What Is Real Estate Accounting

Real estate accounting is a type of accounting that deals with the financial aspects of any real estate transaction. Read on to find out more.

What Is Real Estate Accounting?

Put simply, real estate accounting is the financial planning, strategizing and reporting involved with any real estate transaction. Real estate accountants advise clients in regards to their residential and commercial real estate and property interests and investments. Accountants who specialize in real estate are highly knowledgeable in a variety of areas, including residential, commercial and industrial property investment and development, as well as construction and manufacturing. Real estate accounting helps clients with tax planning and determining risk exposure in real estate transactions.

Why Is Real Estate Accounting Important

More than other markets, the real estate market is continuously and often dramatically in flux. In both the private and commercial sectors, real estate value can often take sudden and drastic turns: million-dollar properties can be bought at bargain prices, while the value of a property bought for nearly nothing can skyrocket almost overnight.  While the real estate market can be unpredictable, real estate accountants specialize in forecasting market trends, so that clients can minimize their risk and debt exposure and maximize their investment returns. Real estate accounting covers private and commercial investment funds, property management, tax planning and debt restructuring.

What Does a Real Estate Accountant Do?

Real estate accountants provide clients with financial strategies and advise. They also prepare reports on behalf of property owners and residential, commercial and/or industrial real estate developers. Real estate accountants participate in planning, investment, budget and tax reporting activities and prepare or contribute to documents such as lease and rental agreements, annual reports and cost estimates. In addition, they calculate tax liabilities, prepare tax returns, coordinate appraisals, asset evaluation and capitalization activities in accordance with the needs and goals of their clients.

Real estate accountants are experts in every aspect of real estate transactions, including property sales, rentals, leases, time-sharing, development expenses, operational costs and profits. Typically, they hold a Bachelor's Degree in business or accounting, in addition to receiving their CPA (Certified Public Accountant) license. Most states require that real estate accountants receive their CPA but not all.

Park Place or Baltic Avenue

Real estate accounting is necessary for any real estate transaction, no matter how big or small. While some real estate accountants specialize in the financial dealings of large-scale development projects, such as building or acquiring multi-million dollar private or commercial properties, others specialize in smaller but equally valuable areas. Real estate accountants will help a family purchase their first home, or a landlord draft an equitable lease agreement.

Whether you're looking for a swanky place on Park Ave., or a starter home on Baltic, real estate accounting is a crucial part of any smart and real estate transaction.

Hire a Professional

Accounting is more than just crunching numbers. When it comes to real estate accounting, it's best to leave it up to the professionals. A wrong number could lead to the loss of a business deal or real estate sale. In addition, real estate accountants provide strategic advice and financial consultation so that clients can make informed decisions about their real estate investments.

Miller Kaplan is a leading certified public accounting firm in the US and specializes in real estate accounting ( millerkaplan.com/industries/real-estate/ ) services along with business management, tax planning, 401k audit, trademark enforcement, licensing and royalty auditing services for high net worth individuals and industries. To know more on why you need real estate accounting, visit Biggerpockets.com.