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As your real estate investment business grows, you’re going to be faced with a growing need for someone to handle your books. This is important, because real estate investing involves plenty of moving parts and expenses/income you need to meticulously track.
Staying on top of that is at least a part time job, and probably not the highest and best use of your time. While you’re out maintaining properties or looking for fresh investment opportunities, you can have a bookkeeper taking care of receipts, categorizations, expense reporting, etc.
The choice you’ll probably face is between one of these:
Hiring a bookkeeper in-house
Hiring an outsourced accountant
There are pros and cons to each option.
At our firm, we’re passionate about making sure real estate investors are well-equipped and well-informed. Read on for more information on hiring a bookkeeper in-house versus outsourced accounting, and check out our outsourced accounting services.
Pros to Hiring an In-House Bookkeeper
Let’s start with the pros of hiring an in-house bookkeeper:
- You get maximal control over how things are done, what things are prioritized, when things are done
- You can assign the projects as you want and control the timeline of deliverables
- You get to see real-time results and on-demand reports/data
An in-house bookkeeper may be a payroll employee or an independent contractor. Either way, they probably work exclusively for you, which gives you a lot of oversight.
Cons to Hiring an In-House Bookkeeper
On the flip side, there are definitely some cons to hiring an in-house bookkeeper:
- You have to find them, vet them, interview them, hire them, and onboard them - all of those logistics are on your plate
- In-house bookkeepers may have a higher per-hour rate, because you are contributing all or most of their income
- If you don’t have accounting knowledge, you may be unable to tell if the bookkeeper is doing things the right way or the best way - this could be problematic come tax time or if they make mistakes
It’s important to make a quick distinction here: a bookkeeper isn’t the same as a CPA. While CPAs can sometimes perform some bookkeeping functions, a bookkeeper is really just performing basic record-keeping tasks. They’ll organize and report on your finances, but what they won’t do is interpret them or tell you what they mean. If you’re fundamentally dissatisfied with the service you’ve received from a bookkeeper in the past, it may be because you had the wrong expectations.
To get more clarity on the different services offered by an accounting firm, click here.
Cons to Outsourced Accounting
This time, let’s start with the cons. The cons of outsourced accounting are the following:
- Outsourced accountants will perform tasks and generate reports on a predefined basis - this may mean you can’t get info on-demand, but get it at agreed-upon timelines or intervals
- Outsourced accounting may offer less customization than an in-house option
- You will have less control over an outsourced accountant - you get services you pay for, and those are often preset
Even when you hire an outsourced accountant, it won’t be 100% hands off. You will still need to coordinate efforts, providing information when requested. The good news is this coordination can probably be done by an office manager or assistant, so you can just see the reporting and only be involved if you need to be.
Pros to Outsourced Accounting
Outsourced accounting is a popular choice because there truly are many pros:
- You get the benefit of using a system that is already proven to work
- Accounting firms have plenty of experience and do things the right way, so there is far less risk of a mistake
- Outsourcing is almost always a less expensive option than hiring in-house
- Outsourced accountants will probably organize tax-ready financials, which can provide faster turnaround times in tax preparation season
- Firms that offer outsourced accounting services may provide additional services, such as consulting and help you intercept what your financial data means so you can make better financial decisions.
Perhaps one of the highest priority benefits of outsourced accounting is that you can work with industry specialists. For instance, we work exclusively with real estate investors, which means we know this field in and out. We can easily offer up recommendations for best practices based on comparable scenarios and what we understand is happening in the market. This is hugely valuable if you want to take advantage of every opportunity available to you, and make the best-informed strategic decisions to grow your business.
Real Estate Investor Bookkeeping Help: Are You Ready?
So, whether you move towards an in-house bookkeeper or outsourced accounting services, how do you know you’re ready to make that move?
You’re ready to hire a bookkeeper or outsourced accountant if you fall into one of two categories:
- You’re a full time investor, and the highest and best use of your time is running your business and managing properties. This means you’re ready to add to your team, and a bookkeeper will definitely be one of your first hires.
- You’re working full time in a different job and doing real estate investing as a side gig. This means you have a little time, and the best use of that time isn’t putting information into Quickbooks, it’s pushing more deals forward.
All serious-minded real estate investors will outgrow DIY bookkeeping. As soon as you have two or three properties, you’re ready to advance your own role and move solidly into strategic leadership tasks. As soon as your business is profitable enough to support an employee, outsourced accounting for real estate is the way to go.
Outsourced Accounting for Real Estate Investors
Outsourced accounting services can be game-changing for your real estate investment business. If you’re willing to give up a little control, and want to get the most cost-effective option, an outsourced accounting team is the right choice.
These accountants will work hard to manage all of your rental income and associated expenses. This gives a clear line of sight into the status of your profits and losses every month, and ensures you are operating in compliance with any and every regulatory framework.
For more info on getting outsourced accounting for your real estate investment business, contact us today.