An investment portfolio is incomplete without real estate investments. They are an effective and secure way to invest your money as they are bricks and mortar investments. Unlike stocks and bonds, you won’t necessarily lose your money if the market turns. You will still have your property investment, but it may not make as much money as you like.

However, properties do require maintenance and organization if you are going to make money off of them and if you are going to do it legally. Getting greater returns and managing your property successfully without overspending is challenging. You’ll need to have some real estate accounting tricks up your sleeve.

Our accounting tips will help you make the most of your investment without delving too deep into your pockets. They will advise you on how to increase your cash flow, monitor all of your expenditures, prepare for an audit, and review where your business could improve.

With these top tips, you can make sure that you make the most of your investment legally and easily, allowing it to thrive and benefit you.

Boost Your Cash Flow Where Possible

Cash flow is an indicator of whether your investment is thriving or not. Your property will see a positive cash flow when the return exceeds the expense, which is the aim of any investment.  However, you don’t need to just hope it happens. There are many small changes that you can make to your accounting system to boost your cash flow.

Staying on top of rent and vendor payments is a simple way to ensure a continuous and strong cash flow. By getting rent statements out early and staying on top of tenants about rent, you ensure that there is cash coming in according to schedule to pay vendors on time without going into your own pocket.

You can schedule your vendor payments for after rent day, so you’re not low on cash when your payments are due. If possible, wait until the final day to pay vendors to give yourself the wiggle room and ensure that you do not go into a negative cash flow. Some vendors may offer early payment discounts, which effectively decreases costs for a bit of hassle.

Manage All Your Expenses Strategically

Any real estate investment sees a lot of cash moving in and out continuously. From rent to utility payments to maintenance, the balance in your business bank account is constantly changing. All of this moving money can be confusing, and you don’t want to end up low on funds, so you need to be proactive and strategic about managing your money.

One of the most significant pointers in real estate accounting is to keep your personal and business expenses separate. The most important reason is that it can trigger an IRS audit because you are blurring the lines of business and professional. However, it can also reduce your tax payments and give you an accurate estimate of your cash flow.

Tracking your expenses with your income with a budget and payment schedule can help you manage your money and achieve a profit. You can schedule your ingoings and outgoings to ensure that everyone receives payment, including yourself. If there is a zero or negative cash flow, you can evaluate your expenses to cut out unnecessary ones and return to a strong position.

Be Ready For An Audit

An audit can come at any time for any reason. There are many tactful ways to prepare for an audit, but you may not know that being organized financially can delay it.

Red flags in your finances can push an audit forward, but no red flags reduce the IRS’s likelihood of noticing your investments. The IRS is less likely to look in your direction if you’re clean, so here is how you can stay compliant:  

  • File a tax return yearly. You may not think you need one that year, but one of the biggest red flags for the IRS is missing tax returns. With an accurate annual tax return, you have a long and detailed record of your finances to show at any audit.
  • You must keep receipts and copies of all your finances for an audit, but a more detailed trail could benefit you. By noting down the details of each transaction, it is easier to explain each transaction and prove your compliance.
  • The thought of an audit can be intimidating, but we urge you not to lie on your tax returns. Any false information can incur fines and move up an audit where they will scrutinize each transaction.  
  • Using a professional accountant or accounting software to manage your taxes is common to ensure compliance. They can organize your expenses for you without digging through piles of receipts as tax season comes around.

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