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Rental Accounting

Pros and Cons of Using Freshbooks for Rental Property Accounting

Rental Property Accounting – Why is it Important?

Having an effective and efficient income and expense tracking tool for your rentals comes with some serious advantages and ultimately will result in you maximizing your tax deductions and saving you hours of admin time.

When choosing a rental property accounting solution for your property management needs you have to make sure that the solution you do eventually choose comes with everything you need, and their support team is ready and willing to help you grow and achieve new success.

For example, your solution needs to offer a practical and easy way to manage income and expense tracking with receipt storage. Additionally, it should allow you to send receipts and invoices, set up automated rent reminder emails, and have quality reporting features to allow you to understand your portfolio’s performance as well as to make tax time a breeze.

Everyone’s needs are slightly different and finding the perfect solution can be a challenge. This is why we’ve put together this article exploring the pros and cons of using Freshbooks for rental property accounting as well as outline some of the key features that set a property management specific solution like Landlord Studio apart.

About Freshbooks for Rental Properties

Freshbooks is an accounting software which allows you to set up clients and invoice and bill them. The system itself is pretty straight forward and has a number of useful features such as time management and a helpful dashboard.

When it comes to managing your rental properties accounts you will want to do the following:

  1. Create your client as your current tenant.
  2. Set up a recurring invoice for your tenant.
  3. Set up your expenses by entering the expense details into the system. A useful feature here is setting up recurring expenses.
Freshbooks

We came across a few particular problems for property managers and landlords when setting up on this software. The first is that you can’t backdate income or expenses. This obviously means you need to keep all your old paper processes or your old system (at the very least until the tax year is over).

Secondly, you can’t attribute expenses to a particular property, meaning when it does come time to fill out your Schedule E tax form you will have to manually go through all the expenses – and if you forgot to add a note detailing which property the expense belonged to you may have to do extra investigative work.

A third major issue we found was that you can’t store your lease documents, or enter any of your property details into the system.

Ultimately, this software isn’t designed for landlords. Freshbooks is designed for freelancers and small business owners. People who work on a job by job basis and need to bill multiple clients. It’s primary, and we think best feature, really is it’s invoicing and billing. For landlords this is not that useful, tenants are contracted to pay rent each month and shouldn’t need to be invoiced monthly. In fact, every email that needs to be sent requesting payment suggests these tenants are problematic.

Related Article: Should you Use Quickbooks for Rental Property Accounting?

Alternative Software Solutions to Freshbook for Rental Property Management

We’d argue, that there are a few key issues which would eventually cause issues and endless frustration for a landlord. The time-saving software you are paying for could end up doing just the opposite. On a more integral level, it is missing a few features which landlords have come to expect from a property management solution. This lack could inhibit your ability to scale and result in you needing to switch over to a new system at a later date – a completely unnecessary and immensely tedious task.

Below we’ve created a quick feature list outlining a few of the customary features that a property management software even one designed for rental property accounting should have.

Feature

Landlord Studio

Freshbooks

Connect your Bank Account Yes Yes
Income and Expense Tracking Yes Yes
Smart Scan Receipt Yes No
Dashboard Yes Yes
Reporting Yes Yes
Schedule E Report Yes No
Automate Rent Reminders Yes Yes
Send Invoices and Receipts Yes Yes
Late Fees Yes Yes
Set Recurring Expenses Yes Yes
Tenant screening Yes No
Multi-user access Yes Extra cost
Collect Payments Coming Soon* Yes
Customise expense categories Yes No
Categorise by property Yes No
Track income against property,
unit, or organization
Yes No
Store Lease Documents Yes No
Mileage Tracking Yes No
Lease Tracking Yes No

* Expected release date for tenant payments is August/October 2020

The right software as we stated earlier in this article depends on your particular needs. How many properties do you have? How many many tenants? Do you have a property manager? Do you have month to month leases or do you perhaps run short term Airbnb rentals? Residential properties or commercial?

Listen to the Podcast: BRRRR Strategy Explained with Matt McKeever

Landlord Studio and your Property Management Accounting needs

Landlord Studio is a solution that is specifically designed for DIY Landlords of residential real estate who wish to play an active part in their rental property management. We have some commercial real estate on our system and quite a few Airbnb/ short term rentals as well.

Our software then is pretty adaptable, however, we know that there is no one-size fits all solution for the market which is why we offer a 14 day free trial along with extensive educational materials so that people can try before they buy.

landlord studio dashboard and app
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Ben Luxon

"Ben is an author and real estate enthusiast. His interest in all things entrepreneurial has led him to work with real estate professionals all over the world, distilling their knowledge into articles and Ebooks. His love of travelling has taken him to over 10 countries in the last year, where he has sampled the craft beer of them all."

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