When it comes to accounting in real estate, there’s nobody I trust more than George and Robin Dube who contribute this week to the Engaged Investor Blog.
Enjoy.
The days of handwritten accounting ledgers are long gone for most of us, thank goodness. Now, a variety of apps, and devices, help real estate investors track and monitor their businesses, whether at a desk or on a beach for the best experience accounting in real estate.
Let’s face it…if you could gain more time for your family and friends, your business, your charities, and yourself, you would. Consider these four key ways to boost your efficiency and create more time to focus on the things you really care about:
Bookkeeping software
OK, what article talking about technology and accounting in real estate would be complete without talking about bookkeeping software? Many people are keeping track of their properties in Excel spreadsheets, which can work for a small number of personally owned properties, but starts to become more about working on your spreadsheets, and less about working on your business, as the number of properties grows. And, if you have JVs with different year-end reporting dates from you, Excel falls down completely.
What are some key things to consider when selecting your bookkeeping software?
- Online versus Desktop – Decide whether you want a system you can access anywhere (e.g. your bookkeeper and you both need to access the system from different spots), or if having a version on your laptop is fine (while still doing regular backups). Pros and cons exist for each, including monthly versus one-time costs, automatic backup versus manual and so on.
- Automation – You will have standard bookkeeping entries you need to do each month (e.g. mortgage payments, property taxes if paying monthly, rents, etc.). So, any program should allow you to memorize and automatically enter these payments. Ideally, it will automatically or through some other trigger, let you pull in bank statements and credit card statements to make data entry much quicker as well.
- Property Tracking – Ensure that whatever system you use lets you track each property separately. For example, QuickBooks has the “class” system which you can use to set up a class for each property and then assign income/expenses to that “class” or property. This is crucial for reporting.
- Reports – Yes reports for you, and for your JVs, are critical. An easy reporting system will save you (and your accountants) literally hours of time. By the simple change of a date, you should be able to pull numbers for your fiscal year, for quarterly reports, and for your JV’s fiscal year end.
We tend to see the following programs:
QuickBooks Desktop or QuickBooks Online (which many of our clients use in conjunction with our training course, accountant in-a-box™, to get set up for real estate investments)
Simply Accounting
For larger investors, more robust property management/accounting software implementations are more common, such as Yardi, Buildium and others.
We are also starting implementations of a program called Nav, developed by BDO and Microsoft.
Accounting in Real Estate Receipt and Expense Tracking
Although related to bookkeeping, this is about keeping track of the various expenses that you incur for your real estate business, whether the dinner bill taking out potential JVs, or renovation receipts for the flip you’re managing.
Again, there are many apps out there to help you track your receipts for accounting in real estate, so find one that works for you if you want to move past scanning and organizing manually. They can range from free apps, such as Certify, Shoeboxed, or OneReceipt, to a full hardware/software solution like Neat Receipt.
Be sure that whatever software or app you use, it is:
- Compatible with your bookkeeping software
- Provides easy export, data backup and storage
- Takes high quality scans/pictures of receipts (the CRA may not accept your expense claim in an audit if the quality of your receipt images is poor)
- Ideally “reads” the numbers from the receipt to enter it into the system automatically (but always check. Nothing is perfect).
Mileage tracking
The old fashioned way to track mileage was a notebook in your glove box. If this works for you, then keep at it. (George still uses a simple spreadsheet.) But, for those of you who hate tracking mileage (which is really pretty much anyone we’ve ever talked with), many different apps on different platforms exist for your mobile device so you can track mileage much more automatically. The key things to consider are whether or not:
- It’s Customizable – You are most likely traveling to different places on your trips, as well as tracking some “standard” trips you take. Being able to program in your repeatable trips, while still easily adding new ones, is key.
- Has GPS – Having an app that uses the built-in GPS on your mobile to track the kilometres you have driven will increase accuracy and save you time.
- Allows for Exportable Data—Ensure the data can be exported to a format and location for easy storage. If audited by the CRA, you want to make sure your data is stored in a safe location so when you drop your phone in the sink, you still have the records CRA wants to see.
While we don’t have a recommendation for a specific app for your accounting in real estate, here are some that you can try out to see what works for you.
iPhone/iPad/iPod Touch:
- MileTracker (By Silverware Software)
- MileBug (By Izatt International)
- Car Care (By KB Productions)
- Track My Mileage (By APG Solutions, LLC)
- Expensify (By Expensify, Inc.)
Android (supported by Blackberry 10):
- aCar (by Fuelly, LLC)
- Trip Log – Mileage Log Tracker (By eSocial)
- Mileage Tracker (By Frank Android Software)
- Mileage (By Evan Charlton)
- Gas Mileage Tracker (By Majors Creations)
- Car Manager (By Global Team)
Records storage
Now that you have all these great systems in place for your accounting in real estate records, make sure you have easy access to them and back up them up regularly. This will save you a lot of heartache and stress by having an organized system that is digital and regularly backed up. A variety of online storage systems, at differing price points and features, exist, including Dropbox (which we use personally), Google Drive, Apple iCloud, or Microsoft OneDrive.
For your records storage, consider:
- Cloud storage – I am a big proponent of cloud storage because we don’t have to think about it. We just have to have an internet connection and a good password. Someone else is responsible for security, backups, storage space, etc. (OK, we know some people don’t like this.)
- Cross-device and platform accessibility—Having access on the laptop, tablet, and mobile is essential. Our family has Blackberry, Android, and Apple devices and our solutions cover them all. Do your bookkeeping, receipt, and mileage apps work with your records storage? Can you access it anywhere? Being able to send our realtor a document for a deal we are trying to close while sitting in a REIN meeting with just our mobile phones is a big deal.
- Space and organization –Will you go completely online with no paper records? (And avoid disaster scenarios like a flood or fire?) Consider this in your storage needs, and make sure you organize the “space” properly. Losing an electronic document due to poor naming conventions or file organization is just as frustrating as losing a paper copy.
- Cost – Yes, cost is a consideration, but don’t cheap out. What’s more expensive? Losing all your data or paying a yearly fee to store it properly and securely?
Whatever systems you do decide on, the key is to actually use them. Having the details you need available wherever you are, and at any time, is liberating. Plus, you ensure you are getting the tax deductions to which you are entitled. Once you get started, you won’t regret it.
George E. Dube, CPA, CA is a veteran real estate investor and accountant. He has spoken, written various articles, and co-authored two books on real estate accounting. Reach George at: [email protected] or @georgeEdube.
Robin Dube is a real estate investor and Marketing Communications Manager at BDO Canada LLP. She and her husband George Dube have been investing and working together for many years.