Hello flippers, Melissa here!
A very important part of real estate investing that often gets overlooked (especially when you are first starting out) is the bookkeeping aspect of the business. True, it’s not the most exciting part. I’m sure most investors would rather run around buying and selling houses than spending some good quality time in front of the computer entering expenses and running reports. 🙂 However, taking the time to set up a good bookkeeping system is more important than you think. If you are not interested in doing your own bookkeeping, I would strongly recommend that you find someone who can.
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It is important to:
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- Track Property Expenses in Detail—I have a report that I created in Quickbooks that I call the “house detail report”. I can run this report by property address to see every single expense we have incurred—such as paying contractors, property taxes, utilities, loan payments, etc. We use this report frequently and it’s been very helpful, especially when we are ready to sell a property and want to know to the dollar what we have into it.
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- Have a Complete Property File-I keep a wire rack of active property files on my desk. Every document pertaining to the purchase, rehab, and sale of this property is kept. This includes receipts. The receipts are important to keep (especially with the lender situation lately). Buyers and lenders always want to see the receipts for the repairs that were completed after an inspection was done. Once the house is sold and closed, then I purge the file of unnecessary clutter. Until then, everything stays. You never know what you will need out of that file!
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- Be Ready for Tax Time-Although I personally do not prepare our taxes, I am able to give our accountant accurate information. Since I track all of our expenses, she can easily find out what we can write off and help us to project where we need to be by the end of the year. Tracking payments to contractors also allows me to do the 1099’s. You want to make sure that you are getting W-9’s on all subcontractors you are paying!! Your accountant will thank you for this at tax time. If you are doing any owner financing you will also need to track the mortgage interest you receive so you can send them a 1098.
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- Analyze Your Finances Regularly-It is good to take a look at your financial statements at least every quarter. This way you know where you stand financially and can plan accordingly. Once a year we have a big meeting where we go over the Profit and Loss and Balance Sheet in their entirety. We also go over other reports such as Marketing, to analyze where we spend our marketing dollars and where they were most effective.
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Comments (12)
Many of us get distracted by the bright and shiny and forget about the details that make this a business. Looking forward to more posts.
Jason
Melissa,
Thank you for this info! I am so enjoying what you an Danny are putting together for us. Please keep it coming.
Brian
I for one do think that this is important and fun as well and would love more posts that elaborate even a little deeper as to how you set up the “guts” of the buisness.
Great stuff here guys. Thank’s for sharing.
Taxes are my kryptonite. How cool to have a team where someone is actually responsible for prepping for them! Maybe one day if I’m lucky 🙂
Brooks,
I hear ya. I am SO glad that I don’t have to worry about it. My wife is the best woman in the world and I am glad she is as excited about this business as I am.
Danny
Melissa,
thank you for posting this financial reminder. It’s so important. Would you say the same could be accomplished using Microsoft Access or Excel?
B
Thanks, Bailey! You could probably do this in Access or Excel, but it could get very time consuming. I recommend spending the $100 on Quickbooks software. Consider it an investment in your business. It really is a great tool for managing the bookkeeping aspect of the business.
Great post! Tax time can be the WORST if you don’t have your act together.
[…] My Wife Posted Her First Article Posted Does your bookkeeping consist of a box of receipts? […]
Thanks for the info Melissa. I am figuring this one out the hard way. I have completed three properties in the last 6 months and have only been putting receipts in folders. Now I have so many that Im pulling my hair out!!! Im working on getting someone to set up quick books for me now so I can get this stuff organized.
Hi
I’m considering starting up in operation either in Connecticut or Maryland Would you recommend any program or software that would be easily usable at this point
I’m assuming you are referring to software for bookkeeping. In that case, we use Quickbooks.
Danny