5 Accounting Best Practices For Real Estate Investors

In general, a good rule of thumb for life is don’t spend more money than you make. This is true if for individuals as well as corporations. As a real estate investor, you should have a handle on how much money you have, how much you’re spending, and what your assets are worth. In order to keep track of these and other things, a good accounting system is crucial.

Good accounting practices allow investors to increase efficiency and streamline operations. In contrast, poor accounting practices make operations harder and slower. Not only that, but not tracking your real estate investment finances could lead to financial hardship.

5 Best Practices in Accounting

Below are some commercial real estate accounting best practices for investors to help you better manage commercial real estate investment in Houston TX:

  1. Have a System — Although it might seem silly to advise you to have a system, but it needs to be said. If you are motivated and industrious, then you can develop your own system. If not, then you can use an accounting software (like QuickBooks) or an app. No matter which accounting method or system you choose, it should make managing your assets and finances easier. On top of that, you should be able to hand it over to someone else if necessary.
  2. Keep Separate Bank Accounts — Many real estate investors use LLCs to guard against liabilities. However, some still mingle their personal and business funds. Maintaining business bank accounts and business credit card accounts is another best practice. This keeps business funds separate from personal funds. In addition, it makes it easier to track transactions. Furthermore, some investors even have separate accounts for each property they own or manage.
  3. Track Your Receipts — Some people keep their receipts in folders. Others toss them into a shoebox. However, a good practice is to log and scan each receipt as you get them. Use a simple spreadsheet to enter amounts, dates, and details on the expense. Then scan them electronically. Not only will this help you keep track of them, but it will also be extremely helpful at tax time.
  4. Do a Monthly Review — No one wants to be surprised by an unexpected expense. Especially a significantly large bill. Each and every month, you should review your assets, liabilities, expenses, and your investment’s (or investments’) overall financial health.
  5. Outsource — For investors with smaller portfolios, doing your own accounting is probably manageable. However, the bigger your assets, the more likely it is that you need help. Without a doubt, outsourcing your accounting to a CPA or another professional will make your life easier. In addition, a financial pro can help you maximize your deductions at tax time.

Best Practices in Accounting: Know Where the Money is Going

As a real estate investor, it is wise to know where your money is coming from, where it is going, and the worth of your assets. By using best practices in accounting, real estate investors like you can stay on top of your assets as well as your liabilities. Not only that, but these practices are very beneficial for both gauging asset performance and when paying your taxes.

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