabilities that can greatly enhance efficiency.

Automation tools allow hosts to automate income, payout, tax, and other financial calculations. This not only saves time but also minimizes the potential for manual errors, ensuring the reliability and uniformity of financial data.

By embracing automation, hosts gain the freedom to concentrate on strategic business decisions rather than getting bogged down in routine operations. This shift in focus ultimately leads to increased profitability and success in managing short-term rental properties.

Track receipts and invoices

Vigilantly track receipts and invoices. Effective short-term rental expense management is impossible without a systematic collection and order of every receipt and invoice related to your rental property. 

Use digital solutions such as expense tracking apps or cloud storage to secure electronic copies of documents and save them in a consistent manner. Reconcile them with your expense tracker on a regular basis and make a point to keep both your digital and physical copies of these documents organized and readily available whenever you have to do your taxes or report your finances. 

With this approach, you will get a full-length image of your rental property’s financial well-being.

Monitor profitability

It is crucial to always monitor profitability while working on short-term rentals. Income and expenditures should be monitored on an ongoing basis to determine the net profit from your property accurately. Efficient and tracking accounting and financial analysis can be achieved using software or spreadsheets. 

Review profit and loss from a perspective that considers variable costs such as equipment lifecycle and housing. Determine high and low results, and from there, set aims and hopes and a map for the future. 

You should regularly monitor your rental property performance and alter your strategy if needed to optimize profitability. Profitability monitoring ensures that your short-term rental is financially feasible and promotes prudent decision-making to improve returns.

Utilize Hospiria’s Finance Function

Utilize Hospiria's finance function for streamlined short-term rental expense tracking. This feature offers full accounting capability to manage booking finances in one centralized platform. 

Automatically calculate income due, payouts to owners, extra services income, and tax amounts with ease. Simplify reconciliation processes for your accounts team, eliminating the need for manual spreadsheets. Gain deeper insights into profitability by accessing comprehensive financial data effortlessly. 

By leveraging Hospiria's finance function, you can optimize expense management, enhance financial clarity, and make informed decisions to maximize the profitability of your short-term rental property.

Common tax-deductible short-term rental expenses

Other common tax-deductible expenses for short-term rentals may include:

• Maintenance and repairs, such as plumbing, electrical work, and general upkeep;
• Utilities such as electricity, water, gas, internet, and cable services provided to guests;
• Cleaning and housekeeping expenses, which can be the costs of a professional cleaning service, cleaning supplies, and laundry service for your guests’ linens and towels;
• Insurance premiums with short-term rental insurance covering property damage, liability claims, and theft;
• Property management fees are included in the cost of a property management company or platform for services such as listing management, guest communication, and maintenance coordination.

Other possible deductions are depreciation, allowance deduction for the wear and tear of the property, marketing and advertising-related costs, and travel expenses, which include transportation, lodging, and meals for travel to your vacation rental for maintenance, repairs, or management purposes.

Utilize Hospiria to track your short-term rental expenses effectively

As you can see, effective expense tracking is critical to the progress of your short-term rental business. This system of fostering your expenses offers the ability to oversee your expenditures and a clear understanding of the financial position of your rental.

Hospiria offers a feature-rich Property Management Software (PMS) that caters to all aspects of rental property management. It can monitor your finances on a per-booking basis (including income from bookings, platform commissions etc.), and allow you to manage your profit effectively through a rental property expense tracker. 

But that’s not all. You can also effortlessly manage bookings and reservations, expand your property's reach through multi-channel distribution, optimize schedules with smart automation, and stay connected with guests through seamless communication channels.

Acquire Hospiria’s PMS today and seamlessly manage your rental business. To learn more and to try out our product trial, go to our website.