Hello fellow BP members! Looking for a little advice.. Little background: I am a financial analyst for a multifamily developer, so i understand real estate and all of the financials associated, but i am definitely not accountant. I currently own 7 rentals, with 2 more under contract; all are self-managed through Cozy.co. I am very quickly realizing that if I do not get a serious grip on this whole weekly/monthly bookkeeping thing, it could get out hand. I want to treat the properties as a business, like they should be treated(and generally do in all other areas), with weekly bookkeeping and monthly/yearly reports. My question is: Should I spend the time to learn an accounting software like Quicken, as well as the time imputing information weekly and keep the "books" myself? Or outsource this task to an actual bookkeeper and keep my energy focused on other aspects of the business? And also, should the bookkeeper be an online service or local firm? My goal is to acquire another 10 units next year, and so on etc., etc. I don't plan on stopping the acquisition train anytime soon. Any advice from investors who have faced this dilemma? What was your solution, and how did it pan-out? Thank you so much in advance for any advice/insight!

@Sterling Fields Being an investor and an Accountant, you should make your decision depending on: - Would the time you spend on doing bookkeeping used to making the next deal and increasing your equity and wealth? - Would you like to be a bookkeeper or a CFO? There is always a learning curve. But once you decide and change your mindset, it will be a breeze to handle any task. If you find someone to make sure you get someone is not just entering your details from the downloadable bank statements. So what is your time worth? No Quicken please, we get emails every day to transfer and convert their data to QuickBooks

I partially agree with both @Gita Faust & @Jeff Gates. Is the accounting industry ripe for disruption? Yes. I've discussed this with many accountants and the majority know this. If you've wondered why accountants are now calling themselves "business advisors", it's because the value is not in doing your repetitive bookkeeping, it's in advice around ever-changing variables like the best tax structures and reaching your financial goals. Companies like https://www.botkeeper.com/ have raised huge rounds of investment, not because they replace accountants completely, but because they automate most of the repetitive work and use a few accountants for the tricky details like what @Cathie Kovacs pointed out. Gita is right that quickbooks desktop is not going anywhere, but this is because it is a hassle to jump ship from quickbooks desktop once it's set up not because its the best solution for your bookkeeping. After building Kitt I truely got an insight into just how much could be automated in accounting, especially in real estate. We rely on consistent cashflow from our property investments which can easily be leveraged to save you time and money. If you've ever built rules in Xero or QBO you'll know what I mean. I work along-side real estate accountants and business advisors that understand that automation is shifting the accounting industry and it's not as bad as it sounds. Yes, there may be less mundane repetitive work, but that also means there's more time for creating true value for their client and really understanding their financial goals and how they could achieve them. Accountants won't disappear but their role is shaping into something quite different.

@Sterling Fields Great Thread! Without knowing anything about your acquisition strategy, I would still recommend hiring a great bookkeeper.In my home market prices are fairly low to average, so a lot of local investors use community banks for their financing. This is great up until that magic limit, at which point the bank will ask for financial statements they can use. Others use private money, either loans or equity, for their financing. In this case, you're maintaining very important relationships with your partners who may want details on the deal, and you'll definitely want to be tracking their distributions. Having a bookkeeper that not only understands "debits and credits", but also understands the various operational, financing, and investing activities specific to each "type" of real estate activity is worth their weight in gold. They should be more than capable of creating in-house or "management" books that will appease your partners on a day-to-day basis, and will make your CPA focus on tax planning instead of tax preparation. Bonus points if the bookkeeper speaks a little plain English instead of just speaking accounting :)The other strength to having a rockstar bookkeeper is a kind of checks and balances. Bad CPA's exist, and sometimes they don't see the whole picture or slow down to really understand your situation. A great bookkeeper should be speaking with you very regularly and will have a deep understanding of your business. Finally, established bookkeepers should have great systems backing their business. No guesswork, no missing paperwork, just a seamless system that is easy to use and gets you your reports and a consultation on time, every time. Big picture - the right bookkeeper can absolutely help you scale at 10+ acquisitions a year. Depending on the bookkeeper, that first acquisition or refi may recoup your annual cost and open up additional growth. 100% do recommend cloud accounting software like Quickbooks Online, 100% do not recommend hodgepodging a system together yourself. That just sounds like more training and headaches down the road.

There is no way that Accounting is being automated. At least, I know Real estate accounting isn't. When you are dealing with Lenders on a regular basis, you will need to move things around and omit things that are not part of the discussion. Budget Forecasting is not something that can be done without discussing what is the next step. Will there be a roof repair/replacement, are we expecting to fix up the unit IF the tenant moves out? These are something that requires planning and strategy.

Jeff, with respect, I disagree. Not to hijack this thread, but a computer will never know if what you bought at Home Depot is turnover expense or a capital improvement....or how to interpret that into the current tax code and handle it appropriately. Having said that, none of us doing our own dental work, right? Yes, you can learn and you should understand what your financial reports mean but I’d suggest outsourcing to a qualified bookkeeper with an understanding in real estate.

This is about accounting. First property management accounting. Second about accounting in general. I did a deep dive at the code level few years ago with Buildium. They do a pretty nice job for property management, but leave out some other accounting features, the owners decided not to include. In most cases Buildium is good for property management and Quickbooks is overkill. If you are property flipper or do capital expenditures that affects the asset basis, Buildium is not the correct choice. Most landlords don't do that and if in one year they must replace a roof, take those numbers to a CPA at year end. (for that one year) I also have coded xero integrations end to end at the code level. So I understand the internals and GAAP. Recently we replace Quickbooks and Xero altogether. They are not the future. Since AI and Machine learning have come to maturity, the accountant as a profession will be replaced. We code this now. Accounting as we know it will not be a piece of software. Where humans engage with it. This 70 year old profession is now being replaced by learning robots. This industry is ripe for disruption.

You took the words right out of my mouth. That's exactly how i feel in terms of long term growth. It's hard to start acquiring team-members when you are so early in your investing career. Paying people to do other jobs when there isn't a ton of money to go around to begin with. I guess i should have posed my question another way: Is bookkeeping something that should be hired out this early in my investing career? It is the long term plan for sure; but is 9 units enough of a scale to pay someone for this position yet? I guess it's a pretty important role so i would assume yes? Thank you for your feedback!

To bookkeep or not to bookkeep?

Sterling Fields

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Brandon, MS · Member since 2017 · 40 posts · 26 votes

7y

@Ryan Daniher While that sounds like a great plan, and yes it would probably be more economical, i would assume that i would need a decent amount of accounting knowledge to keep them in check? I would be lost in knowing if they were doing the work correctly or not; although come to think of it, it would be that way with anyone. I need to look into this deeper because i have ZERO experience with VAs. I do like the idea in theory though. Any suggestions for the best place to learn about utilizing VAs?

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Sterling Fields

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Brandon, MS · Member since 2017 · 40 posts · 26 votes

7y

@Dassi Lazar Yes I am in the same position! Using excel and my free landlord software to track everything is making me very uneasy. So you actually hired an employee(1099 I am guessing)? I haven't even thought of that. How is it working out? I assumed it would be an accounting firm or online source.

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Sterling Fields

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Brandon, MS · Member since 2017 · 40 posts · 26 votes

7y

@Ben Day I have used the same community bank for all of my purchases. My main strategy is using BRRRR. He says there is not limit on the number of loans(but i know that is just not true!). That is a very good point about private money lenders wanting good reports; i assume i will be working with one at some point or another anyways.

Thanks for the advice on what to look for! All great insights into bookkeepers/CPAs

Lol definitely no hodgepodging here!

Thanks again

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Dassi Lazar

Realtor · Baltimore, MD · Member since 2018 · 53 posts · 46 votes

7y

@Sterling Fields yes, I will give her a 1099 at the end of the year. It's working out amazingly! I went to my accountant and gave him all the figures and I love the fact that I know my numbers and are accounting for everything. I think this was a crucial step before expanding.

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Lindel Turner

Investor · Jonesboro, AR · Member since 2017 · 136 posts · 79 votes

7y

@Sterling Fields I categorize them same categories on my tax return. My account uses. I hired a smart teller that works the drive thru at local bank he enters them on google sheets. I do a print out every year for my Cpa. Filtered by category. He loves the extra money I take them to him ever quarter.

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Cathie Kovacs

Rental Property Investor · Stamford, CT · Member since 2017 · 153 posts · 75 votes

7y

There are a lot of variables but if you’re looking for generalities, I’d say your bookkeeping costs should be about 1% of gross rent per year, depending on how many meetings you want and how often you want everything updated (weekly, monthly, quarterly). Worth every penny to know where you stand financially, know that it’s correct and have someone that you’re CPA can communicate with. Preparing your tax return should be a breeze since your bookkeeper has done all the heavy lifting.

Full disclosure, I own a remote bookkeeping firm. We charge a monthly fixed fee. Some charge by the hour (hard to know what it'll cost). Look for software proficiency, experience and REI knowledge. Beware the lady you know at church that does "bookkeeping" for $20/hour. We make a lot of money every year cleaning up their messes.

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Ryan Daniher

Real Estate Consultant · Short Hills, NJ · Member since 2016 · 55 posts · 28 votes

7y

@Sterling Fields I didn't have any knowledge about VA's two weeks ago but just went ahead and hired someone on Upwork for a small task and am starting to get used to it. Www.Upwork.com

Cheers!

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Joel Florek

Rental Property Investor · Michigan City, IN · Member since 2015 · 530 posts · 741 votes

7y

Originally posted by @Sterling Fields:

Originally posted by @Joel Florek:

@Sterling Fields I am at 31 units and still do the bookkeeping myself. I use General Ledger (www.getledgers.com) to manage my bookkeeping. A few notes.

By doing the books myself I get to look at all my transactions and ask myself "why the heck am I spending so much on that." Helps to keep me in check. When someone else does the work you will likely just get the statement and think to yourself that the numbers sound about right and not to worry.

General Ledger is probably the simplest tool possible that allows automated transaction download. I spend about 5min each week categorizing transactions into the different properties that I own. Keep up on it and then I send over the fully categorized transaction statement to my CPA at the end of the year for review and tax prep. Can do it periodically throughout the year as well if you choose to.

Thanks for your input Joel! Me being a multi-family financial analyst, i am a little anal about expenses. So i am not too worried about digging into the data each month and asking questions. Plus my thought is that i would be sending all of the information to the book-keeper anyways?

I will definitely look into getledgers.com. However, i do have a few reservations about using an online software like that one. Correct me if i am wrong, but my feeling is that it won't be able to help me with certain calculations (i.e. depreciation if i have a basis increase, or interest expense if i have a refinance), or keep up with the balance sheet and cash flow statements. Is there somewhere i can track cash flow from non-operating activities? (i.e. cash-out refinance of a property, putting down-payment on a new property).

In my case, I don't track all that stuff on the month to month. I mainly care about cash in vs. cash out in the day to day. I know that depreciation and interest vs. principle will all make the numbers better at the end of the year. Once I hit year end I make some adjustments with my CPA to wrap up tax time. The idea is take care of 95% of the work in real time myself to keep an eye on the ball and work with the expert at the end of the year to dial things in.

With that said, some want to have the books 100% squared away each month. Quickbooks or another full suite accounting solutions would be a better choice for that type of workflow. And depending on your day to day work schedule you may want that function hired out. For me, at 31 units and no "day job" I am fine spending 10 to 15min each week.

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Jason MalabuteBusiness Member

Accountant · Los Angeles, CA · Member since 2016 · 2k+ posts · 900 votes

1y

As an investor and accountant, you need to weigh whether the time you spend on bookkeeping could instead be used to grow your portfolio and build wealth. Ask yourself: do you want to play the role of a bookkeeper, or would you rather focus on being the CFO? Once you commit and adjust your mindset, the learning curve becomes manageable. If you outsource, make sure the person isn’t just plugging in data from bank statements but providing real value. Ultimately, it comes down to what your time is worth. And avoid Quicken—many people end up needing to switch their data over to QuickBooks later.

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To bookkeep or not to bookkeep?

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