Bookkeeping Tips for New Real Estate Investors

8 Essential Bookkeeping Tips for New Real Estate Investors

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1. Open a Business Bank Account

New investors often question whether they need a separate bank account for their rental properties. The answer is a definitive yes! Having a business account is crucial as it can save you both time and money.

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2. Separate Personal and Business Expenses

It’s vital to keep your personal and real estate expenses entirely separate. This means using different bank accounts, credit cards, and debit cards for your real estate business.

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3. Retain All Receipts?

Keeping track of receipts is simpler than you might think, as you don't need to keep physical copies. We recommend taking photos or scanning receipts, which are much easier to manage. Many accounting software options can scan receipts, making them searchable and linkable to your bank and credit card transactions, helping you stay organized and ready to justify your expenses.

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4. Categorize Expenses Accurately?

Once you've separated your business and personal finances and are keeping digital copies of all receipts, categorizing expenses should be straightforward. Proper categorization is key to maintaining organized records.

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5. Reconcile Accounts Each Month?

Account reconciliation involves ensuring that your recorded transactions align with your actual transactions. When everything matches, your accounts are balanced. If you’re using technology, this process should be quick and may even happen automatically.

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6. Review Financial Statements Regularly?

Regularly reviewing your financial statements will enable you to make informed decisions and monitor the performance of your real estate investments. A Profit and Loss (P&L) statement summarizes your revenue and expenses, showing how much profit you've made. A Balance Sheet provides a snapshot of your business's assets and liabilities, revealing the equity you and any partners or investors have in the business.

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7. Consult a CPA with Real Estate Expertise

When it comes to taxes, it's best not to go it alone. A CPA with real estate experience can offer valuable advice and strategies to save you money and optimize your bookkeeping processes.

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8. Leverage the Latest Technology

Modern tools make managing your finances and real estate investments easier than ever. They can automate repetitive tasks like data entry, saving you time while enhancing accuracy.