Your Investment Property reader Jay recently got in touch with a question about the best way to manage his bookkeeping needs.
Dear Sir / Madam,
I own a few investment properties and find it quite difficult keeping on top of finances and how much each property costs etc.
I am an accountant by trade and wanted to find a better alternative.
May I ask what the majority of investors do to keep on top of their bookkeeping? How do they know how much their properties are costing?
Thanks for your help,
Jay’s question seemed like something that a lot of investors might be interested in, so we got in touch with a few experts to ask them for some advice on how to keep on top of things.
Paul Wilson – We Find Houses
There are a couple of ways people can do it, you can use a property management software and keep a separate data file for each property, or more simply use an spreadsheet for each property and enter in the all the information you have.
The key thing is to keep good records and try to keep all your receipts and invoices organised, make sure you enter them in as you get them, don’t leave them and then and do them all later on.
Also flag in your system when you need to renew insurance and things like that, those can be a little out of sight, out of mind so it’s important to get a reminder when they’re due.
Rebecca Hona – wHeregroup
Keep a designated folder for each property that covers all the ingoing and outgoing money for that property.
A financial report from your property manager give you a great snapshot of your property at the end of each year, it will detail all of the rent and expenses for the year and make things relay easy, especially for your accountant.
Make sure you get your end of financial year statement from your bank as well, it’s an easy way to see how much interest you’ve paid for the year and the net return on your property, those two documents will make things very easy for your
accountant come tax time.
There are a lot of programs out there or you can use spreadsheets as well, I’m not a big fan of those for me I like to keep things simple.
Tyran Hyde – Washington Brown
From our point of view make sure you have a good depreciation schedule, if you buy a house and it doesn’t come with one or you renovate, get one done as quick as possible so you know what and how much you can start claiming.
Knowing what you can claim and when you can claim it is important as well as that will allow you to better organise your documents.
Keep good copies of your receipts to give to your accountant, they can’t read your mind to find out what you’ve bought for the property and what you want to claim.
Sam Saggers – Positive Real Estate
I think the best thing out there is (software platform) Xero.
The visibility it has is great, it allows you to get on there and see what money is coming and going daily and you can put your entire portfolio in there and export spreadsheets to give to your accountant or whoever you need to.
It’s something like $30 a month, but it’s the best invention I’ve seen in 20 years of doing this.
Cherie Barber - Renovating for Profit
When approaching any renovation it’s crucial to have an overall project plan, which has an order of works, scope of works, costs and a timeline.
This in turn will tell you exactly what tradies and materials are required for each pivotal stage of your renovation.
You can create your project plan using software such as Microsoft Project, where all the tasks, costs and estimated time lines can be inputted, and it will automatically update as you go, or even create your own simple Excel spread sheet.
Keeping hard paper print-outs of receipts is not important these days, what is more important is having a digital copy of all receipts stored in at least two online spots.
Firstly, a lot of professional renovators buy fixtures and fittings online, which automatically emails you a purchase receipt on confirmation of your order.
I move / file all of these receipts into an individual property folder I have set up in my email account, but before I do this, I enter the cost of that receipt into a common accounting package like MYOB so at any time I can press a few buttons and know what my up-to-the-minute costs are for each of my projects.
I back up my files regularly and most of these accounts are stored online so if your computer was to crash, you can access your data remotely.
There are two common mistakes I see inexperienced renovators make and they both make me cringe.
The first one is when renovators buy something for their projects and flippantly not keep hold of the receipts.
The second most common mistake is renovators not being on top of their expenses.
Being on top of your expenses means entering them into your accounting software at the end of each day ideally (it only takes five minutes) and then you're all done and up-to-date at all times.
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