Note Investing & Taxes - DIY or Hire Someone?

Question

Just curious - taking a poll question for those who invest in notes with partners. Do you do your books yourself or have an accountant / bookkeeper.

I have a book keeper do mine as they have kept me from having to do a lot of additional work come tax time. For example make sure you have clear understanding of principal vs interest paid to a partner. Make sure you have your W-9's in order etc.

Bill McCafferty · Answer

@Chris Seveney

My two biggest team members are my Accountant and my Quickbooks person. My Quickbooks person works for my Accountant.

I track every expense, in and out of my Companies. I actually have a little black case, that's my Traveling Check Book Ledger and Account Tracker.

On the 1st or 2nd of the month, I scan in all my Account Tracker Sheets (basically regular paper for each bank account, with every transaction written down with a description. I put these in a Dropbox Folder with all my Bank Account Statements, Spreadsheets (I'm an Excel freak) and Note Servicing Statements. My Quickbooks person has access to that Dropbox Folder. She goes in and handles all my Accounting and Quickbooks monthly. I don't even need to talk to her. It runs like clockwork. Each of my 3 Companies all have there own set of Quickbooks, we do the web based QBs.

I handle all my Checks and Deposits into my Accounts, but leave the Quickbooks to her. My eyes are always on my Money, since I track every thing. I concentrate on getting deals done, my Clients and buying Product. What I call money task. That's my system.

Bob Malecki · Answer

I use QuickBooks for my single member LLCs and I have a really good accountant to do my tax filings. similar to Mike's comments I found it too cumbersome to deal with an external bookkeeper, plus I doing my own books I have instant access to financial analysis and it forces me to plan better by looking at the data in QuickBooks.

For the two private-equity funds that I started with partners to buy notes we use a fund administrator and their accounting company since the complexities of a multi-member LLC with different investors capital accounts and balances it's just not worth our time to do our own books.

I also operate many joint ventures with individual investors to purchase non-performing notes in each venture. I have my virtual assistant keep a simple spreadsheet to track income and expenses for each venture. I then send a link to each spreadsheet to my accountant for tax filings in issuing k-1s to my investment partner in each joint venture.

Generally, I tend to outsource the financial management aspects of my businesses so that I can focus on strategy and positive outcomes.

Chris Seveney · Answer

@Bill McCafferty

I do something similar, I send and track everything but the tasks of data entry (book keeping) I leave up to my book keeper. I have 5 entities to do books for and working full time, going to school and wife and kids tasks like this I will gladly pay someone to do. I like to focus on doing things that make the business $

Andy Mirza · Answer

I've been doing all of our bookkeeping but, coincidentally, we met with our CPA two days ago to discuss having his firm take over the bookkeeping on our last Fund. My partner and I need to free up time to focus on our higher value activities (raising capital, acquiring and managing the assets). Our CPA and I set up a plan on our transition and I'll integrate them with my management software (Smartsheet) to ensure more seemless integration and automation of tasks. I'm reluctant to give up control by not having immediate access to our finances through Quickbooks but I think it's a necessary thing in order to focus on the necessary things we need to grow.

Gita Faust · Answer

and more.... very important to find someone who can ask questions on your answers.

Basit Siddiqi · Answer

The complexity of the note business/contract should play a large part in whether you or a bookkeeper does it(or at least for the bookkeeper to set it up).

Is it an interest only note or does principal get paid down during each payment?
Are there partner contributions/distributions made during the year?
Are there multiple notes?
Is there a mix of performing/non-performing notes?
Do any of the notes get written off?

Dan Deppen · Answer

I used a bookkeeper who was familiar with note deals to get my Quickbooks setup and train me on it. Now I can keep everything updated myself, but my CPA does my taxes. As I have become busier though I'm pretty close to having the bookkeeper do the monthly updating for me as its not the highest and best use of my time. But I like knowing how to do everything myself before handing it off.

Mike Hartzog · Answer

I do the bookkeeping for my investment entities, which includes a single member LLC, a multi-member LLC, and a fund. I just found it to be more of a pain to deal with a bookkeeper than to do it myself, and it is not that much additional work. In addition, we hold some partials in the fund portfolio and the bookeeping for those is not straightforward, i.e., the principal and interest breakout you get from the servicer is not the breakout you need to book with a front end partial. (Because some of the interest paid is actually principal from the perspective of the partial loan.) I have a hard time trusting someone else to do that properly.

Note Investing & Taxes - DIY or Hire Someone?

Note Investing & Taxes - DIY or Hire Someone?

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