Steve really dislikes real estate bookkeeping!
I don't like it either.
Yet, the books gotta get done! - Right?
Thanks for the question Steve, Now let's solve this problem!
Are you that guy or gal with the help sign and a pile of receipts?
At the very least here are some suggestions to:
Easier for you to work from for your own investor books entries, if your using something like Quick Books software.
So who likes real estate bookkeeping?
I've known several accounts and CPA's who've never said anything about how they like the paper-work...
They do say it's a job that pays very good, and they're okay with the desk job!
Steve said, "as soon as I can afford a full time Accountant, all will be good".
"Your Team of Professionals"
The next member of your team to keep track of your money and do your real estate bookkeeping is either an Accountant, CPA, or both.
Remember they are not your employees! They are paid a fee for services rendered, when you need them.
It can be as little as $50.00 to $100.00 per month for an Account to enter your receipts into investor books software.
The cost will depend on the amount of receipts and statements you submit each month.
The advantage is:
The "Books" are the "Controls" of "The Business"!
You can't tell how a business is running by looking at the building...
Or for Rehabbers, by looking at a rental unit or a rehab project.
Watch the graphs from your investor books software to see your trends!
Up to date real estate bookkeeping is advantageous when borrowing money for your Rehabber and Landlord business!
I have found out not all Accountants do Tax Returns...
And not all CPA's do accounting.
Add them to your Team of Professionals as soon as you can afford them.
Then you can concentrate on making money with your investment properties!
Until then, at the very least, save receipts separately...
- Receipts for Business
- Receipts for your home personal expenses.
See the picture... This is how I keep my receipts, and you’re looking at an entire year of receipts.
I have one 3 ring binder with expense envelopes with monthly receipts for Home, and one for business.
I put them in the envelope when I get them - and that's it...
Ready to give the Accountant, one month at a time.
Keep in mind; I organize receipts for my real estate bookkeeping to give to an Accountant.
Since the Home receipts aren't usually tax deductible... You don't have to pay an Accountant to record them into your investor books software.
For Home receipts, if you want to track them, a simple and inexpensive software program to consider may be Quicken by Intuit.
An even cheaper yet just as efficient method is the Simplified Bookkeeping System...
It's a hand written entry journal you can get for monthly or weekly accounting.
A very common method is an expense envelope readily available at office supply stores.
Record the receipt information on the outside for at-a-glance reference and put the receipt inside the envelope.
- Use one envelope per month
- Use separate expense envelopes
- - One for Business receipts
- - One for personal / home receipts
This method has served me well when I need to access a receipt for refunds and warranties. It's a real time saver!
It's also easy access for your Accountant, CPA, and or in the event of an IRS tax audit.
Expense envelopes come in different sizes.
The 8.5" x 11" fits nicely into 3-ring binder, in a nicely tabbed section of your project job-site work book, if you use one.
I use 2 separate 3-ring binders at home for my expense envelopes...
For Home & Personal, filing receipts (non-tax deductible), is the information needed to Plan for Financial Freedom!
These receipts are vital to overall family financial planning and budgeting.
Just as the real estate bookkeeping is vital to your business!
Knowing these figures are the path to knowing exactly what annual income you need to produce from your investments to Set You Free with Financial Freedom.
An alternative method...
If your the type that just isn't going to hand write the information of each receipt in the ledger of your expense envelopes...
You may prefer "The Baggie Method"!
- - Use heavy duty freezer type, gallon size baggies. They measure about 10.5" x 11.5".
- - Write the month and year on each baggie. One baggie - per month of receipts.
- - Use 12 monthly baggies for business, and 12 baggies at home for personal receipts.
- - You can 3-hole punch the baggies to fit into your site project binder... or
- - The heavy duty baggies will stand up to the rugged work vehicle, on the floor, in the tool box, and withstand harsh weather conditions - just remember to keep it zipped.
At the very least when you get a receipt, put it in the correct monthly baggie separately for real estate bookkeeping and personal bookkeeping.
Save time, save money, claim all your tax deductible expenses. The baggie is ready to turn into your Accountant - preferably monthly.
Accountants and CPAs charge by the hour.
A monthly bag of receipts will save you 100s of dollars from the Accountant separating a box full of receipts for the entire year.
The fastest method I've learned to save time and money is to never pay with cash!
That's a whole step I can eliminate to save time with my real estate bookkeeping!
A lost cash receipt is a lost deductible expense.
May I Suggest...
- One for personal and one for business.
- 1-3 credit cards for personal
- 1-3 credit cards for business
Avoid Cash Receipts if you can, it makes the accounting easier. Especially for real estate bookkeeping.
Just a suggestion.
If you want to save some money, you can do the real estate bookkeeping yourself.
Give your printed accounting records,
from the accounting software,
to your CPA,
for tax returns.
By using accounting software like Quicken or Quickbooks by Intuit...
Enter receipt information directly from your checkbook registers and credit card statements.
Receipts shouldn't have to be touched. Every check written in your check book register, and line item on your credit card statements, reflect a receipt in your expense envelope or baggie.
Enter each payout from the credit card statements and check registers into the accounting software, print the reports, and give it to your CPA.
I never give my receipts to my CPA - just the printed reports.
Wallah... Your CPA can expedite your tax return much faster, saving you 100's of dollars from looking for receipts.
Remember when we said, "We don't like real estate bookkeeping!"
If you're a Rehabber like me...
I'd rather be working on my properties.
Occasionally I come up with a rehabbing project I would rather not do, for instance...
Replacing a packed solid, cracked, cast iron 4" waste pipe.
That's a real crappy job and a biological health hazard.
I can replace that section of pipe for about $40.00...
Or I can pay about $500.00 and hire the job out.
I do the job myself with a smile, save $460.00,
and am thankful I don't have to do crappy projects every day as a "Job".
I'm not crazy about real estate bookkeeping either.
I'm most grateful I don't have to do that everyday as a "Job"!
A few days per year to do the accounting,
- To save TIME from a whole years worth of filing receipts,
- To save Money and organize receipts myself,
Is simply part of the job.
Real Estate Bookkeeping is one of the projects on EVERY rehab property...
Whether you do it yourself or hire it out, it's gotta-get-done!
It's All About the Money! - Right?
Investment properties can be very profitable...
Keep in mind, "The Books Are The Business".
That's where the money is tracked!
If I were to show you my business,
I wouldn't show each property I own to prove profit,
I would show you the Books.
That's where the CONTROLS are.
The Spread Sheets:
P&L - profit and loss statements,
Assets and liabilities,
Everything you ever wanted to see about a business, is in the Books.
If you're a Rehabber like me...
We just can't afford not to get the real estate bookkeeping done!
Until you can afford to hire it out,
just do-it and get it over with.
The longer you put it off,
it's like a cloud hanging over your head,
it will affect the workmanship of your rehab project,
and could possibly have an ill effect on your heath.
Get it done and Celebrate...
By taking Joe-the-rehabber out to lunch:~) or your significant other instead!
A junior landlord completely remodeled one of his apartments;
covered all the floor registers with new flooring,
eliminated the chimney to make the room bigger, and disconnected the furnace entirely.
He called me to reconnect the furnace because the tenants said the apartment was cold.
I said, "What the Heck Were You Thinking?"
This is his 11th apartment, not his first. How did he manage to forget about the furnace?
The short answer is...
He dislikes paying for expensive labor on apartments!
He hired very cheap help while he was "busy" with other "things".
A very costly mistake!
Loss of rents!
Re-construction on a completed remodel!
A fellow rehabber looses tax refund money!
Incurred added accounting expense.
Worse yet she's been loosing sleep over it for years!
She asked me how she could fix her accounting problem.
She was stuck on a bank statement that didn't reconcile - 3 Years Ago!
I said, "What the Heck Were You Thinking?"
Take it to the bank and have them explain it to you.
This is not her first tax return!
She's been filing on time for decades.
How did she manage to put off this problem for 3 years?
The short answer is, She dislikes bookkeeping!
She was "busy" with multiple rehab projects and figured she would hire it out later.
A very costly mistake!
Loss of time sensitive tax return money.
Increased costs of accounting expenses.
And worse yet, the burden of stress.
Rehabbers sometimes do, what we don’t like to do!
We're thankful that we don't do "it" everyday as a "Job".
Yet we have the skills to do just about anything, anytime we choose.
We can hire the work out if we like...
And that's just not something you can do being employed with a job.
Rehabbers are problem solvers!
We enjoy Freedom and Independence doing what we love to do.
It's our fun and exciting Lifestyle.
So here are the Words of Wisdom that I follow:
1) Fix it now, get it done, and move on to the next, or...
2) Hire it out, pay a fair wage, and build relationships with your service providers...
3) Quit and go get a Job.
4) Number 3 is just not an option!
There is one more personal secret I can offer...
I coined the phrase 20 years ago, "It's no fun alone!"
Make it a family project,
Swap labor with someone,
Or you can pay me to sit with you and I'll watch over you while you do your real estate bookkeeping.
Thanks for the question Steve, Hope this helps.
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