Your Profit and Loss Report is your Resume!
I know that when we are new to this business, we are hesitant to spend more money than we think is necessary, after all, we have spent a ton of money on the rental home and getting it ready to rent out, so to think of anything else like a financial software program, is just not on the list of things to do, at least for now. We only have a house or two, we say.
And just because we got away with not having a professional layout when we received a mortgage for our first rental or even second rental, we think it's okay just to present a mortgage company, bank or hard money lender, just some figures written down on a piece of paper or on an Excel Spread Sheet.
But what happens when the time comes when you want to really expand? A money lender is going to want more than just an excel spreadsheet, sometimes even after your first house is purchased and you are on your second. They want to see that you are truly a professional. A real business that has a lot on the ball. Especially if you plan to expand. They want to see that you have grown as well by how well you run your company.
QuickBooks and CPA's are usually very best friends with each other and that says a lot to your money lender. It tells them that you are serious about your business and are interested in keeping track of every penny you spend, by keeping expert reporting on every aspect of your investment properties. And you have chosen a software program that is popular with CPA's.
If you are an employer and an applicant applies for a position with you and hands you their resume done via an Excel spreadsheet, versus someone who hands you a professional resume done through Microsoft Word or some Resume software program, which one would you think would be the best suited for the job, based on both applicants having the same qualifications? Looks do matter, especially to business people. Especially to someone you want to borrow money from.
QuickBooks is an expense account. Right off the bat, you are able to list QuickBooks as an Office Expense. So there is no excuse for saying I can't afford it right now. If you can afford a house, you can afford QuickBooks, (or any financial software program that is professionally suited for businesses) a computer, a printer, and the equipment you need to run your company. It is a must, that you also include this as an investment.
Many mistakes new investors make is to skimp on their office equipment. It is just as important as the rental home you purchased.
This Industry has to do with legal issues, and many lawsuits, and if you don't have the best to protect your investment, then you won't be in this business very long.
I know, it seems silly to think that by investing in a financial software program verse Excel will make any difference at all, but it truly does to the person you want to borrow money from. It could make a difference between you getting that home or that other investor who also applied.
My personal experience: I tried using QuickBooks years ago, but found it not that real estate friendly for my purposes. Perhaps it was just my own and/or my CPA's setup that was amiss--just not a good fit. Maybe today there are templates that are designed to be more real estate specific?
We now use Buildium to manage several hundred doors, and it works fine for us--this is not a plug for them--there are many accounting programs on the market that will present a professional and polished picture to whomever is involved.
Your point is well taken -- this is a business and needs a professional touch in every aspect possible. Otherwise, it's just another hobby.