Industry Specific Bookkeeping Tips: Real Estate

For real estate bookkeeping, it is essential to be “obsessed with the details”. Please note, I am not a tax professional, nor can I give you accounting/tax advice. However, I can help you with your bookkeeping! Here are some helpful tips to keep your real estate portfolio squared away within your books! 

1. Separate Finances - 

• Business vs. Personal: Open dedicated business bank accounts and credit cards to keep your personal and professional finances entirely separate. 

• Property vs. Entity: For investors, consider separate accounts for each property or business entity to better track performance and expenses. If you don’t want separate accounts, no biggie! Just make sure you keep your tags on in Quickbooks so you can differentiate between locations/projects. 

2. Digital Documentation:

Store all receipts, invoices, bank statements, and contracts in a secure, digitized format using cloud-based services like Dropbox or Google Drive. If you aren’t tech-savvy just make sure you have a system, and STICK TO IT! 

3. Track Income & Expenses Meticulously

• Income: Record all revenue streams, such as agent commissions, property sales, and rental income, in a timely manner. 

• Expenses: Categorize and track all business-related expenses, including:

• Marketing: Website, advertising, lead generation costs. 

• Office & Operations: Supplies, software subscriptions, MLS fees. 

• Agent-Specific: Brokerage splits, continuing education, home office costs. 

• Property-Specific (for investors): Repairs, maintenance, property taxes, and property management fees. 

• Trust Accounts: Manage and track client funds held in trust accounts separately, ensuring accurate reporting of funds held on behalf of others. 

4. Monthly Reconciliation: Perform monthly bank and loan reconciliations to catch discrepancies, errors, or missing transactions quickly. This is crucial for accurate financial statements and tax preparation.

5. Understand Tax Regulations

• Deductible Expenses: Familiarize yourself with what expenses are deductible and their specific limits (e.g., 50% for meals). 

• Tax Basis Accounting: Real estate often uses the tax basis of accounting, though some larger firms might use accrual accounting. 

6. Maintain Key Reports - 

• Transaction Ledgers: Keep detailed ledgers for property sales, purchases, and rental transactions. 

• Financial Reports: Regularly review income statements, balance sheets, and cash flow statements to understand your business's financial health and identify trends.