Necessary to have someone else do the accounting?

Question

I'm just starting out, about to close on my first deal. Wondering if it's necessary to have a professional to the accounting work as to not mess it up for tax reasons. Or is it manageable by the owner and not worth it. I'd rather do it myself but worry the consequences of messing up as I'm still new. Thanks!

Bruce Woodruff · Answer

You should be fine until you get a few properties. I use online apps (Wave is one good one) have a separate bank account and separate ledger account for each property...

Bonnie Low · Answer

When you say 'accounting' do you mean the actual tax return or are you talking about the day-to-day bookkeeping? You can do both (though I wouldn't attempt to file business taxes myself), or you can do the bookkeeping and hire out tax prep, or you can hire out both. I like the hybrid approach myself. I do all of the day-to-day bookkeeping for my 5 units and then bundle it up at the end of the year and send it to my CPA to file my taxes. Regardless of how you decide to do it, I recommend you look into a program like Baselane for your bookkeeping from the beginning. Sure, you can track everything just using a spreadsheet or you can use the "shoe box" method for your receipts (I've done both!), but it will make your life so much simpler and more efficient if you set up a bookkeeping program from the start because eventually you're going to want one. There are several popular programs out there, but personally I like Baselane because it's specifically for real estate investors so all your transactions will fit into the Schedule E you're going to need at tax time. No mad scramble to categorize everything right before the tax deadline. You just tag your transactions as you go and then run a report at EOY. Just one of the many cool features.

Kristen Ambrose · Answer

Congrats on purchasing your first property!

I agree with everyone above, you can definitely do the bookkeeping yourself at this point within excel. As long as you keep everything in a separate bank and credit card account, it should be fairly straightforward to track. You can find some good YouTube videos on the types of income and expense categories to use.

I would hire a CPA to do your taxes as they'll make sure you are filing properly and in a way that's most advantageous for your situation.

Basit Siddiqi · Answer

Open up a separate bank account just for your rental activity.At the end of the year, export the date into excel and properly classify each transaction as income or an expense. Properly categorize the expenses.That should help you with your bookkeeping.

Conner Olsen · Answer

If your finances are simple and you only have one rental, it's probably fine to do it yourself. I think accountants are more helpful when strategizing taxes and not only filing taxes for you.

Michael Smythe · Answer

@Lane Mcdonald are you doing to tax returns currently?

How detailed are you?

How disciplined are you to put the time into learning Schedule E and depreciation forms?

Lane Mcdonald · Answer

Just one at the moment with no property manager, I'd like to do as much as I can myself until it gets to be too much to handle.

Chris Seveney · Answer

@Lane Mcdonald

If it is one rental, it is simple to do yourself. Do you have a property manager? Because if you do, they will provide you monthly accounting statements as well.