Follow Us on Social Media

email icon rss icon linked.in icon google plus icon twitter icon facebook icon

How to Automate Your Real Estate Bookkeeping

by Andrew C. MacDonald on May 16, 2011 · 4 comments

  
automating your real estate bookkeeping

One of the least popular tasks for many real estate investors is bookkeeping. Whether or not it is your cup of tea, I have a couple simple tips for automating the process so you can free up your time for some of the other tasks you like better.

This system isn’t quite fully automated, but it’ll certainly make bookeeping easier and save you plenty of time.

3 Components of Semi-Automatic Real Estate Bookkeeping

Separate Bank Accounts

The first, and arguably most important step in automating your bookkeeping is to create separate bank accounts. At the bare minimum you’ll want to have one separate account for each ownership structure under your responsibility.

For example, if you own your properties personally, create a separate account for your real estate investments. Or, if you work with partners, have a separate account for each of the various partnerships or joint ventures you work with. To take things a step further, you may want to create one account for each individual property even if some properties have the same ownership structure.

Pre-Authorized Debit

Most mortgage companies these days use pre-authorized debit. On whatever day your payment is due, your lender will take the payment directly from your account. To further automate the process, why not setup pre-authorized debit for your property tax, insurance, utilities, property management, and any other regular monthly expenses? Sure you need to keep an eye on the transactions each month, but using PAD ensures your bills get paid even when life gets a little hectic. Knowing your business can survive a little longer on its own is usually a step in the right direction.

Tracking

At some point you’ll want to track your transactions by entering them into your system. Whether you keep track of your income and expenses using a simple Excel spreadsheet or favor accounting software for the task, most banks allow you to download a CSV file containing your transactions. Simply copy the transactions you download from your online banking to whatever system you use and your update is complete. Thanks to the separate bank accounts you’ll be using, the transactions will already be separated. At this step you can start to really see the benefit of using one account per property.

Why You Should Automate Your Real Estate Bookkeeping

Be Organized by Default

Most of us prefer to be organized, but when things get busy, bookkeeping and paperwork can get pushed aside and start to pile up. If you setup separate accounts and pre-authorized debit for your bills, the system keeps everything organized for you.

Avoid Commingled Funds

From a cash management perspective, having a commingled fund may seem like the best idea. Pooling all your cash into a single account means you have a larger balance to work with and are less likely to deal with overdraft issues.

The problem with commingling funds is there is no clear separation. With separate accounts you’ll be able to tell at a glance if your property is profitable or bleeding cash. You’ll also be able to tell if you have a healthy reserve fund available for each property.

It’s Easy

Perhaps the best reason to automate your real estate bookkeeping is because its so easy to do. Investors rarely enjoy accounting, so why not make a couple of easy changes to simplify the process and save yourself time and frustration?

Creative Commons LicensePhoto credit: o5com

Email *
  



{ 3 comments… read them below or add one }

John Evan Miller May 16, 2011 at 4:17 pm

Separate banking accounts have really helped in the past, and I can’t say enough how convenient it is to have all related transactions and account activity together – especially if your business has anything beyond the most basic structure out there.

Reply

Andrew C. MacDonald May 16, 2011 at 8:52 pm

Hi John, this is probably the best tip I can provide and if you’ve used it you know why. It is far too easy to lose control over your bookkeeping, so the hard separation works wonders.

Reply

Jason Chandler May 22, 2011 at 4:19 pm

Great tips and advice. Separate accounts makes things so much easier.

Reply

Leave a Comment

Comment Policy:

• Use your real name and only your name in the field designated for your name.
• No keywords allowed as anchor text in the name or comment fields.
• No signature links allowed under your comments
• You may use links in the body of your comment, but it must be relevant to the discussion at hand, and not merely be some promotional link.
• We will have NO reservations about deleting your content if we feel you are posting merely to get a link without adding value to our discussion.
If you add value, but still post keywords, we'll use your comment, but remove your link and keywords.
• For more information about acceptable practice, see our site rules.

Want your photo to appear next to your comments? Set up your Gravatar today.

{ 1 trackback }

Previous post:

Next post: