Business Management

Real Estate Bookkeeping 101: How to Set Up Your Business for Success

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Business desk with a keyboard, report graph chart, pen and tablet on white table

Are your books up to date, clean, and spitting out the numbers you need?

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First, I want to present some questions to get you thinking while reading the rest of this post:

  • How are you managing your business finances right now?
  • Are you using Quickbooks, Xero, a spreadsheet, a napkin, anything?
  • If you are using software, do you know if every single purchase or sale your company makes is being recorded?
  • If yes, how often are they being recorded? Is it done daily, weekly, monthly, quarterly?
  • Do you know if your books are being reconciled every month?
  • Do you know the different reports you should be looking at during the month?
  • If you ask for a certain report, is someone able to put that into your hand? And are you confident in the numbers on that report?

I know, it’s a lot to think about. But as you can see, there are factors that are very important to you as the business owner when it comes to your books. One of the best ways to ensure you have clean books is to work with a profitable bookkeeper and CPA.

The keyword here is profitable. What do I mean by profitable?

Related: The Investor’s Simple Guide to Excellent Real Estate Bookkeeping

Identifying the Qualities of a Good Bookkeeper and/or CPA

Here are some things to consider when working with a bookkeeper and CPA (even if they are W-2 employees on your team).

Is your bookkeeper’s mindset surrounding profitability and keeping that in front of you?

Bookkeepers can be one of the people on the team that makes sure you focus on your profitability as they will be the ones in your books every day.

Is your bookkeeper keeping your books without hassle?

You should not have to make a lot of decisions for the bookkeepers. They may have questions from time to time, but they should not be taking a lot of your time unless it’s to make your more profitable or to save you from making a grievous error.

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Related: The 5-Step Newbie Guide to Successful Real Estate Bookkeeping

Is your bookkeeper keeping your books up to date?

If you want your books up to date daily, as long as that is reasonable for your purposes, then the bookkeeper should do that. If it’s not reasonable, then make sure to make clear up what interval is acceptable to you (whether it be every 48 hours, weekly, monthly, etc.).

Is your bookkeeper generating the reports you need to make the decisions you need to make?

Generating the reports you need is crucial to your success, but they should not just be generating them but giving them to you in a way you understand them and can make profitable decisions.

Is your bookkeeper taking items off your plate to focus on a higher-dollar-per-hour task?

This might go without saying, but bookkeepers should focus on documenting your transactions so you can go out and do the higher-dollar-per-hour task that you should be doing as an entrepreneur. If you are constantly having to be sucked into the lower-dollar-per-hour tasks, it’s time to look for a new bookkeeper.

Is your CPA doing all he can to reduce your tax liability and keep you out of trouble?

Is your CPA keeping up on the tax laws and focused on how to keep more money in your pocket while making sure you don’t end up wearing an orange jumpsuit?

Related: The Investor’s Complete Guide to Finding & Hiring a Perfect CPA Match

Is your CPA talking over you,  and you’re not able to understand him?

You want to make sure your CPA isn’t always talking over your head, and you understand what he is saying. I’m not saying you have to understand every single word, but when it comes to your business, you both better be on the same page.

Is your CPA a heavily involved part of your team?

A good CPA is going to free you up to work on your business and even give valuable insight.

Hopefully, these questions help you if you are currently working with a bookkeeper or CPA to know if they are profitable for you. They are both crucial components to your team, so you want to make sure that you audit their performance to ensure they’re suiting your needs.

Getting Organized Will Make You A Better Investor

Related: Record Keeping: How to Manage and Organize Your Real Estate Investment Files

Advantages of Cleaning Up Your Books

Yes, bookkeeping is a lot of work. It's also integral to your success as a real estate investor. Here are the five most important advantages of ensuring your records are clean, organized, and accurate.

  1. Decrease your chances of being audited—or at least help you out in the instance you are.
  2. Improve overall knowledge of your business, as well as revealing strengths, weaknesses, etc.
  3. Enable you to make faster, better decisions.
  4. Decrease your day-to-day stress—you’re always aware of the health of your business from your books.
  5. Increase your profitability by identifying opportunities to improve revenue.

Real Estate Bookkeeping: Key Takeaways

Do you really know your numbers? How can you be sure?

  1. Know which numbers you need to track.
  2. Have confidence in those numbers once they are tracked.
  3. Ensure you’re able to access reports providing those numbers at a moment’s notice.

All of this is specifically related to the finance pillar of your business, but overall, keeping tabs on your numbers across your company is what will generate true wealth.

Questions? Comments? 

We’d love to hear from you below!

David Richter is an active real estate investor, who has been essential in closing over 850 deals over the last seven years. Those include wholesale, turnkey, BRRRR, owner finance, rentals, lease o...
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    Boaz Emuna
    Replied 20 days ago
    Hi, Thank you for a good article. when I start investing in RE. I managed my bookkeeping by my self with self build excel sheet. when i found out that excel is excellent with calculation but not convenience to enter & manage data. I build an info sys with MS Access. yes, its took me over a year of work. but the result are a professional look software, that cover all the RE management. now I have RE in Israel, Germany and USA. i must work with CPA, but my sys help me with all i need for running my business.
    David Hansen Attorney from Rapid City, SD
    Replied 20 days ago
    Really good thoughts to keep in mind!
    Pratap Koppula Accountant from Los Angeles
    Replied 17 days ago
    Never the less, these days many Property Management Solutions are available and some of them are offering Financials as well. Accounting is not a separate job, make it integral to your PM, the Operational and Financial information when integrated and reviewed as a single set of KPI's gives you wonderful insights, reduces the data duplicity and errors and brings exceptional transparency, Unit level Profitability, to name a few. In essence, Accounting is not a separate job, this is integral to the core skill of Property Management.
    Nate T. Investor from Tempe, Arizona
    Replied 17 days ago
    Anyone have a good bookkeeper to recommend in the Phoenix area, that works with real estate investors?
    Katie Rogers from Santa Barbara, California
    Replied 16 days ago
    A great way to organize your bookkeeping is according to the tax return. Makes the tax return very easy to complete.