I am starting to read a book that takes away the voodoo of accounting. Its called Accounting for Dummies. Robert Kiosaki said to learn how to do a balnce sheet and income statement. His view while simplistic was too simplistic for me. This book explains each document well enough so that I can see how it (accounting) really applies to business.
I don’t see much talk about accounting on this site, but it has to be important.
So how do you guys manage your bookkeeping (which I recently found out is different from accounting) and your accounting?
My biggest mistake that I made in starting my furnished rental business was to pass the accounting on to others. I should have been following along much more closely, setting up my own codes for the houses, and had regular meetings to understand the accounting.
Instead we went through 1 bookeeper and 2 CPA firms in 3 years. Paid a lot for software that we didn’t need, paid a lot to the CPA’s to unravel the previous accountant’s work. Just this last year we got all the houses correctly coded so stuff can be input into the computer and we can figure out if we are making money or not. If you have only a few rentals it can be simple.
We don’t have that many (45) but about half are leased from others so there’s extra accounting. Plus we have hundreds of tenants in one year.
So even with 1 rental, make your accounting your top priority!
Furnishedowner
When I first started in real estate I used Quick Books Contractor edition. It is great and cuts down on what you pay your CPA in the end as it provides organized detailed reports for them.
I am a buy and hold guy. I am not sure what the difference is between bookkeeping and accounting and how much of each I really need.
I use professional property managers and their systems take care of a lot of accounting. I get professional monthly income and expense reports. At the end of the year, I get an annual summary by property along with a 1099 for my rental income and the property manager will also 1099 contractors (as needed) who did work in my property.
I use the property manager’s reports to enter their numbers into an Excel spreadsheet where I also enter the direct debits I pay for mortgage, hazard insurance, and HOA fees. In very few instances, do I actually write checks. I have most recurring expenses set up on autopay. Even the power company has a landlord service which automatically transfers electric service to my name when a tenant vacates and terminates their account.
My spreadsheet is organized much like a Schedule E. At the end of the year, I print my annual reports by property and enter the numbers into Turbotax. Turbotax maintains the depreciation schedules for each property.
I guess most of what I do is basic bookkeeping. I do my own tax returns. What more do I need that would require an accountant?
I don’t think it is necessary to use an accountant or bookkeeping service, but if you do, you’d better understand what they are doing with your money.
Accounting isn’t all that intuitive. It takes some concentration to understand how it works.
I’m never taking anyone’s word for it about where my money is or how it’s been spent. I’m going over their figures and I’d by god better get the same results as they did.
I hope you balance your checkbook when you get your bank statement, and reconcile your credit card statements every month. You can loose a heck of a lot more if the books don’t balance and you don’t catch it.
I mention accounting because I know I don’t understand how money REALLY works. I don’t get it. I can make money, but I don’t know how to keep it nor how to grow it. The good thing about this real estate site is that it has REALLY made me focus on my money FIRST, and the real estate second. Once I am comfortable with my money, then I can be comfortable with real estate.
As it stands, I am still deep in the learning phase, I want to do something so bad, but I am not ready.