Quickbooks and other software are great for general businesses. But for landlords and others in the real estate industry, using Quickbooks to track income and expenses for rental properties can be frustrating. That’s simply because Quickbooks wasn’t built for real estate owners. And other software like Cozy doesn’t have the features needed to handle the accounting aspect of the real estate business. Both are great for a general audience but not equipped for the specific business needs of real estate.
So you must be wondering if there are any good alternatives to Quickbooks? Well, Beaver. Beaver software is both an accounting and property management software built-in one. Not only does it serves both accountants and property managers but it also migrates your data and integrates it for financial analytical purposes. This way not only does it take care of the back-end work but it can make financial projections to show you how well your business is doing!
But lets take a look at some problems other software like QuickBooks has to face.
Although there are many blogs and Youtube videos that can teach you tricks and “workarounds” to force Quickbooks to do what you need it to do, such as allocating expenses by property. But ultimately Quickbooks is made to cater to general business. But business comes in many shapes and forms and most require tailored software that makes running their business as smooth as possible, especially in the real estate business. A kind of software specifically designed to meet a real estate owner’s needs.
From the perspective of a landlord, these three priority tasks are of the most important to them:
- Rent collection
- This is the very reason why you purchased the property. Your goal is to maximize collection by setting a reasonable, market-based rent that attracts quality tenants.
- Expense payment
- This is what you want to minimize – however, it’s an inevitable part of homeownership. Every property purchase comes with expenses for property taxes, insurance premiums, utilities, repairs, etc.
- Keeping track of income and expenses for tax filing
- Finally, you want to track your rent and expenses accurately, for end-of-year tax filing. You never want to miss out on a tax deduction you could have taken, or overpay your taxes.
These are the priority tasks for every landlord, and doing them well is the key to success in growing their portfolio.
In short, various software can take care of each task well, but only Beaver takes care of all three well. Recently, we have seen a surge of new online rent payment software such as Cozy and Rentpayment.com. But these types of software whose core function is rent collection do not have a robust bookkeeping function to measure a property’s true financial performance. Collecting rent is just one side of the story. You also need bookkeeping software.
On the other side of the spectrum, property management software such as Appfolio or Buildium has numerous features built into them. However, many users come to Beaver because other softwares’ accounting features are still not robust enough. A lot of our users have been using at least two different software to manage the three tasks above. Now, they only need to use one with Beaver. This makes Real estate accounting not difficult anymore. You can now do it on your own with Beaver.
Why isn’t standard accounting software enough?
It may be enough if you own only one property, or do not care about monitoring financial information by each property (which is unlikely for any serious investor reading this). Note that individual investors who file a “Schedule E” tax form must report income and expenses broken down by property – so this is not an option for many.
In theory, those who do not need to file a “Schedule E” tax form – i.e., landlords and investors who own properties under a corporate structure such as an LLC or a Corporation only need to report the aggregate income and expenses for the entity, no matter how many properties there are. However, even if it is not required for tax purposes, understanding each property’s performance is fundamental to evaluating your return on investment and any serious discussion with a potential buyer when you decide to sell it.
With Quickbooks and other standard accounting software, it is notoriously difficult to break down income and expenses by property. As a work-around, multi-property owners using Quickbooks typically pay extra charges to create multiple accounts or assets. This process can be tedious and the costs can add up when you own many properties or units within a building. And yet, it’s important to know how much that top-floor or corner apartment with a park view is really outperforming the other units.
Why isn’t an “Income and Expense tracker” enough?
As I mentioned, there are lots of new and exciting “real estate” focused software on the market. For example, Stessa allows you to make a Profit and Loss Statement by the property, for free. Cozy also has an “expense tracker” in addition to its main rent collection feature. But Quickbooks remains the choice for many serious investors. Why?
These types of expense trackers may be sufficient if you own property as an individual and only use the tax form “Schedule E”, which asks only for income and expense information (by the property).
But for institutional investors, the IRS requires a Balance Sheet in addition to a Profit and Loss Statement, and many “Income and expense trackers” do not have the ability to create a Balance Sheet.
A Balance Sheet is a snapshot of your asset, liability, and equity information. The asset contains your property’s information, liability contains your mortgage information, and equity contains your capital and retained earnings (accumulated income and loss). You need all of this information to file your tax return if you are running your real estate business as a company.
What about online rent payment software?
Online rent payment software like Cozy is great. It is easy to set up and use and is free (so far). However, collecting rent is only one-half of the work. After you collect rent, you have to bookkeep it. And as I mentioned above, this software does not have a robust accounting feature.
The biggest downside is this: If your rent collection software does not have a full accounting feature, you will have to transfer data from the rent collection software to another accounting software. What a headache! Many people transfer this data manually from one software to another, but with all-in-one software, you can eliminate this task completely, and reduce time and human errors.
What about the “all-in-one” property management software?
How about a “property management software” that seems to have everything a landlord could ever dream of? A software like Appfolio has many features, from listing a vacant property, reviewing a tenant’s application, online rent collection, and income and expense tracking. But again, many users have chosen Beaver because it has features for robust accounting and can create things such as a Balance Sheet and Profit and Loss statements.
Beaver is the best alternative to your accounting software such as Quickbooks and online rent payment software such as Cozy. Beaver has all the necessary features to take care of the financial aspects of your real estate business. There are many software in the market that do well with its core function, but there is great efficiency to be gained by having all of the key features in one software.