SHOULD YOU HIRE A BOOKKEEPER TO MANAGE YOUR PROPERTY PAPERWORK?
For many, property investing is a lifestyle choice – a way to reach financial freedom so they can stop selling their greatest asset – the time they spend working – to their employers. As their portfolio grows, however, so does the time they must spend managing their property paperwork. Bills must be paid and filed away. Data must be entered. Calculations should be made to assess how well properties are performing. This means hour upon hour of bookkeeping and secretarial work every week, before … TAX TIME. At this point, many an investor has slammed down their highlighter and said, “Screw this! Let’s hire a bookkeeper.” But, is this really the best option? By exploring the pros and cons of using a bookkeeper versus doing it yourself, it becomes easy to see why My Property Tracker offers the best of both worlds – and more.
THE UPS AND DOWNS OF DIY
Melissa Matheson, 45, is a full-time territory manager for a FMCD company and mother of two. Since 2011, she and her husband have built an investment portfolio of 18 properties in addition to their family home. From day one, Melissa has managed all of their property paperwork herself, filing documents by category within separate folders for each property.
In conjunction with this, she keeps an Excel spreadsheet that itemises all costs relating to the purchase, finance and weekly running of each investment. For the purchase of each property, she includes: who did the conveyancing, the amount of deposit paid, the purchase price, the amount of stamp duty and the cost of legal fees. She then lists the details of the corresponding mortgage (including interest rates) and expected rent.
To determine the cash flow of each property, Melissa has created a “forecasting section” in which she includes all expected bills and maintenance for the year ahead. And, there’s more. “I have also got a transactional spreadsheet,” she says, “where, every month, I download all the transactions from our main bank account and credit card into the one spreadsheet.” She then allocates categories to each transaction to flag whether it is personal or related to property, and sub-categories to indicate whether property transactions are those of rental income, interest repayments or bills. She says, “When it comes to tax-time, I can filter that by property.” This gives their accountant a clear indication of how much has been spent on each investment.
Despite the many hours she spends every month keeping on top of property paperwork, Melissa has never hired a bookkeeper. Like many investors, she likes to have her finger on the pulse. She says, managing the paperwork yourself, “Gives you an understanding of the incomings and outgoings,” which, “keeps you close,” to your portfolio. Doing it yourself allows you to be more in control of your investing – all while gaining knowledge and experience along the way.
On the other hand, doing it yourself is time-consuming and can be very tedious. You have to know what you are doing and, depending on how you have structured your investing, keeping track of expenses can become complicated. And then, there’s the issue of tax-time.
LET’S TALK ABOUT TAX, BABY
(Let’s talk about all the good things, and the bad things that may be, let’s talk about tax…)
It doesn’t matter how appealing you try to make it sound, preparing for tax-time is dull and time-consuming. Instead of clearing your desk in a moment of unbridled passion, you clear it through hours upon hours of painstaking data entry and document compilation.
Melissa says, “Previously, if I was being a bit unorganised with keeping up to date with my expenses, in about April or May, I would set up the trestle tables in our family room – and they’d stay there for about four months.” She says, whenever she could find time, she would sort through everything she needed to give to her accountant, who would then enter all of the data into his accountancy software.
THE PROS AND CONS OF HIRING A BOOKKEEPER
If you don’t like the idea of spending your spare hours compiling documents to give to your accountant in the lead-up to tax-time, hiring a bookkeeper may be a solution. Bookkeepers range in price and accreditation. According to the National Bookkeeping Directory bookkeepers may charge between $18 and $65 per hour, depending on their role and qualifications. Using a bookkeeper to manage property paperwork can help you simplify your tax-time preparation. By doing all of your data entry for you, they can produce all of the necessary documentation to give to your accountant at tax-time. This allows you to focus on what you do best, without having to learn how to be a bookkeeper in your spare time – very handy for people with complicated investing structures.
The down side of using a bookkeeper is that you are not in the driver’s seat anymore. Since you are not the one entering the data and doing the sums, you are no longer able to see just how well your portfolio is performing at any given time. Plus, if you only use a bookkeeper in the lead-up to tax-time, then you will only get a clear idea of your portfolio position at the end of the financial year. This is a pretty big minus for property investors. As Nathan Birch says, investors should treat their investing like a business. To be successful in business, you need to know your numbers and how they stack up.
On top of all of this, you still have to prepare all of your paperwork to give to your bookkeeper, so although they save you some time in data entry and analysis (which is streamlined by software such as Xero), you still have to tackle all of the admin stuff yourself.
MY PROPERTY TRACKER – THE BEST OF BOTH WORLDS
Recently, Melissa made the switch to My Property Tracker, a web-based bookkeeping and archival solution made by investors, for investors. “I knew that it would save me loads of time – and it’s worth every cent,” she says, “I work full-time, we’ve got two children, my husband works reasonably long hours, and it was starting to affect my work-life balance in terms of me getting bogged down with the paper work.” Instead of filing her documents and entering all of the data into her multiple spreadsheets, she now sends her documents to her MPT email address as they come through. The MPT team enter the data for her. She now spends one third of the time she previously did on managing paperwork.
Because Melissa and her husband’s investing structure was fairly complicated, keeping track of the paperwork herself was becoming a difficult task. “What we’ve done in our portfolio is raised equity from one property to pay for another property,” so when looking at loans, it’s a case of, “this loan pays for that property, but that property is held against a different mortgage.” She says, “My Property Tracker has sorted all of that out for me.”
Using My Property Tracker has also given Melissa greater confidence in the performance and position of her portfolio because it has removed any guess work from the equation. It’s intuitive interface clearly shows the number of properties in your portfolio, how much they are worth and how much they are making. It also showcases your cash-flow by telling you all of your recent incomings and outgoings. “Because all of the information is there, you’ve got a much more transparent idea of what’s happening with each property,” she says. This is what sets apart MPT from a standard bookkeeping service. How many bookkeepers would enter data on each bill as it comes through? How many bookkeepers would provide you with an App designed especially for property investors that enables you to see how well your portfolio is performing in real-time?
Another thing that sets MPT apart from the rest is that it also acts as your administrator. Every document sent through is securely archived and easily accessible to retrieve whenever you need it. With MPT, you no longer need to keep original hard copies of every document – it’s like a big, digital filing cabinet. And it’s not just for bills, you can send through everything, including the original contract of sale, legal documents and pest and building reports.
On top of this, MPT also keeps track of your building insurance – and even notifies you when it is due to be renewed. This is definitely something a standard bookkeeper wouldn’t do!
What about tax-time? Melissa no longer has to set up her trestle tables. “It’s now so efficient that I will be able to just go into My Property Tracker, and once the last statement has been entered for the year, I’ll be able to press a button and it will produce a report that I can send straight to the accountant that has all of the costs and income associated with each individual property.”
BOOKKEEPER, DIY OR MPT?
When comparing all three options, My Property Tracker clearly comes out on top. It streamlines tax-time. It does all of the complicated data entry and analysis. It does all of the filing and archival. It reminds you to renew your insurance. Most importantly, however, it tells you everything you need to know about the performance and cash-flow of your portfolio as a whole – so you can run your investing as a business, while saving time and preventing tax-time headaches.