Real estate accounting software not only saves you time, but it can also directly affect your profitability. In fact, the time savings can equal tens of thousands of dollars. Read on to learn why.
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- What Is Real Estate Accounting Software?
- Things to Consider
- Our Top Picks
What Is Real Estate Accounting Software?
It’s not 1975 anymore, which means you should not still be using paper to track your commissions and expenses. Real estate accounting software simplifies your life by automating this entire process.
Video Source: Summit 7 Youtube Channel
Traditionally, brokers and agents would collect receipts, income, and other expense numbers, manually enter them into a ledger, and then reconcile their books at the end of the month.
In many cases, you’d need to hire a full-time bookkeeper to stay on top of things. Not to mention the fact that manually entering anything into a database opens the door to errors.
Bookkeepers cost between $20 and $50 an hour, which means even a few hours a week adds up to thousands, if not tens of thousands of dollars per year.
How It Works
Real estate software removes the human from the equation by automating the entire accounting process. Not only does it automatically source data from your bank statements, but it also reconciles your books at the end of each period.
In a nutshell, accounting software does in a few minutes what a human could do in a few days. And these products are not nearly as expensive as you’d think. Read on to learn about products available, common features, and which platforms we think are best.
Real estate accounting software comes in many shapes and sizes. Some platforms are bare-bones, and others include every feature under the sun. We’re going to focus on the features found in most platforms that will save you the most time.
Any good accounting software should automatically sync with your bank and credit card statements to identify and categorize expenses. Many platforms require a few hours spent up from setting up categories and vendors.
For example, if you have a recurring charge from a Cox Cable, you’d label this as a utilities expense. Any time the real estate software platform sees this expense, it’ll categorize it as a utility.
Other times, the software will have pre-loaded categories that sync up with your credit card statements, so you won’t have to do much work on the front end.
Traditionally, agents had to submit their receipts to a bookkeeper who would enter them into the system. Using automation, the platform does this for you without much (or any) manual input.
This feature alone saves many hours of unnecessary time and energy, and is a pillar of any good real estate accounting software.
Ever get sick of manually running commission reports? Many platforms allow you to click a button and, using pre-defined commission splits, determine how much an agent will receive.
This is a huge time-saver because everything is done automatically. Again, when a human is manually calculating anything, there’s a near certain chance that errors will be made. Automation removes this uncertainty, both saving you time and money.
The IRS allows you to deduct any mileage you put on your vehicle for work-related purposes. Traditionally, you’d keep a log of the miles you drove and manually input that into a spreadsheet.
Recent improvements in GPS-tracking technology let you download an app to track your work-related mileage automatically. You can save trips that you commonly drive and even turn on your tracker between specific hours.
We all know how frustrating it is to lose a receipt, thereby jeopardizing the chance of getting reimbursed.Real estate accounting software also makes it painless for agents submitting expense receipts for reimbursement.
Simply download an app and take a photo of your receipt. Good platforms will recognize the expense, categorize it, and then add it to your broker’s books via the cloud.
Whether it’s calculating an agent’s commission split, or just reconciling a bank account at month end, real estate accounting software makes it easy to accomplish.
Because these products track everything electronically, it’s easy to generate reports. Simply open the app, click a few buttons, and an easy-to-read report is generated.
If you bill your time to clients or generate invoices, real estate accounting software can save you hours of time each week. Instead of writing invoices by hand for every job, simply click a button.
You’ll have already set up vendors in your system, and the software will auto-populate all relevant information into a simple invoice. This saves you time, but also shows clients that you’re a serious shop.
To be honest, when I get a hand-written invoice, it makes me question whether the vendor knows what they are doing. Why? Because if they aren’t automating their accounting processes, it makes me wonder where else in their business they are not being efficient.
1099s are perhaps the most frustrating documents to complete. They have multiple pages, each with many duplicative sections. It easily takes an hour to complete each one by hand.
If you are writing even a few of these, that’s a huge chunk of time wasted. With real estate accounting software, you can complete hundreds of tax forms in a few minutes using automation.
Things to Consider
This goes without saying, but each software platform will fit a different type of real estate professional. After all, some of you automate your entire accounting process while others only automate part. For this reason, there are some things to consider before picking a product.
As with anything, the more complicated it is, the more likely it is to cost more. If you are seeking a real estate accounting software platform that does everything, you’ll pay between $50 and $150 per month.
But if you’re only looking for a mileage or expense tracker, you can spend as little as $10 per month. Regardless, even on the high end, the cost savings will likely save you hundreds, if not thousands of dollars per year.
As we’ve said, there are many different types of software platforms, each offering a wide variety of features. Before picking a product, you should consider your pain points.
For example, think areas in your business that you dread every month. Is it bookkeeping? Is it around tax time? If you think you are inefficient in a particular area, that’s a good candidate to automate.
Fortunately for you, there’s likely a software provider who’s seeking to fix your problem! Just remember that there are many products for many problems. So don’t buy an all-in-one platform when you won’t use 90% of the features, because you’re likely overpaying.
Our Top Picks
There are an every-increasing number of real estate accounting products available in the market. After all, this industry has been stuck in the paper age for far too long, so opportunists are seizing on the switch to automation.
Below are some of our favorite products that seek to solve various problems that you may be having. We included each of these to provide a wide range of accounting software options for you.
For simple things like expense tracking, tax reports, and receipt entry, Realtyzam rules. It’s perhaps the best and most affordable software to meet the needs of single agents.
Priced at $9.95 per month (if paid annually), this platform caters to the everyday needs of agents hiring a bookkeeper. While it does not track commission splits or help with transaction management, it’s a great foot in the door to more advanced products.
While Freshbooks does not cater exclusively to real estate professionals, it offers great functionality for those seeking to automate all aspects of a business.
With features like electronic invoicing, time tracking, project management, payments, reporting, and accounting, it’s a great all-in-one platform for brokerages and teams seeking a great deal of automation.
Pricing starts at $15 per month and increases as you add features. If you’re currently using Quickbooks, we think this is a good solution to save a bit of money.
Xero is another Quickbooks alternative that makes it easy to process invoices, enter bills, and reconcile bank transactions. Pricing starts at $9 per month and tops out at $60.
Baseline plans include 5 invoices and entering 5 bills while the premium plan lets you send invoices and quotes and manage expenses while also tracking project time and costs.
Brokermint is a complete back-office solution for real estate brokerages and large teams. It’s best features include commission tracking, transaction management, expense reports, and agent management.
This platform is not meant for single agents, but rather brokerages and teams seeking to automate their overall business. With features like agent tracking, you can keep tabs on various parts of a complex business.
Pricing starts at $99 and increases as you add features and agents. Because the price is dependent on your own business, it will vary according to your needs.
We think Buildium is a great solution for property managers. Their flexible platform is easy to use and helps you manage every aspect of your property management business.
Not only can you keep track of your tenants, but they can also make payments through the online web portal, and all income and expenses are tracked in the cloud-based system. Plans start at $47 per month and increase as you add units.
Should you Use Real Estate Accounting Software?
Unless you are stuck in the 1900’s, you should be using real estate accounting software. After all, it’s easy to use, affordable, and there are an ever-increasing amount of options available.
With products like Realtyzam costing only $15 per month, an entire year is almost less than the price of hiring a bookkeeper for a week. When you think of it like that, it seems silly not to invest in one of these platforms.