Bookkeeping Can Make Or Break Your Investment Property Career
The general concept of scalability is not a difficult one to understand. If you want to increase your profits you want systems and operations that can easily scale up with minimal adaptation. Your goal is growth without having to overhaul the way you do business. As a real estate investor, what does your process look like? If your portfolio were twice the size it is now, would the systems you have in place be efficient enough to keep up and continue growth? Would you be able to find all important documents quickly should a tenant bring suit after a slip and fall on your property? If the answer to either of these questions is no, it is very likely that organizing your approach to bookkeeping could make all the difference in your success as a real estate investor.
RECORD KEEPING WITH EFFICIENCY AS A GOAL:
At Nexus Property Management® we place the highest value on efficiency. The more efficient our management, maintenance, and leasing teams are, the more time we have to add additional value for our clients. As an investor, you should have the same approach. Efficient record keeping is essential when it comes to managing and staying ahead of the numerous documents and forms you’ll need to keep up with and have at your disposal during the life of your property ownership.
Our recommendation is to get yourself a scanner and scan any documents when they come in. Reducing paper and ever-growing folders and physical files not only reduces clutter and friction when it comes to finding what you’re looking for, it also allows you to access those files wherever you are at any time. You might know exactly where those insurance papers are in your bottom left-hand drawer, but can you access and distribute them from the road when there’s an emergency at one of your properties? You can if they’re scanned, filed digitally, and you have basic access to your phone. In short, the recommended best practice is to scan, title, save, and place in an appropriately titled (digital) folder...then shred the paper copy. Embracing technology allows you to access all of these files and provides a template that works whether you’ve got 1 unit or 100.
SEEMS LIKE A WASTE OF TIME...I KNOW WHERE MY STUFF IS ALREADY:
That might be true...but remember the goal is efficient growth. If you need to change your process after you begin to expand your portfolio, it means your original process was inefficient and simply not good enough. Just to provide further clarity, here is a list of some of the documents that our most successful clients regularly deal with and need to have at their fingertips should a problem or issue arise at one of their many properties:
- 1031 Exchange documents
- Insurance binders
- IRS documents
- LLC documents
- Tax bills
- Credit Card Statements
- Closing documents
- Existing Condition reports
- Insurance claims
- Lead certificates
- Mortgage statements
- Police reports
- Smoke surveys
- Tax returns
- Utility bills
- Tax documents
- Commitment letters
- Fire inspections
- Insurance quotes
- Letters of Good Standing
- Purchase and Sale Agreements
- Security Deposit refunds
- General surveys
- Title insurance
[ Learn More: How To Get Started In Real Estate Investing: Step by Step ]
Maybe your system works for you right now...and if you’re content with staying put financially and not buying any additional properties, it makes some sense to stay with what is most comfortable for you. But, like most real estate investors, if you want to be ready to add that next apartment as soon as you’ve got the capital to do so, spend some time now to revisit your bookkeeping to ensure you can keep up with the many documents that accompany your growth. It doesn’t take long to build the infrastructure that will save you so much time down the road.
[ Learn More: Why Real Estate Investment Is The Best Investment For You ]
DRESS TO IMPRESS: A SUCCESSFUL FIRST IMPRESSION
Organized and efficient bookkeeping certainly makes your life easier, but in the world of real estate investment, it’s more than just that. Like a well-dressed applicant walking into a job interview, the ease (and speed) with which you are able to locate and share requested documents provides lenders, attorneys, insurance agents, or whomever you’re working with a first impression of what you’re like as a property owner, and you always want that impression to be a positive one. The many real estate professionals you need to work with if you want to increase your profits prioritize who they work with. You’ll be far from the top of the list if you’re known to waste time and complicate processes that others can handle with maximum efficiency. Even if improving recordkeeping doesn’t seem like a big deal to you, it is for those who realize and appreciate that time is money.
IN SUMMARY: BUILD YOUR SYSTEM FOR OFFENSE AND DEFENSE
The bottom line is if you’re not good with paperwork, it will show. Perfecting your system is the best route to the best services from the people who can help you the most. It’s also the best way to be armed with the documentation needed when the inevitable issue arises that someone insists you’re responsible for. Whether your task is growing your portfolio by taking the steps to acquire a new property or you’re defending yourself against a third party claim, organized documentation is the unheralded key to successful real estate investing.
To learn more please reach out to our Nexus team. We’ve been building and perfecting our system for over seven years. With over 1000 units under management and four franchised locations, scalability is at the core of all we do.
[ Learn More: The Real Estate Closing Process Explained, Step by Step ]
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Mick Lefort is the Vice President of Operations for Nexus Property Management®. A National Property Management Franchise that manages all types of rental property from single family homes or condos to large apartment buildings and complexes.
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