De-Risk Your Books and Get Time Back – How Real Estate Investors Get Ahead With Outsourced Bookkeeping
Managing multiple properties, dealing with tenants, scheduling vendors, watching the market… real estate investors have a lot on their plate. With so much in the air, one of the costliest balls to drop can be bookkeeping and accounting, which is essential to the success of any real estate business. In this article, we explore what real estate bookkeeping is, why it’s important, and how outsourcing your bookkeeping reduces risk and gives back more of your most precious resource: time.
What is Real Estate Bookkeeping?
First things first, real estate bookkeeping is the process of recording and organizing all financial transactions related to real estate properties and your business. These transactions include rent payments, property taxes, mortgage payments, repairs, and maintenance expenses. Proper bookkeeping ensures accurate financial reporting, which is critical for making informed business decisions.
How to do Bookkeeping for Real Estate?
Bookkeeping for real estate can be complex, especially for investors who own multiple properties. It’s more than simply reconciling a checkbook. Proper real estate bookkeeping involves tracking income and expenses, maintaining accurate records, adhering to a well-planned chart of accounts, and preparing financial statements. To do this, real estate investors must have a solid understanding of accounting principles, financial reporting requirements, and what can and can’t be categorized in various accounts.
Is Real Estate Bookkeeping Difficult?
Yes. While it may be tempting to handle the books in-house, real estate bookkeeping can be difficult, especially for investors without a background in accounting. More than simply reconciling a checkbook, proper real estate bookkeeping involves meticulously tracking income and expenses, maintaining impeccable records, adhering to a well-planned chart of accounts, and preparing financial statements. It requires attention to detail and a thorough understanding of the real estate industry's unique accounting practices and financial reporting requirements.
Real estate investors who handle their own bookkeeping open themselves up to a variety of risks that can have significant impacts on their financial health and overall success. Common risks include:
- Inaccurate Transactions Records – Incorrectly recorded transactions lead to errors in financial statements and tax returns, potentially resulting in penalties, fines, and even legal troubles
- Failure to Track Expenses – Forgetting to track expenses or failing to categorize them properly results incorrect deductions, inaccurate financial forecasts and plans, and can bear significant tax implications
- Mixing Personal and Business Finances – Investors who handle their own bookkeeping sometimes blur the lines between their personal and business finances, leaving them with confusion, errors, and greater financial risk.
- Missed Deadlines – When business picks up, investors handling their own books may miss important deadlines for filing tax returns or making payments, leading to penalties and interest charges which can be excessive
The impact of these mistakes can be significant. Real estate investors may end up paying more in taxes, face legal consequences, and even lose potential deals due to inaccurate financial statements. It can also take time away from more important tasks such as finding and managing properties. Working with a professional bookkeeper or real estate accountant ensures that finances are properly managed and helps avoid costly mistakes.
How Outsourcing Real Estate Bookkeeping Can Benefit Your Business
Outsourcing real estate bookkeeping to specialized firms like RealCount offers a multitude of business benefits, including:
- More Time Better Spent – Outsourcing your bookkeeping frees up valuable time to focus on other areas of your business, including sourcing new investment opportunities, managing properties, or expanding your portfolio and increasing revenue.
- Reduced Expenses – Hiring a full-time bookkeeper can be expensive, especially for small to medium-sized real estate businesses. Outsourcing provides direct access to a team of experienced professionals at a fraction of the cost.
- Accurate Financial Reporting – A team of specialized accountants with a deep understanding of the real estate industry's unique accounting practices ensures your financial reporting will be accurate and reliable, helping you make informed business decisions.
- Tax Savings – Finding a trustworthy partner with tax planning and advisory services provides the extra advantage of leveraging deductions and credits that minimize your tax liability.
Real estate bookkeeping is essential to the success of any real estate business but can be an Achilles heel if handled improperly. Outsourcing bookkeeping to a specialized firm like RealCount can de-risk your books and offer several benefits, including time-, cost-, and tax savings, as well as accurate financial reporting. If you are a real estate investor looking to streamline your bookkeeping process and focus on growing your business, consider letting RealCount handle your books.
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