How to Set Up a Real Estate Ledger

by Contributor; Updated September 26, 2017

A real estate ledger tracks the income and expenses associated with real estate properties. Setting up a real estate ledger isn't too different from setting up any other type of business ledger. The first step, regardless of the type of ledger you're creating is to decide whether to do it manually, or using computerized software. There are advantages and disadvantages to both.

Step 1

While keeping a manual ledger might seem out of date in the computer age, for a small business or single agent it might make sense. The biggest advantage of a paper ledger is that you can see everything in a single glance, there's no scrolling and no figuring out how to fit the pages together once they're printed. Other advantages include being able to take it with you anywhere, the ability to flip it open at any time and take a look at your entries and no worries about computer crashes destroying your data.

The disadvantages of paper ledgers are that you must manually add and subtract, which can easily lead to errors. They can also be more time consuming if you have large amounts of data to enter. In addition, there's no easy way to share the information with others. You can't quickly email or upload a paper ledger.

The advantages of software are automatic calculations, quick and easy entry, the ability to quickly share the information with your accountant or others, and the fact that there are several programs created specifically for real estate. Also, you can often get instant online support if you have questions about where and how items should be entered.

The disadvantages of software are that you must constantly create a backup in case of computer problems, your ledger is not as portable if you don't own a laptop computer, and it is often easier to put numbers in the wrong columns than in a paper ledger where you can see the entire page.

Step 2

Once you have decided which method is right for you, it's time to decide on the categories in your ledger.

This step is the same for both paper and software-based ledgers, however, if you purchase software such as Real Estate Agent Accelerator many of the categories will already be in place for you. If this is the case, create a list of categories anyhow and add any that the software has not already added for you.

If you are creating categories from scratch, grab a piece of paper and make two columns, one for expenditures and one for revenue. You can be as detailed as you want to be, but avoid being too general. You will want to separate some income streams for tax purposes, such as commissions and bonuses.

For the revenue column, think of all the types of income you expect to receive, and list them out. Be sure and also include a "miscellaneous" or "other" category, as there are always unexpected items that just don't fit anywhere else.

Do the same for the expenditure side. Think of the different types of expenses you incur and list them. They can be combined or separated as you see fit, but you will want to keep items that affect your taxes differently in their own columns. For example, you could have a listing for office supplies and a listing for cleaning supplies, or you could combine them into a single category since they both are deducted the same way on your taxes (as maintenance expenses). Ask your tax accountant for advice, but some items you should probably keep separate are travel expenses and major purchases such as vehicles, since those expenses are deducted differently.

Step 3

The final step is simply to fill in the tops of the columns with the categories you have created and begin making entries under each column as they occur.

If you are using a paper ledger, it is often easiest to dedicate one half of the book to expenditures and the other half to revenues. The clear division between the two will help you avoid entry mistakes.

If you are using a spreadsheet program, you may want to consider creating two separate files, one for revenues and one for expenditures to help avoid confusion. Some programs automatically set these two categories up for you, which also helps avoid mistakes.

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