All Forum Posts by: Ben Day

@Juan Lizarazo plenty of options around. If your goal is to grow your portfolio and outsource all tasks, you can't go wrong with Quickbooks Online. It is the easiest software to get help with as you scale, and the easiest to delegate to a professional. 

Real Estate specific "accounting" software options like Stessa are neat, but hiring rockstar help for those is rough. 

Also, most of those niche options miss the mark on some bookkeeping fundamentals. It might not make a difference to you, but your tax pro and bookkeeper will hate it. 

In our experience, the BEST construction and rehab teams know and do the following: 

A. There is a difference between project tracking and expense/profit tracking. A task management tool or simple checklist should help you get your projects done on time and within scope, while something like Quickbooks can capture your costs and inform you of your accounting. It's fine to track these in a separate system since...

B. Construction/Rehab Profits are projected up front, and protected during the work. These teams have clear underwriting showing them how much money they will make on a deal. The only time that expense/profit number should significantly change is if 1) They take too long (see A), 2) They do work outside the original scope (see A), 3) the original underwriting made bad assumptions about costs/profits, or 4) some act of god changes your exit. You should be able to keep all of these reasonably dialed in as long as...

C. You have the right people in the right seats doing the right tasks. If your construction team is great at project management ~ and then you pull them out of that seat to do expense data entry ~ you may be slowing them down and hurting your own profits. Have a bookkeeper help you track the costs on your projects while your construction team knocks out the project, and compare both sets of information to check for inconsistencies. Put controls in place so that your rehab team can't hit you with a surprise bill, or misappropriate funds. And finally...

D. Use tools and software that empower your team. If your bookkeeper and tax pro like Quickbooks, you should use that. AND ~ if they like Quickbooks, they should be able to clearly show you all of your information on a timely basis, answer all of your questions, and help you stay informed on your projects. I would avoid spreadsheets, since there's definitely a "too many cooks in the kitchen" problem with that approach. 

The same thing goes for your construction/rehab teams. If they prefer simple printed checklists, Podio, Buildertrend, Clickup, whatever ~ you should use that AND that team should be able to keep you very up to date on the projects using those solutions. 

The magic on this step is you - what information do you need, what steps need to be done and in what order, how are you communicating that, and how is it showing up in your scope of work. A great bookkeeping or rehab team will be able to advise you a bit on this, but your active involvement in managing and reviewing those team is how you'll get the best results. 

As far as "profits from ownership" ~ See B. You should have a general idea of this from your underwriting, whether it's a flip or a BRRRR

Hey Connor! 

In my opinion, hiring a bookkeeper has more to do with your goals than finding the best ever solution. 

If you're looking to add a couple properties a year and are taking things slow, hiring a bookkeeper may not be the best fit for you. Talk with your CPA about the best way to run things yourself, or get some coaching on how to do this. 

If you're looking to scale with some intention, you'll want to hire a bookkeeper. More than that, your bookkeeping hire will need to have knowledge around what your CPA needs AND what your lenders will need. Bookkeeping should have an ROI, which is usually a combination of time savings, ease of lending, and as few hiccups on your tax filing as possible.

When you hire a bookkeeper, you'll want to be sure they know how to use the balance sheet. We see a lot of folks in this space throw together a P&L and skimp on the other statements which is the WRONG plan and causes long term problems. 

@John OConnor

Hey John!

1) They know real estate - while I'm sure you don't "have" to know the difference between a major and minor chord as a piano tech, it definitely helps that communication barrier :) same thing with wholesaling, JV, syndication, BRRRR, cash for deed, etc. Every accountant/bookkeeper I've met thinks "I've lived in a house before, how hard could this be?" and starts drowning immediately in the terminology

2) they don't just use a P&L - real estate requires a balance sheet. Plenty of these new REI apps skip the BL, or make it complicated to use. Your bookkeeper should know why assets, liabilities, and equity are important so that they don't screw up your taxes OR your ability to get financing

3) they’re available - bookkeepers are like any other contractor ~ the good ones are hard to get ahold of (ask me how I know 😂). Bookkeeping seems like a low barrier entry field, so there are a LOT of people in this space. When you’re hiring a bookkeeper, you want to make sure that they’re availability and business model match what you need. A lot of my bookkeepers work weird side-hustle hours, which is fine for me since I’m available basically 24/7

There are a million things you can look for here, these are the big ones for me.

Also, stick to cloud software built for accounting like Quickbooks Online. And, think REALLY hard before opening a billion LLCs :)

@Sam Dangremond

Great question!

You own it, your PM just manages it for you. Therefore yes, should be on your balance sheet.

Additionally, we’ve seen PMs get weird with security deposits in the past. So it’s definitely worth your time to make sure they’re handling it correctly.

@Shea Spinelli #1 complaint with Buildium is that they don’t play well with others. The tech they integrate with is very curated on their end, which means if you want to build your business you have to build it their way.

My rule with software is that you should go with the tools that do the specific job you’re looking for, and sync them with other rockstar tools. I like QB for accounting but their payroll processing is a joke and their merchant processing is rough - so we have other tools for those things and they all integrate. Big seamless system, using companies who specialize in that thing.

Buildium’s specialty was being first on the scene. They pivoted to focusing on tenant management and PM reporting. They bolted on accounting. None of this is bad. But they’re not the best at everything, and they haven’t shown much interest in playing well with the rest of the tech industry. The fact that my preferred tech stack and Buildium can’t play well together is why we like TC. If Buildium stopped holding its customers hostage and started collaborating, I’ll change my tune in a second.

@Shea Spinelli if it’s a CPA saying QBO isn’t powerful enough, I can understand that. But, only because most CPAs I’ve seen make that statement have zero desire to learn new tech and are set in their ways. QBO has been a powerhouse since 2017 for us. Might be work another look if you’re looking for synergy. But if you’re happy, you’re happy!

@Shea Spinelli what data are you not getting out of QBO? My firm uses it exclusively and we get all kinds of info out

@Sannibel Carter

Hey Sannibel!

The goofy thing about bookkeeping is that there isn’t a really excellent certification (yet!) that’s on par with something like an EA or CPA. There are a few programs available but just like anything else, it’s not a sure fire thing that they’ll be a good fit.

I can tell you that the best bookkeepers for REI are the ones that actually understand REI. Plenty of accountants puff their chest out and say they know what's going on, but then don't know the difference between a flip or a rental.

Best thing you can do is grill them with industry questions. If they can’t tell you what wholesaling means in this context, it’s probably not the best person for the job. Even if you’re not going to do any wholesale deals, there’s a good chance you’ll want to do something specific to real estate and having someone who ACTUALLY understands what you’re doing is critical.

Beyond that it’s the usual bookkeeping biz questions ~ do they work alone, is this a business or side hustle for them, are they flat rate or hourly, what’s the expected deliverable, stuff like that.

Good luck!

@Youssef Fahmane welcome to the club :) 

Obviously, the highest and best use of your time is not bookkeeping. Unless you have a rockstar team and it's your one true calling, you can absolutely outsource it. 

Seven steps to making real estate investment bookkeeping as easy as possible: 

1) Get some real cash flow

2) make sure you have separate cash & credit accounts. Per property checking accounts is a little overkill, but having dedicated accounts for each rehab is a really easy way to not have to save 100+ receipts. Nothing is worse than having to dig through a bunch of personal accounts to find the stuff you need to books financial statements together. 

3) Use a real accounting system (Quickbooks counts, you're good here)

4) Get trained on your accounting system (bonus points if you can get training from someone that you can outsource to later)

5) Get even more cash flow - outsourcing usually starts around $200/mo and that's the really, really, really cheap stuff. Good rule of thumb is to think you'll spend more than $300/mo, or 1-3% of revenues. Once you get to this step the cash flow you're generating should be dedicated to buying your time back. 

6) Outsource - bonus points if you can find someone that understands real estate not just from an accounting standpoint, but the operations and lending as well. 

7) Leverage your team to do ridiculous things and never do the stuff you hate ever again