Some of the biggest benefits of owning a vacation rental include generating extra income, building equity through long-term appreciation, preparing for retirement, and claiming deductions to keep taxes as low as possible.

In order to make the most from (and pay the least for) a vacation rental, it’s important to have a good bookkeeping system in place. In this article, we’ll take a look at paid and free options for vacation rental bookkeeping and discuss what to look for in a great bookkeeping system.

Key takeaways

• The main options for vacation rental bookkeeping are spreadsheets, general accounting software, vacation rental software systems, and software specifically designed for real estate.
• Key features of a great vacation rental bookkeeping system include automatic income and expense tracking, options for multiple rental properties and bank accounts, and simplified financial and tax reporting.
• Some common tax-deductible expenses that a vacation rental bookkeeping system should track are cleaning, maintenance, professional fees, commissions, utilities, and depreciation.

Options for vacation rental bookkeeping

Keeping track of income and expenses is a key part of owning and operating a vacation rental. Here are options to consider for vacation rental bookkeeping, along with the pros and cons of each:

Spreadsheet

A basic spreadsheet program such as Microsoft Excel, Numbers, Google Sheets, or OpenOffice Calc are already on the computers and smartphones of many real estate investors. However, while using a spreadsheet to track vacation rental income and expenses may be the easiest choice, it isn’t necessarily the best choice. 

One of the reasons is because vacation rental guests usually stay for an average of 6 nights, which means a landlord with a busy vacation rental could have an awful lot of manual data entry to do. 

Pros

• Many investors already have a spreadsheet software program.
• Easy to use for tracking income and expenses.
• May be able to download a CSV file from a bank account, then cut and paste into a spreadsheet.

Cons

• Manually entering data can easily become overwhelming and lead to data entry errors.
• Reconciling a spreadsheet each month with a bank account can be difficult at best.
• Compiling financial reports is complicated and time consuming.
• Tracking prepaid rent and security deposits can also be hard to do.

Generic accounting software

General accounting software such as QuickBooks or Wave can also be used for vacation rentals, although setting up a system can be arduous. Because generic accounting software is written to work for almost every business, the programs require a lot of tweaking to work for a vacation rental property business. 

In QuickBooks, users must follow 7 steps just to set up a single line item on the chart of accounts. There can be quite a few hoops to jump through before a chart of accounts on general purpose accounting software can be used for a vacation rental.

Pros

• Available in desktop, mobile app, and online versions, depending on the software.
• Can connect bank accounts to sync transactions directly into the software.
• Generic software can be customized to meet the needs of almost any business, although it will require time and effort.

Cons

• Because generic software is designed by almost any business, it can take significant time and effort to set up for a vacation rental business.
• Knowing how to enter and categorize transactions requires knowledge of generally accepted accounting principles and procedures.
• Although bank accounts can be connected and synced, a user still needs to verify that each transaction is posted correctly.
• Manual entry may still be necessary to accurately match revenue and security deposits to guests and vacation rental properties.

Vacation rental software

Vacation rental software and apps offer a wide variety of features, such as automatically connecting with various booking channels like Airbnb and VRBO, scheduling reservations and updating calendars, managing maintenance, and tracking income. 

However, vacation rental software can be expensive to use because pricing is usually based on a monthly subscription plan or a percentage of the rental fee collected. 

Pros

• Booking details and guest information flows directly into the vacation rental software.
• Many applications can track rental revenue and deposit by guest, making bookkeeping a little bit easier.
• Most vacation rental applications can also be used to general basic financial reports like income statements to better track profitability and prepare year-end taxes.

Cons

• Monthly and annual subscription fees, and paying a percentage for revenue collected for each reservation, can end up being unnecessarily expensive.
• Not all vacation rental software apps sync with a bank account, which means transactions must be entered manually.
• Vacation rental software may also be difficult to customize for an investor’s specific needs, such as having multiple bank accounts or a credit card account.
• Vacation rental software may not offer the same features accounting software does, such as generating a profit and loss (P&L) statement for each property or portfolio, or keeping track of property depreciation to minimize taxable net income.

How to use Stessa for vacation rental bookkeeping

Unlike the paid options just discussed, Stessa is a free software program specifically designed to help you keep track of rental property performance and finances. Stessa works for vacation rental bookkeeping, along with long-term rentals like single-family homes and smaller multifamily buildings.

This recent support post explains in detail how tracking vacation rentals on Stessa works. For a quick overview, here are the 4 general steps to follow to use Stessa for vacation rental bookkeeping:

1. Download a CSV file with transaction history from Airbnb, then upload the entire transaction file to Stessa, which automatically categorizes most (if not all) of the transactions.
2. On the Leases & Tenants page for the specific vacation rental property, change the rent roll to short term and enter the projected nightly rental rate and occupancy for the current year.
3. On the Property Details page, enter the projected monthly operating expenses to compare actual expenses incurred to budgeted amounts.
4. Connect bank accounts, credit card accounts, and mortgage accounts for each vacation rental property to allow Stessa to connect, sync, and automatically categorize each transaction.

Stessa’s key features as a vacation rental bookkeeping system

Here are some of the key features that vacation rental owners may find useful when using Stessa as their bookkeeping system:

Income and expense capture

All income and expense transactions should be recorded, no matter how minor. Costs such as replacing a broken glass or shower curtain or providing a bottle of wine can add up. Stessa allows vacation rental owners to link a debit card to their bank accounts to keep track of minor expenses.

Maintain a business bank account for each vacation rental

One of the drawbacks to many vacation rental software programs is that revenues only flow into one bank account. On the other hand, with Stessa a vacation rental owner can set up multiple checking and savings accounts and determine where each income item belongs.

Track assets and capital expenses

A vacation rental chart of accounts is used to systematically track the various transactions that come with owning and operating a vacation rental. There are five major categories on a chart of accounts: assets, liabilities, owner’s equity, income, and expenses.

Financial reporting

Using Stessa for vacation rental bookkeeping also makes generating financial reports much, much easier. Typical performance reports for a vacation rental might include a tenant rent roll, income statement, net cash flow report, capital expense statement, and vacation rental balance sheet showing assets, liabilities, and owner’s equity.

Tax preparation

Stessa automatically tracks income and expenses from linked bank accounts on both a portfolio and property level, as well as depreciation. When tax time rolls around, members of the Stessa Community can access the Stessa Tax Center to receive perks like a personalized tax package, actionable tips from The Real Estate CPA, and an exclusive TurboTax discount.