Although we use real estate as the vehicle to produce our income, regardless of which business you are in, it is always about paying attention to the bottom line. Understanding where the dollars come from and how they are paid out will help you maintain a clear picture of your current financial position and provide you with a road map to your goals. If you plan on doing your own bookkeeping, there are many unique situations you will have to understand how to record in order to be sure you are paying the taxes you owe and not paying any you don't. If you decide to hire out your bookkeeping, hire someone with the experience related to recording transactions you will be doing in your business. Does your bookkeeper know that a mortgage payment potentially has three parts; principal, interest, and impounds? He might, but is he assigning each to its own account and classing them all to the same property?
Buying a property subject to brings on a whole new set of challenges for an inexperienced bookkeeper. Payment statements need to be obtained from the seller or the lender to be sure you are taking proper credit for payments you will make while you hold the property. A bookkeeper with limited real estate accounting may not understand how to enter the numbers from the HUD when you purchase, how to record the repairs you make, or how to correctly enter your final HUD after you sell making sure your profits and expenses are properly accounted for.
Get QuickBooks and take some classes. It is best if you understand how transactions should be recorded before you turn your books over to someone else. If your CPA discovers errors when it is time to file your taxes it could be financially disastrous to your business and your free time while you attempt to remember deposits and withdrawals made weeks, or months before. Your bill to her will also start to increase as she helps you try to figure out what you were doing back when you were doing it. There are many associations related to our industry who offer classes on bookkeeping. Other successful investor's recommendations should also be sought out.
Follow the dollars and be sure they are properly recorded. Knowing where your money goes and comes from gives you a clear picture of where you are financially and helps you plan your tax strategies before your fiscal year ends. It could mean the difference of having something left over for your pocket at the end of the year after taxes or scrambling to figure out how you are going to come up with Uncle Sam's share of your profits.