In real estate investment you often have to make big decisions at a fast pace. Operational aspects, like finding the right deal, purchasing a property, assembling a team, starting a remodel and actually selling, can consume whatever time you have available. Add to that the constantly changing real estate prices and regulations to stay on top of, and you are officially overwhelmed.
These operational aspects don’t necessarily leave you a lot of time left to focus on the bookkeeping basics, which can take several hours for setup and maintenance. But when it comes down to it, bookkeeping and detailed accounting are crucial in order to measure the growth and success of your real estate investment business!
At Margo’s Bookkeeping Services we have helped countless investors organize and take charge of their bookkeeping and accounting needs. Here are some of the most common mistakes that we have seen investors make when it comes to their real estate business:
Are you guilty of making any of these real estate investment errors?
1) Incorrect Employee Classification
It’s not uncommon for an investor to utilize a combination of employees and independent contractors. Whether it’s full time or independent work, each employee will fall into a specific tax structure. It’s vital that you classify your employees vs. independent contractors properly to avoid misfiling or overpaying your taxes! The experienced team at Margo’s Bookkeeping Services always stays abreast to the latest tax tips, and will help you weed through the red tape to ensure that you aren’t overpaying come tax time.
2) Poor Record Keeping
Accurately tracking income and expenses correctly will result in meticulous measurement of your profits. But the crucial aspect that is often missing is time. Juggling multiple properties or complex transactions means that you might accidentally drop the ball when it comes to financial planning, or you may just feel overwhelmed with all of the transactions that you’re trying to track. At Margo’s Bookkeeping Services our job is to record and oversee your accounting needs to ensure that you stay financially healthy. Hiring a remote or part-time bookkeeper means one last stress on your plate, and more time to allot for planning and execution of your business!
3) Not Separating Bank Accounts
We can’t stress this enough: Have separate bank accounts! Segregating your personal and business finances is ideal when it comes to end of year tax calculation. If you’re ever audited, the IRS may ask for complete records of your real estate activities, and untangling your business and personal expenses can be a huge project! Having two separate accounts that are the responsibility of a real estate bookkeeper means hassle free expenses!
4) Not Backing-up Data
IT problems are now a part of life. It’s imperative to have a back-up plan in place in case a technology issue rears it’s ugly head. But if you don’t have time to deal with general bookkeeping aspects, setting up a back-up system isn’t necessarily at the forefront of your mind. Using a bookkeeping service that automatically backs up all of your data means that you can rest easy, and focus your energy on operational chores!
5) Classifying Expenses Incorrectly
If you don’t have a thorough understanding of tax exemptions in regard to your company expenses, you might lump the wrong things together, or worse – not make any expense classifications at all! Categorizing your expenses properly means different tax returns and fees. The Margo’s Bookkeeping team is up-to-date with all pf the changing laws and rules for classification so that you are sure to get the the most comprehensive understanding of your business finances.
At the end of the day, this is your business. Making mistakes as an investor could mean a huge financial loss. Instead, entrust your bookkeeping responsibilities to a professional team of real estate accounting experts; at Margo’s Bookkeeping Services our job is to keep your business growing and flourishing.