WHAT IS REAL ESTATE BOOKKEEPING?
Real estate bookkeeping is important because every real estate agency needs to keep its records organized and accurate. Without bookkeeping, it gets hard, if not impossible, to correctly monitor the financial health of a business. If you are a real estate agent, you are a business owner now. You might not have known when you started, but every business needs to keep track of its records. You need accurate books in order to make good decisions and to be able to pay your taxes correctly. Not doing your books can lead to losing deductible expenses or other benefits.
If you want to manage cash flow efficiently and stay compliant with tax laws, you need accurate books. Bookkeeping for real estate agents is important as it is the foundation of accounting. They work together, hand in hand, and they need each other to be as efficient as possible. Let’s take a look at the difference between regular and specialized bookkeeping.
REAL ESTATE VERSUS REGULAR BOOKKEEPING
Regular bookkeeping focuses on tracking the general financial activity of a business. This refers to income, expenses, bills and bank reconciliations. The regular system is designed to support the industries that have relatively straightforward transactions. In simple terms, the income comes from a few different sources, and the expenses are categorized broadly. It focuses on ensuring that records are accurate, that tax preparation can be done without problems, and that the business owner has an idea of the financial health of the business. It’s a pretty intuitive thing, as everything that goes in and out needs to be recorded, and that’s it.
On the other hand, real estate bookkeeping is more specific and complex, because it involves managing finances over multiple accounts, owners and properties. As an example, security deposits must be recorded as liabilities, not income. Not knowing these things will lead to inaccurate records. There are many other little things that must be handled differently when talking about real estate bookkeeping. To put it simply, real estate bookkeeping is specialized to record and organize financial transactions related to property operations, investments and sales. If you want to ensure the proper tracking of property performance and tax compliance, you need bookkeeping for real estate.
REAL ESTATE GLOSSARY
Bookkeeping for real estate can be pretty complicated, especially when you don’t know the terms. Every real estate agent should be familiar with some terms, so let’s take a look at some of them:
Equity refers to the portion of your property that you really own. It represents your financial stake.
The term leverage refers to using borrowed money to buy more property or to amplify potential returns on investments.
In real estate, a pro forma is a forward-looking financial projection that estimates a property’s future income.
A P&L statement is a report summarizing income and expenses. It shows how much the company makes, detailing where money comes from and where it goes.
DSCR stands for Debt Service Coverage ratio, and it’s the key financial metric showing the net operating income to debt obligations.
If you have any questions regarding our real estate bookkeeping services, you can always contact us. We are available for calls and online meetings, and we ensure that the services we offer are personalized for your business. Work with a bookkeeper in our team and release all of the stress that you have related to bookkeeping for real estate.
BOOKKEEPING FOR REAL ESTATE
There are some bookkeeping practices that everyone who has a business should know. These practices ensure that tax season will not be stressful for you, and that all your records are clear. Let’s take a look at some of the practices that you should adopt!
Keeping your business and personal finances separate is one of the bookkeeping practices that every business owner should do. This is a proof of professionalism, but it is also essential for tax clarity. Separating your finances gives you a clear image of the actual financial health of your real estate business.
You want to keep clear records of your income and expenses. This can be done with a simple spreadsheet, or an accounting software program. It’s important to track all income and all expenses of your real estate business, no matter how small the amount is.
Understanding tax laws determines how income, expenses and deductions are reported. Staying compliant helps avoid penalties while also maximizing tax savings. Tax laws differ from one place to another, which is why you need a professional real estate bookkeeper.
Maintaining your documents organized makes a bigger difference than you might think. Well-organized records make audits easier, save time and reduce errors. It also allows for better decision-making because all the information that you need is available to you.
Using accounting software makes bookkeeping for real estate agents simpler and more accurate because it uses automation for repetitive tasks. It saves time as it simplifies invoicing, reporting and supports compliance. Accounting software can also provide real-time financial insight.
THE BENEFITS
Proledge is a company offering several professional services of bookkeeping for real estate agents. We prioritize communication and we always deliver services that are customized for each situation. We can work together short-term or long-term, depending on what you need. Let’s look at the three main values in our company.
PROLEDGE BOOKKEEPING SERVICES
We provide different services that are related to bookkeeping, and we can ensure that all of them are executed by experts. We are the best option for bookkeeping for real estate agents!
WHERE TO FIND US
We offer our services both online and offline. And if you prefer the offline interaction, know that there are a few cities in Texas where you can find our offices. Visit it here for real estate bookkeeping services:
FREQUENTLY ASKED QUESTIONS
In real estate bookkeeping it’s important to track all sources of income related to property operations. The primary income stream is rental income, which should be recorded by property and unit. Late fees, application fees, pet fees, parking fees, laundry income, storage fees, and any short-term rental charges should also be recorded as income. Security deposits require additional attention, as they should first be recorded as liabilities. Special care is also needed when recording and categorizing lease break fees and utility reimbursements. All of these should be carefully recorded if you want to be able to identify trends and to ensure compliance with tax laws.
To ensure financial accuracy, it’s best to reconcile bank accounts for rental properties at least monthly. The monthly reconciliation allows you to verify if everything was recorded correctly, from income to expenses and owner’s contributions. Regular reconciliations allow for a quick identification of incorrect recording, double entries, missing transactions and unauthorized charges. The quicker you spot a problem, the easier it is to fix. Consistent reconciliation supports accurate financial recording, smoother year-end closings and greater confidence in your cash flow data. So, for the best results, reconciling bank accounts should be a monthly task. It shouldn’t be a dreaded task, but rather used as a tool to build a successful real estate business.
There are several financial reports that should be reviewed regularly in real estate, if the purpose is to maintain control over property finances. The first one is the Profit & Loss statement, which is essential for monitoring income, expenses and the overall profitability by property. Then, cash flow reports should be reviewed regularly as they help assess whether rental income is sufficient to cover expenses and debt obligations. Do not forget about accounts receivable and payable, as they also present important data. For property managers, trust account reports and owner statements should also be reviewed. Truth be told, all reports should be reviewed as often as possible.
Bookkeeping for real estate agents might seem easy at first. But the more you grow, the more time you will lose doing your books. When you are just starting a business, you cannot afford to lose any time or even money. There are other parts of your business that require your attention more. As your property portfolio grows and the rental income increases, doing your own books will start being more and more complicated. A professional real estate bookkeeper will take the stress off your shoulders while also delivering accurate reports. Bookkeeping for real estate agents is complex and should be done by a professional.
Accurate financial records are at the foundation of any successful company you can think of. When you are working in any industry, but especially in real estate, you need to know the financial situation of your business before making any decision. You don’t know when you should act upon an opportunity if you don’t know your cash flow situation. Moreover, well-maintained records improve transparency with owners and investors. They also reduce stress in the tax season, because you know that everything is in order. There will be no penalties to pay, and you can end the year without worrying. Accurate financial records support the growth of your real estate business.
TESTIMONIALS
Working with ProLedge means professionalism and dedication. Check out what our clients had to say about our bookkeeping services!
We’ve been working with ProLedge for three years now and as a small business owner, their service has made a huge impact on both the accuracy of our bookkeeping and allowing us to focus on the things that we do well. Working with ProLedge was one of the best decisions we’ve made, and highly recommend them!
Using Proledge Bookkeeping Services to handle our bookkeeping has been excellent. My CPA focuses on year end tax planning and strategy and Proledge makes sure our books are clean and transactions are all accounted for. I’ve been a happy client for years now and they have always been easy to work with, transparent, and prompt in responding to any questions. Highly recommend!
I really like this company. They came to my rescue 3 years in a row, with my backed-up bookkeeping needs, in a timely and professional manner. It’s been a pleasure and a breeze working with Rebecca. I’m happy to have retained their services. I highly recommend them.
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Our blog provides information on the latest bookkeeping news and tips. We always keep this section updated, so check our website regularly!
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The financial fortitude of modern businesses is often tied to the movement of money, in and out of companies, over a specific amount of time. Cash flow, in the contemporary
The financial fortitude of modern businesses is often tied to the movement of money, in and out of companies, over a specific amount of time. Cash flow, in the contemporary
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Melissa K is an absolute GEM to work with. She’s been working with my company since the early stages and has provided a competency that I don’t for granted. Knowing that the company books are tidy, correct, and easy to understand is the ultimate security for a startup in my opinion. Melissa is definitely a part of the team and we’re happy to work with her as we grow!