Bookkeeping for landlords: how to set it up from scratch

Ten steps to set it up

1. Decide who owns the property. You, an LLC, or partners. This decides which return reports the rent. A single-member LLC is usually reported on its owner's return; ask your tax preparer. See one LLC per property.
2. Get an EIN if you need one. A multi-member LLC, or an owner with employees, needs an employer identification number. The IRS issues them free at irs.gov; does a rental LLC need an EIN explains when.
3. Open a bank account just for the property. Rent goes in, the property's bills go out. Nothing personal touches it. This one habit prevents most bookkeeping messes.
4. Choose a start date. Pick the first day of a month, collect the bank balance and any loan balance on that day, and start clean from there.
5. Set up the chart of accounts. About 35 accounts is plenty. Expense accounts should match the Schedule E lines, with a separate account for improvements. A ready list is in the rental property chart of accounts.
6. Record the opening balances: bank, security deposits held, loan principal, and the purchase price split between land and building.
7. Record every transaction as it happens, or at least weekly. Deposit, bill, loan payment, transfer. Each gets an account and a note saying what it was for.
8. Keep receipts. A photo of the invoice attached to the transaction is enough. Anything over a few hundred dollars needs one, so the repair versus improvement call can be made later.
9. Reconcile the bank every month. The books' balance must equal the bank's. Bank reconciliation for rental property has the steps.
10. Close the month, then look at the profit and loss. A short month-end close routine turns a pile of transactions into a report you can trust.

Cash or accrual, and why most small landlords choose cash

Cash basis records income when it is received and expenses when they are paid. Accrual records them when they are earned or owed. Most owners who file Schedule E use the cash method, and the IRS lets a taxpayer use it if it clearly reflects income. The IRS explains accounting methods in Publication 538. If you borrow from a bank or sell, the lender or buyer may ask for accrual statements, and the choice should be made with your tax preparer. Cash vs accrual for rental property shows the difference with numbers.

A worked example

Example a made-up owner buys a duplex on March 1 and sets up books. The bank account opens with $6,000 of the owner's money (owner contribution). In March the account receives $2,400 rent from unit A and $1,200 from unit B, and a $1,500 security deposit from unit A (liability, not income). It pays $320 for insurance, $140 for water and a $260 plumbing repair, and a $1,300 loan payment of which $480 is interest and $820 is principal.

Example March income is $2,400 + $1,200 = $3,600. March expenses are $320 + $140 + $260 + $480 interest = $1,200. March profit before depreciation is $3,600 - $1,200 = $2,400. The bank balance is $6,000 + $3,600 + $1,500 - $320 - $140 - $260 - $1,300 = $9,080. Of that, $1,500 is the tenant's deposit and $820 went to principal, which is not an expense. Those two items are what separate a bank balance from profit.

If you are ever unsure where a number came from, it should be traceable to one bank line. That is the test of a set of books.

What records to keep, and for how long

Keep bank statements, leases, invoices, closing documents and loan statements. The IRS says to keep records that support an item on your return until the period of limitations for that return runs out, and longer for property: keep the records on a building at least until the limit runs out for the year you sell it. The IRS table is in How long should I keep records?, and how long to keep rental property records walks through it for landlords.

Mistakes to avoid in the first year

• Paying personal bills from the rental account. Use an owner distribution instead.
• Waiting until tax time. An unreconciled year takes many times longer to fix than twelve monthly reviews.
• Counting the loan payment as an expense. Only the interest is deductible; principal is not.
• Counting deposits as income. They are owed back.
• Mixing properties in one account. Give each property its own books so each Schedule E column is a copy job.

How DoorKeeping handles it

DoorKeeping starts you with one set of books per property LLC: a ledger, a bank account, deposits held and a profit and loss, with expense accounts mapped to Schedule E lines. Bank feeds bring in the transactions and match tenant deposits, bills can be read and coded by AI for your approval, and month-end close checks each month against the bank. You can ask Claude or ChatGPT for a property's profit and loss at any time. DoorKeeping prepares your numbers and the Schedule E and 1099-NEC reports from the books; your tax preparer still files your return.

Sources

1. IRS, Get an employer identification number, read Oct 30, 2026
2. IRS, Publication 538, Accounting Periods and Methods, read Oct 30, 2026
3. IRS, How long should I keep records?, read Oct 30, 2026
4. IRS, Publication 527, Residential Rental Property, read Oct 30, 2026

Questions

Do I need a separate bank account for a rental?

The law does not always require it, but it is the single best habit. A separate account makes the books a copy of the bank, and an LLC that mixes its money with yours can weaken the separation the LLC is meant to give.

How often should a landlord do bookkeeping?

Record transactions weekly and reconcile the bank monthly. A small portfolio takes under an hour a month once the setup is done.

What is the first thing to set up?

A bank account used only for the property. Everything else, the accounts, the reports and the tax forms, is easier once the money is kept apart.