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Imagine your life without any records at all. Will you be able to keep track of how much you owe to your friend if you consistently borrow money from them without writing it down somewhere? You will not, and neither will a real estate investor who becomes lazy when it comes to bookkeeping.
If you are a real estate investor, for your business to grow and for cash to keep coming in, you need to have a record of all your revenues and expenses. Here are some tips that will help you get efficient at virtual bookkeeping services so that you can track your financial transactions without any trouble.
Top 6 Tips to choose Bookkeeping for Real Estate Investors
Choose a Method for Accounting
Choose one of the two methods for accounting for real estate investments. You can go for either accrual or cash accounting, depending on your business. If you have a well-established real estate business, accrual is the best way to go. A small business could do well with cash accounting. Always check if your business is liable to follow the accrual method due to GAAP.
Compartmentalize
Do not jot down all the information in one place. Instead, put it in different sections so that whenever you want to look at them, the task will not overwhelm you. Keep a separate record of the financial transactions and keep all the supporting documents in another file.
Separate files will make your life easier. You will know exactly where to find whatever you need to know and won’t have to roll up your sleeves and sift relevant information out of the books.
Keep Accurate Records
Not having accurate records can be a big stress trigger when it comes to bookkeeping. It can get very difficult without accurate records to justify tax deductions. You run the potential risk of scoring a huge tax bill in the event of a state or an IRS audit when you do not have anything to back up your tax deduction claim. In addition to that, time and money are saved if accurate records are properly maintained.
Install Software
In this age of technology, real estate bookkeeping has become a very simple task. Instead of spending a lot of money on firms that can help you with it, install a good tool for your real estate business.
Accounting software is efficient at managing your investment in real estate. Most investors swear by these software tools. Pick and choose one that is convenient to use. The renowned names include QuickBooks and Xero.
QuickBooks Online is a user-friendly tool that is efficient enough to take care of all your accounting transactions effortlessly. Its Plus version is highly recommended as it allows members to associate transactions with their given property. Make sure before jumping right in to watch some good tutorials to get the best out of the version you choose.
Categorize Your Books
Go through IRS schedules to know which category will best suit your business. Most real estate investors use Schedule E of the IRS system. on your software, create separate tabs for different categories.
Get a Professional on Board
Consult your CPA for matters related to bookkeeping. There are several regulations which you need to keep in mind, and there’s no better person than your company’s accountant to help you with that. Ask for tips from your CPA and take their advice on the matter.
You can also hire an accountant who can help you organize regularly or hire a virtual assistant who can aid with all the administrative needs, including gathering all the profit and expense information and sending it to the accountant every month, making everything easier for you to manage.
Bottom Line
Bookkeeping is crucial for a real estate investor’s business to flourish. A part of getting successful is to cultivate positive habits, which include keeping a record of all your revenues and expenses. Consider following the tips I just mentioned above so that your real estate business not only thrives but also expands. It can be the key to achieving your goals for your business. If you still have any queries or would want to discuss your project requirements with us.
Get in touch with our Certified Accountants and we will get back to you within 24 hours!