Do You Need Custom Real Estate Development Accounting Software? Essential Features to Look for

07 May, 2024

Real estate is an industry that’s been plagued by financial complexities, and looks like one that’s most likely to benefit from tech. Is that true, though? After all, there’s a fair amount of inertia fueled by the homeowners’ and tenants’ anxieties, and any tech that’s entering that market needs to mitigate that. As real estate professionals navigate diverse property portfolios, intricate lease agreements, and evolving regulatory requirements, the question in terms of tech goes as follows: Do you actually need custom real estate accounting software?

In this article, we’ll explore the essential features to look for in real estate accounting software solutions and discuss when custom development may be necessary to meet your specific business needs. The difficult part is that you may be either a property manager, investor, or developer, and of course that will skew your perception of any digital system out there. And there’s no real common ground here, unless some custom systems are in place, designed specifically for the type of business yours is.

We’ll try to tackle this Gordian knot by understanding the key considerations in choosing the right accounting software. After all, it’s essential for optimizing financial processes and driving success in the competitive real estate market, and that’s something everyone will benefit from.

The current state of Real Estate accounting software

Real estate as an industry has seen its highs and lows in any country over the past decades, what with all the shocks this blue globe has experienced since 2000. The real estate accounting software industry, though, has witnessed significant growth and innovation, simply because difficult times call for efficient automated solutions to manage complex financial transactions, property portfolios, and regulatory compliance requirements.

According to a survey conducted by the National Association of Realtors, 80% of real estate professionals cite the adoption of technology as essential for maintaining a competitive edge in the market. This sentiment accounts for a rising demand for real estate accounting software solutions, with the global market expected to reach $10.55 billion by 2026, growing at a CAGR of 9.3%. Moreover, data is becoming more important: a report by Deloitte cites 72% of real estate executives prioritizing investments in analytics and reporting tools.

Basically, numerous real estate professionals seek to streamline operations, improve accuracy, and gain better visibility into their financial performance, so the market for accounting software tailored to the needs of the industry has expanded rapidly.

Meanwhile, based on our own experience, the key trends shaping the real estate accounting software industry over the past 5 years include:

  1. Cloud-Based Solutions: Cloud-based real estate accounting software has become increasingly popular due to its flexibility, scalability, and accessibility. By leveraging cloud technology, real estate professionals can access their financial data from anywhere, at any time, and collaborate with team members seamlessly. Cloud-based solutions also offer enhanced security features and automatic updates, reducing the burden on IT teams and ensuring compliance with data protection regulations.
  2. Automation and AI: Automation and artificial intelligence (AI) are transforming the real estate accounting landscape by streamlining repetitive tasks, improving accuracy, and enabling predictive analytics. AI-powered algorithms can automate data entry, invoice processing, rent collection, and financial reporting, saving time and reducing manual errors. Machine learning algorithms can also analyze large datasets to identify patterns, trends, and insights that help real estate professionals make informed decisions and optimize their financial strategies.
  3. Integration with PropTech: The integration of real estate accounting software with property technology (PropTech) solutions is becoming increasingly common, allowing seamless data exchange between different systems and platforms. Integration with property management software, CRM platforms, and IoT (Internet of Things) devices enables real-time data synchronization and enhances operational efficiency. For example, real estate accounting software can automatically reconcile rent payments, track maintenance expenses, and generate financial reports based on data collected from IoT sensors installed in buildings.
  4. Regulatory Compliance: Regulatory compliance remains a top priority for real estate professionals, particularly in light of evolving accounting standards and tax regulations. Real estate accounting software solutions are continuously updated to ensure compliance with industry-specific regulations, such as GAAP (Generally Accepted Accounting Principles), IFRS (International Financial Reporting Standards), and tax laws governing real estate transactions. Features such as built-in audit trails, customizable reporting templates, and automated tax calculations help real estate professionals stay compliant and mitigate risk.
  5. Customization and Scalability: As real estate companies vary in size, structure, and business model, the demand for customizable and scalable accounting software solutions continues to grow. Real estate accounting software vendors offer flexible pricing plans and modular features that allow clients to tailor the software to their specific needs and scale up as their business grows. Customization options may include configurable workflows, user permissions, reporting dashboards, and integration capabilities, ensuring that the software adapts to the unique requirements of each client.

Out-of-the box or custom?

So should you go with a custom-built solution or adopt an out-of-the-box one? The paradox here is that almost everyone will say a particular ready-made one is perfect – but only based on what their role in the real estate process will require. In other words, the more your business relies on cooperation between stakeholders, tenants, owners, landlords, developers, etc., the more you’ll be likely to require a custom solution. Because in these cases, you will have to disentangle multiple financial realms from each other, while still retaining a certain connection between them to be able to enjoy well-tuned dashboards.

First things first, though.

Of course, opting for an out-of-the-box solution offers the allure of immediate implementation. These solutions come pre-packaged with a suite of features designed to cater to a broad spectrum of needs. Yet, in their universality lies a limitation – they may not perfectly align with the specific nuances of every business.

On the flip side, custom-built software holds the promise of tailor-made perfection. It’s the bespoke suit of the accounting world, meticulously crafted to fit the contours of a particular business model. Customization empowers real estate professionals to cherry-pick features, design workflows, and integrate systems in a manner that mirrors their unique processes and objectives.

In short, custom-built software is particularly beneficial for:

  • Complex Development Projects: Real estate developers managing large-scale or multi-phase projects benefit from software tailored to track costs, revenues, and project milestones accurately. For instance, a developer handling a multi-phase residential development may need custom software for construction progress tracking and revenue recognition.
  • Diverse Property Portfolios: Property management companies overseeing varied property types require flexible accounting solutions. Custom-built software can offer modules for lease accounting, reporting templates, and automated workflows tailored to each property type. For example, software for retail property management may include features for percentage rent calculations and common area maintenance charges.
  • Real Estate Investment Trusts (REITs): REITs have unique regulatory and tax requirements. Custom-built software can handle specialized calculations for taxable income, dividend distributions, and regulatory filings specific to REITs. For instance, software for healthcare REITs may address compliance with healthcare regulations and reporting requirements for healthcare-related revenue and expenses.

While off-the-shelf software offers quick deployment and cost-effectiveness, custom solutions provide tailored functionality that evolves with the business. It’s a dynamic choice, shaped by considerations of scalability, competitive advantage, and regulatory compliance. Ultimately, the decision isn’t just about software – it’s a strategic investment in the future of the business, ensuring it remains agile and adaptable in an ever-changing landscape.

Essential features to look for

When selecting real estate accounting software for your business, it’s important to consider a range of features that you really care about: that is, ones that actually streamline your financial operations, enhance productivity, and improve decision-making. Here are some key features we’ve noticed our customers to particularly look for.

Bill Pay and Tracking

Efficient bill pay and tracking capabilities are indispensable for real estate professionals, as they manage a myriad of expenses related to property management, utilities, maintenance, and other operational costs. According to a survey conducted by the National Association of Realtors, 78% of property managers consider managing finances and accounting tasks as one of the most time-consuming aspects of their job. In fact, a study by Deloitte found that businesses that automate their accounts payable processes can reduce processing costs by up to 80%.

Moreover, real-time expense tracking is essential for maintaining financial visibility and ensuring proactive decision-making. After all, about 2/3 of property managers (across reports) are known to believe that real-time financial reporting is critical for effectively managing their properties. This means the winning software is something that allows you to track expenses in real-time and generate detailed reports for analysis. By leveraging advanced reporting capabilities, real estate professionals can gain insights into spending patterns, identify cost-saving opportunities, and optimize their financial strategies for greater profitability and success.

Tenant Portal and Online Rent Payment

A tenant portal with online rent payment functionality has become increasingly essential in today’s digital age, offering tenants convenient and secure ways to interact with property managers. According to a study by Buildium, 82% of tenants prefer to pay their rent online, highlighting the importance of providing digital rent payment options. Therefore, it’s crucial to invest in real estate accounting software that offers a user-friendly tenant portal interface with seamless online rent payment capabilities. A number of well-known software platforms such as AppFolio and Buildium have made a name for themselves by providing robust tenant portals that allow tenants to easily pay rent online, view lease agreements, submit maintenance requests, and communicate with property managers, leading to higher tenant satisfaction and retention rates.

At the same time, secure payment processing is paramount to protect sensitive financial information and ensure compliance with data protection regulations. A report by TransUnion found that 76% of renters are concerned about the security of their personal and financial data when making online payments. Not that there aren’t any platforms that allow that, really: real estate accounting software solutions such as Yardi Voyager and Rent Manager were popular as recently as 2022 exactly for that reason. They tend to offer advanced security features, including PCI compliance and encryption protocols, to provide tenants with peace of mind when making online rent payments. Additionally, automated rent reminders help ensure timely payments and reduce delinquencies, enhancing cash flow management for property owners and managers.

Owner Portal

An owner portal is essential for providing property owners with real-time insights into their investments. Almost all property owners consider access to financial reports and performance metrics crucial for evaluating property management services. Therefore, it’s vital to select real estate accounting software that offers an intuitive owner portal interface. That’s why leading software platforms have opted to provide customizable reporting options, allowing property owners to track financial performance, occupancy rates, rental income, expenses, and property maintenance activities with ease and convenience. This, however, usually comes at the expense of other functions.

QuickBooks (and/or similar platform) integration

QuickBooks is, of course, a big deal. After all, this is one of the most widely used accounting software solutions, and integrating it, or other popular accounting software can significantly enhance the efficiency and accuracy of real estate accounting processes. By integrating real estate accounting software with QuickBooks, property managers and real estate professionals can streamline data synchronization between financial systems, eliminating the need for manual data entry and reducing the risk of errors. This integration enables seamless transfer of financial data such as invoices, transactions, and expenses, ensuring consistency and accuracy across platforms.

Moreover, real-time synchronization between real estate accounting software and QuickBooks allows for up-to-date financial reporting and analysis, empowering decision-makers with actionable insights into their property portfolios. When selecting real estate accounting software, it’s essential to prioritize solutions that offer easy integration options with QuickBooks or other popular accounting software solutions such as Xero, FreshBooks, or Wave. These integrations not only enhance efficiency but also ensure compatibility with existing accounting workflows and systems. By seamlessly connecting real estate accounting software with QuickBooks, real estate professionals can streamline financial reporting, automate data entry, and ensure data consistency, ultimately improving operational efficiency and enabling better decision-making.

Financial Reporting

Robust financial reporting capabilities are essential for real estate professionals to track key performance indicators (KPIs) and make informed business decisions. According to a survey by Deloitte, 85% of real estate executives believe that effective financial reporting is critical for achieving strategic objectives. The resulting directive is simple: choose real estate accounting software that provides customizable reporting templates, real-time dashboards, and drill-down functionality. Notable software platforms such as Yardi Voyager and MRI Software offer advanced reporting features, allowing users to analyze profitability, monitor cash flow, and gain actionable insights into their financial data with ease and precision.

Maintenance Request Management

Effective maintenance request management is crucial for ensuring the smooth operation of real estate properties and enhancing tenant satisfaction. According to a survey by industry experts, 70% of tenants consider timely maintenance response as a top priority when evaluating rental properties.

Several widestream software platforms allow tenants to submit maintenance requests online, track work orders, assign tasks to maintenance staff, and monitor progress in real-time. By leveraging these features, property managers can streamline maintenance processes, address issues promptly, and minimize downtime, ultimately improving tenant satisfaction and retention rates.

Smart Bill Entry

Smart bill entry features leverage optical character recognition (OCR) technology to automatically extract data from invoices and bills, reducing manual data entry and minimizing errors. Look for software that offers smart bill entry functionality to streamline invoice processing and accelerate accounts payable workflows.

Cash Reconciliation

Cash reconciliation features play a vital role in maintaining accurate financial records for real estate properties. According to industry research, 60% of real estate professionals cite cash reconciliation as a key factor in financial management. Therefore, it’s crucial to select real estate accounting software that offers automated cash reconciliation capabilities. Leading software solutions streamline the reconciliation process by reconciling bank accounts, tracking deposits and withdrawals, and identifying discrepancies between bank statements and accounting records. By automating cash reconciliation, property managers can ensure accuracy, minimize errors, and maintain financial transparency with ease and efficiency.

Document Management

Document management features may be hated, but are still essential for maintaining organized and accessible records in real estate management. According to industry surveys, 75% of property managers consider efficient document management crucial for compliance and operational efficiency. Therefore, it’s imperative to choose real estate accounting software that offers robust document management capabilities. Leading software solutions provide secure document storage, version control, and search functionality, allowing users to store, organize, and access important documents such as lease agreements, contracts, vendor invoices, and compliance documents with ease. By enhancing document management efficiency, real estate professionals can ensure compliance, streamline operations, and mitigate risks effectively.

Conclusions (as of 2024)

Off-the-shelf options are a great immediate “pain relief”: they offer convenience and on-the-spot deployment, and you’re actually lucky if your company can truly benefit from one. However, the most innovative companies will need custom-built solutions, simply because they tend to occupy the niches that are at the intersection of the traditionally alienated roles. In this context, custom-built software presents an opportunity to tailor your accounting solution to fit your exact requirements. Whether you’re managing diverse property portfolios, overseeing complex development projects, or navigating regulatory compliance, the decision to opt for out-of-the-box or custom solutions is multifaceted.

If you find yourself grappling with the limitations of pre-packaged software or seeking to gain a competitive edge through tailored functionality, it may be time to explore custom real estate accounting software. To embark on this journey of customization and innovation, consider reaching out to a trusted software development agency. With their expertise and collaborative approach, they can help bring your vision to life, ensuring that your accounting software aligns seamlessly with your business objectives and propels you toward success in the dynamic real estate landscape. Ready to take the next step? Contact us to discuss your custom software needs and unlock the full potential of your real estate operations.

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