Is Your Real Estate Financially Healthy?

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When it comes to real estate investing, here are several key questions you may want to ask yourself:

  • Are my investments on the right track?
  • Do I create enough cash flow to justify keeping the investment?
  • How can I be sure that my property management company is not stealing from me?

Investors should know the answers to these questions daily. Managing your property by the numbers will help to ensure that your property is managed effectively, your returns are adequate, and your management team is a good fit for you and your property. Analyzing the numbers will help you to figure out how your property is performing, what you can do to improve your profits, and also how to distinguish what problematic areas you can provide solutions to. In order to achieve these goals, you need to have accurate numbers to work with.

Most people do not like the task of bookkeeping because it can be tedious and boring. It certainly is not the most exciting part of being an investor, but it is vital to your success since steady cash flow is the life line of your real estate business. To make sure your property is performing efficiently, you must first understand your property’s financial health. Let’s take a look at how meticulous bookkeeping can help ensure you make the right management decisions with your properties.

How to Invest in Real Estate While Working a Full-Time Job

Many investors think that they need to quit their job to get started in real estate. Not true! Many investors successfully build large portfolios over the years while enjoying the stability of their full-time job. If that’s something you are interested in, then this investor’s story of how he built a real estate business while keeping his 9-5 might be helpful.

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Real Estate Financial Health Checklist

1. Monitoring the Expenses of Your Property: To keep your property within your budget, it is important to keep detailed records of your expenses. When evaluating which repairs are reasonable enough to undertake, you must look at the numbers before committing to any huge repair or improvement projects on your investment property. While undergoing a big improvement project, you will want to make sure to keep track of your financial progress as frequently as possible. This way you can always be up-to-date on what has been spent on the project. By identifying which improvements can potentially cause you to go over budget, you can keep an eye out for any necessary adjustments that need to be made.

2. No Expense is Too Small to Count: Most real estate investors keep great records for all of their larger expenses, but few give smaller expenses the same treatment. When minor expenses are excluded, you are not able to accurately determine how your investment is performing. Smaller expenses can add up over time so you want to make sure to capture all of them. Having a good filing system in place will help you to keep track of all of the costs associated with your property improvements, utilities that you may have to pay for, any minor repairs that are paid out of pocket, and even small stuff like having an extra pair of keys made. Keep all of your receipts together from stores such as Lowe’s, Home Depot, etc. Taking these steps will help you to keep a clear picture of exactly how your property is doing. This will also help you so that you take as many deductions as possible during tax season.

3. Tax Deductions – Bigger & Better: Now that you know the importance of tracking your expenses, you might wonder what additional expenses you could be capturing for tax write-offs. There are several expenses that investors incur frequently but often miss when it comes to tax time.  The first that comes to mind is mileage. Almost everyone drives to their investment properties, runs errands for the property such as getting supplies or depositing checks, etc. However, usually these mini-trips do not get tracked.  To document your mileage, keep track of how far you drove as well as why you made the trip. The IRS is pretty clear on what they expect: if you do not provide documentation, you cannot deduct it. The easiest thing to do is to keep a mileage log. You can also do this for your cell phone expenses. A few other expenses real estate investors tend not to track are: travel, educational expenses and meals. This is money that may be claimed as a significant deduction so be sure to take advantage of these. You can take advantage of these opportunities simply by keeping track of these expenses with your monthly bookkeeping.

4. Don’t Forget to Reimburse Yourself:   A big no-no for real estate investors is to pay for any expenses using their personal account. This is a huge mistake because it often causes confusion which results in the expense not being tracked. This can be avoided easily by accurate documentation and by staying organized. Instead of using your personal accounts to fund expenses during the month for your property, consider transferring money at the beginning of the month from your personal account to your property’s bank account. Then you can pay all of your properties’ expenses without worrying about any negative effects on your personal bookkeeping. It will also help you during tax time and protect you in case of IRS audits.

5. Take Charge of Your Cash Flow: The most crucial area for real estate investors is cash flow. Accurate bookkeeping will allow you to have more control over your finances monthly, quarterly and annually. Analyzing your cash flow on a regular basis will help you to determine if your money is being utilized in the best way possible for your property. Your new and improved bookkeeping system will let you compare how your cash flow fluctuates throughout the year. This allows you to make informed and timely decisions with respect to your investment properties.

Real Estate Success Tips

Now that you know how bookkeeping directly impacts your cash flow,  it doesn’t seem as boring anymore right? We all want to manage our properties effectively while making the right decisions so be sure to have accurate financial records as part of your plan for success. These secret tools can help you leverage your property to its full potential. Remember “what gets measured gets managed”. These bookkeeping tips can help you make the right decisions to increase your cash flow.

Photo: larique

About Author

Amanda Han

Amanda is a CPA specializing in tax strategies for real estate, self-directed investing, and individual tax planning with over 18 years’ experience. She is also a real estate investor of over 10 years with a focus on long-term hold residential and multi-family assets across multiple states. Formerly a tax advisor at the prestigious accounting firm Deloitte in the Lead Tax Group, focusing on tax strategies for the real estate industry and high net worth individuals, and at an international Fortune 500 Company in the high-tech industry in the Corporate Tax department, Amanda’s goal is to help investors with strategies designed to supercharge their wealth building. Amanda’s highly rated book Tax Strategies for the Savvy Real Estate Investor is amongst Amazon’s best seller list. A frequent contributor, speaker, and educator to some of the nation’s top investment and self-directed IRA companies, Amanda has been featured in prominent publications including Money Magazine,, and Amanda was a speaker at Talks at Google and is a 40 under 40 honoree by CPA Practice Advisor, showcased amongst the best and brightest talent in the accounting profession. Her firm Keystone CPA, Inc. was awarded a two-time winner of the Top CPA of Orange County Award by OC Metro Magazine. She is certified by the CA State Board of Accountancy and is a member of the prestigious American Institute of Certified Public Accountants (AICPA) with clients across the nation.


  1. Great advice, Amanda! I think #2 is such a huge deal. Some of the folks my husband and I talk to, especially those considering commercial investments, analyze the little things carefully to find ways to more efficiently manage an asset. Sometimes they find opportunity in an asset because — as you alluded to — these details are ignored probably because the bookkeeping can be “tedious and boring”. Thanks for sharing your expertise!

  2. Everything to do with real estate is put on a credit card, no errors. My office equipment, truck, phone or what ever else that I use to run my business is tax deductible. My CPA keeps my taxes at a bare minimum, close to zero. A spreadsheet covers everything to do with the rentals so I know which ones are making money. Keep all my properties in good repair and in saleable condition. Good write up Amanda.

  3. Thanks for the comments Jim and Liz. I always tell my clients that whatever system works for “you” is the system to use. Some people are great with doing everything in excel, others like accounting software, and others like to have everything in folders. As long as your method is something that works for you and you are using it consistently, that is the key to making it work!

  4. I keep track of my rental income and expenses with the same obsession as a cat preens itself.

    But it wasn’t always that way. Especially in the beginning. I didn’t know what was going on until tax time and then the picture wasn’t good. I used to ignore it like a blind spot and continue to dive right in with my faith that real estate was my ticket to retirement.

    And it’s probably a good thing I did because it has worked out the way I hoped and if I had instead kept a close track of the bookkeeping so early on in the game I probably would have given up.

    If you don’t like keeping track of expenses the easiest way is to just have a separate account. If the balance goes up every month then your rentals are working out. If you keep having to feed the account with liquidity injections from your personal wealth then something is going wrong.

  5. So many people are bad at 2 which flows into being poor at 3 as well.

    I might not get it all entered into my spreadsheet right away but I’ll hold onto every $1.20 receipt for a new key and jot down it in my milage log and also note the time for my RE professional log.

  6. John Thedford on

    Thanks for the article. My last IRS audit resulted in a bill for less than $200 from the IRS. I was pleased. Keeping good records pays off. I suggest using an easy bookkeeping platform such as QuickBooks. You will find it is effective not only for tracking your RE investments and expenses but also your household as well. I picked up a check writing program called Check Launch that interfaces with QB. This allows the user to write checks from one computer (never having to purchase pre-printed checks again), and it automatically deducts from your account as you write checks. It really helps streamline bookkeeping. As far as mileage, I track every mile every single day. At the end of the month I get a check for mileage reimbursement. You might be surprised how fast it adds up. Keep in mind that you will have to replace your car one day so possibly putting aside your gas reimbursement will be a great way to have a large down payment or maybe even pay in full in advance. Do you want to give extra money to the IRS (that you DO NOT owe) or do you want to keep great records and keep the money for yourself? Good business records pay for themselves many times over.

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