Accounting for Real Estate: Best Practices for Industry Professionals
Real estate is a dynamic industry, one in which real estate agents and investors are able to delve into the exciting day-to-day happenings of the current market. The process of securing the best real estate involves a bit of treasure hunting, some business finesse and plenty of professional experience — and it also requires financial prowess.
Whether you are hoping to take on accounting for real estate yourself or you are looking into outsourcing Philippines or other locations, you will need to know the best practices and tips.
The Importance of Accounting for Real Estate
The fact of the matter is, accounting for real estate can sometimes seem like the most tedious part of the job. It’s not nearly as invigorating as scouring the market for that perfect property, crafting an enticing offer and celebrating when it’s accepted by the sellers. However, it’s the only way to discover just how successful your business endeavor is, which makes it one of those necessary chores that you simply have to complete.
When you establish a solid real estate accounting routine, you will find that it’s easier to track, manage and understand your financial success as a real estate agent. Not to mention, many of these accounting procedures are required in order to stay in compliance with local regulations.
By implementing the best practices in the industry and creating a sustainable accounting routine that you can manage in the months and years ahead, you will be positioning yourself for long-term success and continued growth.
The Basics of Real Estate Accounting
Before you begin looking into tips and ideas for improving your accounting practices, you will want to understand what real estate accounting is — and what it isn’t. Accounting for real estate goes beyond monitoring your credit card and keeping track of your business charges. That’s just simple bookkeeping. Accounting, on the other hand, is a practice that requires you to perform bookkeeping tasks on a regular basis while also looking at the broader scope of the financial health of your business. Accounting goes beyond the day-to-day tasks of managing your business finances, and allows you to feel confident, prepared and in control of your real estate business.
In order to begin accounting for real estate, you will want to start tracking some important expenses. These include:
- Commissions that you earn, as well as the income that these commissions generate.
- Fees associated with maintaining your real estate license.
- Overhead costs for maintaining a real estate office.
- Costs for marketing materials and promotional campaigns related to your real estate business.
- Transportation costs that you incur while conducting your business.
Accounting for Real Estate: Best Practices
By being aware of these best practices for accounting for real estate, you will be able to streamline your process and ensure that your business is poised for long-term success as well as continual financial gains.
Invest in an Accounting Software for Real Estate
If you are relatively new to real estate accounting, then one of the best things to begin with is a real estate accounting software. Accounting software that is designed specifically for the real estate industry will automate most of your accounting tasks, simply requiring you to input the costs that you have been tracking all along. These intuitive software programs will minimize your administrative tasks while giving you the confidence you need to know that your accounting is being taken care of. Some of the top accounting software options for real estate agents and investors include RealtyZam and Xero.
Perform a Monthly Review of Your Finances
Whether you take care of your accounting in the traditional way using pen, paper and an accounting book, or you rely on an advanced software program, you will want to perform a monthly review of your finances. This monthly check gives you an opportunity to look for discrepancies and to evaluate your business processes. It is during these monthly reviews that you may discover that you are not earning as much as you would have wanted, or you may find that you are far exceeding your expected performance. Either way, monthly reviews allow you to verify your processes, reflect on your priorities and make an actionable plan moving forward.
Be Aware of State and Federal Regulations for Real Estate Accounting
As a real estate professional, you need to remain in compliance with all local, state and federal regulations that are in place. These regulations may vary based on where you live and where you do business, so you should do your due diligence and learn more about what you need to do in order to remain in compliance. If you aren’t familiar with these regulations, you can work with a local tax attorney in order to learn more about what you need to do.
Keep Your Real Estate Accounting Separate From Your Personal Accounting
Most real estate professionals and investors are self-employed, which can make it difficult to separate your personal accounting from your real estate accounting. However, it’s very important that you keep these two practices entirely separate, as it’s the only way to measure the true health of your business endeavors. In addition, keeping your personal and real estate accounts separate can help protect your personal assets.
Back Up Your Books on a Regular Basis
Your real estate accounting books will serve as a guide for your future endeavors. Not only will these books offer insight into what needs to be done for the future, but they also give you an opportunity to take a retrospective glance at your business. As such, it’s important that you back up your books frequently so that you can protect this valuable data that you will rely on for the months and years ahead.
When it comes to real estate accounting, it’s best to become very familiar with the best practices or consider outsourcing Philippines, where you can have a professional manage your real estate accounting for an affordable price. Professional accounting services allow you to feel confident as you take your real estate business to new heights.
Here’s the author’s bio:
Stephen Atcheler is an entrepreneur in the Real Estate space. He has grown multiple businesses, including a Real Estate Agency, and an online Real Estate Advertising business, and is currently the founder and driver of the fastest-growing Real Estate BPO in the Philippines. If you would like to connect or get in touch with Stephen, he is very active on LinkedIn and always happy for a new connection.