Doing your books takes more time than you can afford.
Your time is limited. Think about the value of your time. Is spending a few hours on bookkeeping each week worth it in that context? If you looked at your hourly rate, would it cost more for you to do your books or for you to hire a bookkeeper? If outsourcing is the more economical option, hire a bookkeeper and spend your time on other business tasks, like property management, renovations, tenant communications, or acquiring new properties.
Your books are out of date.
Managing your properties, working with your tenants, keeping up with your W-2 job, and balancing your personal life all seem to take priority over bookkeeping. Out-of-date books pose their own problem, though. Without current books, you can’t monitor your property’s—or your business’s—health. It’s hard to answer basic financial questions: Where is your money going? Can you afford to take on a new property? Is it time to raise rents? Did you return those security deposits? A bookkeeper can help you answer all those questions.
You’re consistently paying late fees or interest unnecessarily.
Covering a late fee here or there may not seem like a big deal, but they add up. Bookkeepers help get you organized, so deadlines and bills don’t get lost in the shuffle. Up-to-date books mean you have a better picture of your cash flow and can plan for costs accordingly. Plus you can trim costs by eliminating unnecessary interest and fees.
Tax time is a nightmare.
Have you missed out on deductions or credits because your books weren’t current, you were rushed, or you didn’t know how to categorize your transactions? Do you spend a lot of time calling and emailing your CPA during tax season as you struggle to catch up or clean up your books? Skip the drawn-out, painful back-and-forth. A bookkeeper makes the end-of-year tax work a clean handoff.
Attention to detail isn’t your strong point.
Big-picture thinking is great, but someone needs to stay on top of the bills, late rents, tax-filing deadlines, receipts, and bank transactions. Small bookkeeping errors can have big consequences for your business, from late fees and penalties to missing investment opportunities to tax audits.
Your business isn’t able to grow.
Do you need a loan to purchase another property? You’ll want a reputable lender and a good interest rate. Maybe you want to bring on an investor or partner. Achieving any of these is difficult without current account books. Working with a bookkeeper ensures that current financial figures are ready when you need them.
Calculating your estimated taxes feels impossible.
To calculate your estimated taxes, you need to know your average monthly income. If your books are out of date, those estimations are difficult. With the IRS, accuracy matters, even for estimated figures. If you underestimate and underpay, you may end up with penalties and interest. If you overpay, your overage will come back eventually—but in the meantime, you’re limiting your cash flow. Bookkeepers can help with those estimated tax calculations, saving you time, headaches, and money.
Your accountant updates your books for you annually.
At first glance, using your CPA as a bookkeeper may not seem like a problem. Is your CPA only updating your books once a year when they’re working on your taxes? If so, you’re missing out on monthly reporting. Those reports help you make informed business decisions during the year, get better loan rates, and attract investors. Plus, CPAs cost more than bookkeepers. Save some money, hire a bookkeeper, and benefit from their work throughout the year.
Takeaways
Outsourcing the bookkeeping work for your rental property business can be a tough call to make. For the eight situations we discussed, hiring a bookkeeper actually strengthens your business, saves you time and money, and can help your business grow. Adding a bookkeeper to your team isn’t an extravagance in these cases—it’s a smart move.
At REI Hub, we understand that your financial team may grow. That’s why we make it easy to add your bookkeeper as an additional user to access your portfolio. Simply enter your bookkeeper’s name and email address to the Portfolio Access section of your profile. They’ll receive an invitation to create their profile and access your books. Not a subscriber yet? Try our free trial to see why accounting professionals and real estate investors alike consistently recommend our bookkeeping software.
“A client asked me to review this for her due to the complicated nature of QuickBooks and cost. After spending 5 hours in the platform, I moved my client’s portfolio of 6 properties over and my portfolio of 9 properties over.”
—Nicholas J., CPA
