Real Estate Investor Accounting and Accounting Services

Real estate investing can be an extremely profitable and rewarding business venture. The income from rental properties has the potential to provide investors with ongoing income that could last into retirement years.

It can also serve as collateral for other needs throughout life, such as college funding for their children, weddings, lavish vacations, and so on. However, it’s essential to understand that owning rental property comes with many tax implications and accounting responsibilities that need to be handled properly to ensure success within this type of investment.

If the books are not kept up-to-date, investors can run into trouble with tax authorities, who want to make sure that all applicable taxes are paid on time and in full.

Why You Need Real Estate Investor Accounting and A Property Accountants’ Services?

Real estate investor accounting and a property accountants’ services are essential for a few key reasons:

Real estate investors have unique tax situations that require specialized knowledge to optimize their returns.
Real estate tax accounting is complex and often involves multiple entities and partnerships.
Good accounting and financial reporting can help you make better investment decisions and protect your assets.

If you’re a real estate investor, it’s crucial to find a real estate tax accountant who has experience dealing with the tax laws and regulations that apply to your investments. The right property accountants can help you take full advantage of all the tax breaks available to you, as well as help you stay in compliance with ever-changing tax laws.

They can also provide valuable insight into how well your investments perform and point out any mistakes you might be making.

The Real Goal of Real Estate Accounting

The true goal of real estate accounting is to provide a certain level of financial transparency about the performance, health, and profitability of your real estate business for you and your investors.

To do this effectively, at a minimum, there needs to be a set of books that captures all transactions from origination to disbursement across each entity in which you invest (LLCs, LPs, etc.).

Good accounting will also capture critical information such as depreciation schedules, debt repayments/loan amortization, tax preparation projections, and reconciliations, along with other pertinent data needed by both you and your investors.

This information is the foundation of good business intelligence. As such, you should try to find an accountant who can provide as much insight into your real estate investments as possible.

Accounting vs. Bookkeeping for Real Estate

Bookkeeping is a process that captures all transactions from origination to disbursement across each entity in which you invest (LLCs, LPs, etc.) and reconciles them with bank statements and tax filings so that investors may receive accurate financials periodically at their discretion.

At the same time, accounting goes one step further by providing information on depreciation schedules, debt repayments/loan amortization, tax preparation projections, management accounts reconciliations along other pertinent data needed by both parties.

To do this effectively, there needs to be a set of books that captures all transactions from origination to disbursement across each entity in which you invest (LLCs, LPs, etc.).

Real Estate Investment Accounting Considerations

When investing in real estate, it’s essential to understand the different accounting considerations that come into play. Below are some of the most important ones to be aware of:

Evaluate Expenses

When evaluating expenses for a real estate investment, it’s essential to consider what type of property you’re dealing with. For instance, repairs and maintenance will be a more significant expense for a rental property than a commercial one.

Another thing to keep in mind is that some expenses can be amortized over the life of the investment, while others must be expensed in the year they’re incurred. Interest payments, for example, can usually be amortized over the life of the loan. But repairs and maintenance must be expensed in the year they’re incurred.

By understanding these concepts, you’ll be able to evaluate your investment’s expenses more accurately and make sound decisions about your property.

Tracking Income & Expenses

When you’re recording expenses related to your rental property, it’s essential to be accurate and consistent in how you track them. In other words, don’t record the cost of a new roof under the category of “maintenance” one month and then switch to “repairs” the next.

Instead, break down your expenses into categories like advertising, insurance, legal fees, mortgage interest, property taxes, repairs, and so on. This will make it easy to keep track of your overall expenses over time and ensure that you’re claiming all the appropriate deductions on your tax return.

Avoid Tax Penalties, Back Taxes, and Delays

The last thing you want is to miss a tax deduction or credit that can save you money or help offset your current year’s income. And the best way to avoid this is by working with an accountant who knows all the ins and outs of real estate accounting and who can keep track of everything for you, so you don’t have to worry about it.

As far as taxes are concerned, try to be aware of these common mistakes made by investors:

Forgetting to claim certain expenses on their return (usually because they didn’t track them properly).
Claiming refunds on depreciable assets.
Receiving capital gains distributions from REITs without first paying back taxes.
Failing to claim mistakes on earlier returns.

Asset Protection

The last important accounting consideration for real estate investors is asset protection. If you’re investing in real estate, you may have to go to court at some point – which means your financial records may become public information.

Often, the best way for an investor to protect their assets from creditors or other claimants is by establishing separate business entities such as LLCs and property trusts (which can also help with taxes).

Common Real Estate Accounting Mistakes

A real estate transaction can be complex, with many steps and parties involved. It’s essential to ensure that all the details are handled correctly so that there are no problems down the road. Here are some of the most common accounting mistakes made in real estate transactions:

Not recording all changes in property ownership correctly. This can lead to confusion about who owns a property and can create title disputes down the road.
Failing to account for sale proceeds properly. When money changes hands in a real estate deal, it needs to be accounted for accurately on the buying and selling sides of the equation.
Not tracking tenant payments correctly. If you’re not keeping track of how much money tenants are paying you, you can’t properly account for money that should be yours.
Not hiring a real estate accountant to help with taxes and recordkeeping. If you do your taxes or use software, it’s very easy to miss deductions and credits that will save you money on your taxes.
Failing to pay estimated taxes. If you don’t owe income tax at the end of the year (which is rare) but did accumulate taxable income during the year, you may need to make quarterly payments towards your expected tax bill.

Hire JTT Accounting for Real Estate Investor Accounting, Pro Property Accountants and Amazing Real Estate Accounting Services

There are many reasons to hire JTT Accounting for real estate investor accounting. We have a ton of experience helping investors manage their finances, and we know the specific needs of this industry.

Our team is knowledgeable in all aspects of real estate investing, from property management and tax planning to investment analysis and financial reporting.

We understand that investors need quick and accurate financial information to make sound decisions about their properties. We provide regular reviews and updates on your portfolio’s performance, as well as weekly cash flow statements and monthly balance sheets.

We also offer a wide range of additional services, such as bookkeeping, tax preparation, and investment advice, to help you make the most of your investments. Call us today!

Real Estate Investor Accounting and Accountant