What are the Accounting Tips for novice Real Estate Investors

By Alina Trigub

What are the Accounting Tips for novice Real Estate Investors?

This is a guest post by Blair Jaedon.

Commercial real estate is one of the most lucrative investments in the world, but it’s also complex with a lot of moving parts. Investors will likely find themselves working on several investment projects at any given time. That’s why accurate and efficient accounting is essential—especially for new commercial real estate investors.

Use Separate Bank Accounts

Mixing business and personal transactions can spell disaster for lots of reasons. This leads to messy bookkeeping, poorly-managed cash flow, and a confusion over tax filing, among many other things. This can derail both business and personal financial goals which you’ll need to identify early on, whether you’re building up your retirement fund, or a legacy by investing in the commercial real estate.

By having a bank account solely for your commercial real estate business, overseeing the business transactions becomes much easier. All your financial activities will stay in one place, and it will be easier to create financial statements. That said, it’s ideal to have a separate bank and credit account for each property you manage.

Keep Track of Receipts

Accounting, at its core, is diligent record-keeping. One of the best ways to help you do this is to keep receipts, both physical and digital. You can start by building a habit of tracking receipts and categorizing them no matter how small or seemingly insignificant the amount may be.

Note that some receipts may actually fade after some time, so it’s important to digitize receipts too. You don’t need fancy equipment to do this; you can take a picture of the receipts using your phone and input the information onto a spreadsheet. This also helps you search through past transactions quicker, as you no longer need to thumb through piles of paper receipts.

Consult an Accountant

Not everyone is cut out to become an ace accountant. Many investors, both new and seasoned, enlist the help of registered agents or CPAs to walk them through the ins and outs of real estate taxes. In fact, there’s a 4 percent projected growth for accountants predicted to happen by 2029 across industries. As each economic sector grows, so does its demand for accountants who can work on their financial records.

To meet this demand there are now a large number of freelance accountants offering their services. While the majority will have studied accounting at a regular university, many will have also taken an online accounting degree to learn about key concepts such as financial reporting, auditing, and advanced managerial accounting. And they’re just as capable as those who have degrees from traditional, in-person educational institutions. This should be good news for you since it means that there is a steady pool of professionals who can help manage your investments and help with bookkeeping. Moreover, these online-trained accountants may even possess unique skills in remote work and online tools, which is in demand more than ever before.

Embrace Technology

Speaking of the times, society has become more reliant on technology—and for good reason! There are lots of accounting software and apps like QuickBooks, Xero, Bill.com, and Expensify among many others that can help you streamline your bookkeeping. What’s important is that you create a system that lets you reap the benefits of these virtual tools.

These technological advancements give you real-time insight and data-backed forecasts about your properties. Additionally, accounting software that is used properly and is regularly updated helps reduce unintentional accounting errors. If you do find mistakes, digitized accounting records are much easier to amend, since you don’t have to manually recalculate and review all transactions.

When dutifully done, accounting can guide new commercial real estate investors in their decision-making, helping them understand how to increase rental income and reduce expenses.