You have a rental property. Whether it was a home you lived in or just an investment property, if someone asked you if it was a business, what would you say? How you answer depends on a lot of things.
One thing to take into consideration is how emotionally involved in the “business”are you? If you have emotions tied to the property or business relationship it may keep you from making practical decisions.
Here is an example:
A young couple moves out of state and decides to rent their first home to one of the couple’s siblings. The couple needs the rent money from the sibling to pay the mortgage so they can save the money they make now for their next home. This sibling is also responsible for the utilities. The couple keeps the utilities in their name just to be sure they are being paid. The sibling consistently shorts the rent and refuses to pay the utility bills. Instead of being able to rationally decide that evicting the sibling is the answer, the couple instead puts up with it until it causes issues between them. Business? Probably not!
Next, how do you account for the monies collected?
Is the security deposit in a separate interest bearing account? Are the costs and income also kept separate from household accounts? How the IRS determines if something is a business or not is by seriously looking at commingling of monies. Successful businesses, even family run ones, don’t put business assets into house accounts.
If you seriously want to treat your rental property as a business you need to change your thinking.
If you need help in what to do, contact a property management company like Denver Realty and Rentals. We can help and take the day to day responsibilities and money collection, etc., out of your hands. We can help you treat it like a business! 303-452-5853