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What Would You Do Here? Tackling a Real Estate Cleanup

I recently had a real estate investor contact me in need of a financial cleanup and catch-up for the current year. She admitted her books are in disarray and expressed concern about her ability to file taxes.

After a brief 15-minute conversation and a quick review of her records, I can confirm the situation is as chaotic as she feared. The investor owns three LLCs that are hopelessly entangled:

Residential Rental Real Estate Company
Commercial Real Estate Ventures
Interior Renovation Business

While she has separate QuickBooks accounts and bank accounts for each LLC, she often transfers funds between businesses. These funds primarily cover real estate acquisitions, general purchases, payroll, or contractor payments. Thankfully, she assures me that no personal transactions occur across these businesses.

The residential rental property LLC, being her oldest and most active company, is the primary focus of this cleanup. It’s the only one she wants to tackle right now, leaving the other two for later discussion.

She previously outsourced her Bookkeeping to an online Accounting service based on the West Coast but discontinued their services at the end of 2023 due to high costs. Since then, she hasn’t engaged a new bookkeeper, leading to a backlog of about 1,100 transactions for the residential business alone.

Faced with this situation, I’m curious—what would you do? This challenge is unlike any Bookkeeping cleanups I’ve handled before, especially involving mixed personal and business transactions, typically in sole proprietorships or single-member LLCs. I have yet to work with a real estate investor juggling multiple LLCs intertwined like this.

If I decide to take on this project, I’m contemplating charging between $5,000 and $10,000. But is this reasonable for such a complex task?

I welcome any suggestions or insights you might have.
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Taking on the project of cleaning up the Bookkeeping for a real estate investor with multiple LLCs and intertwined finances can be daunting, but it’s achievable with a systematic approach. Here’s a step-by-step guide on how to handle this situation:

Initial Assessment and Agreement

Full Assessment: Start by scheduling a meeting to fully understand the scope of the work. Analyze the extent of the mess in the residential property LLC and the interplay between the three LLCs. Confirm all the transaction discrepancies she mentioned.
Set Clear Expectations: Outline the services you’ll provide, focusing on cleaning up and catching up the residential property LLC for the current year. Clarify that addressing the other two LLCs will require separate engagements.
Formal Engagement Letter: Draft an engagement letter that outlines your responsibilities, the estimated timeline, deliverables, and fee structure. Ensure both parties agree and sign before starting the project.

Cleanup Strategy

Organization Phase:
- Consolidate Transaction Data: Gather all financial records, including bank statements, receipts, and transaction records to ensure no missing data.
- Account Structure Review: Check the QuickBooks setup to ensure accounts are correct for a residential real estate business. Adjust as necessary.
Reconciliation and Categorization:
- Reconciliation: Start by reconciling bank statements for the residential rental real estate company. This will highlight discrepancies and unidentified transactions.
- Transaction Categorization: Go through each transaction and categorize correctly as per IRS guidelines. For inter-company transactions, maintain a detailed record and apply proper Accounting treatment to clear these balances.
Inter-Company Transactions:
- Record and Adjust: Document every time money was transferred between LLCs and adjust financial statements accordingly.
- Interest and Loan Accounts: Think about creating loan or owner’s equity accounts in the books to track these inter-company transfers accurately.
Regular Updates: Provide the client with regular progress updates to ensure transparency and confidence in your work.

Catch Up and Compliance

Complete Missing Transactions: Ensure that you are up-to-date with all entering and categorizing of approximately 1100 transactions.
Tax Preparation: Collaborate with a tax professional, if needed, to ensure the corrected books reflect accurate tax filing statuses.

Maintenance Recommendations

Recommendations for Future: Once the cleanup is complete, suggest implementing a system for regular Bookkeeping checks, such as monthly reconcili

One response

APAdmin

26 February 2025 at 2:39 PM
Taking on the project of cleaning up the Bookkeeping for a real estate investor with multiple LLCs and intertwined finances can be daunting, but it’s achievable with a systematic approach. Here’s a step-by-step guide on how to handle this situation:

Initial Assessment and Agreement
1. Full Assessment: Start by scheduling a meeting to fully understand the scope of the work. Analyze the extent of the mess in the residential property LLC and the interplay between the three LLCs. Confirm all the transaction discrepancies she mentioned.
2. Set Clear Expectations: Outline the services you’ll provide, focusing on cleaning up and catching up the residential property LLC for the current year. Clarify that addressing the other two LLCs will require separate engagements.
3. Formal Engagement Letter: Draft an engagement letter that outlines your responsibilities, the estimated timeline, deliverables, and fee structure. Ensure both parties agree and sign before starting the project.
Cleanup Strategy
1. Organization Phase:
  - Consolidate Transaction Data: Gather all financial records, including bank statements, receipts, and transaction records to ensure no missing data.
  - Account Structure Review: Check the QuickBooks setup to ensure accounts are correct for a residential real estate business. Adjust as necessary.
2. Reconciliation and Categorization:
  - Reconciliation: Start by reconciling bank statements for the residential rental real estate company. This will highlight discrepancies and unidentified transactions.
  - Transaction Categorization: Go through each transaction and categorize correctly as per IRS guidelines. For inter-company transactions, maintain a detailed record and apply proper Accounting treatment to clear these balances.
3. Inter-Company Transactions:
  - Record and Adjust: Document every time money was transferred between LLCs and adjust financial statements accordingly.
  - Interest and Loan Accounts: Think about creating loan or owner’s equity accounts in the books to track these inter-company transfers accurately.
4. Regular Updates: Provide the client with regular progress updates to ensure transparency and confidence in your work.
Catch Up and Compliance
1. Complete Missing Transactions: Ensure that you are up-to-date with all entering and categorizing of approximately 1100 transactions.
2. Tax Preparation: Collaborate with a tax professional, if needed, to ensure the corrected books reflect accurate tax filing statuses.
Maintenance Recommendations
1. Recommendations for Future: Once the cleanup is complete, suggest implementing a system for regular Bookkeeping checks, such as monthly reconcili
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What would you do here? Real Estate clean up mess.

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