By Garrett Sutton, Esq.
It is far too easy for finances to get tangled up, even for the most well-intentioned and serious-minded of investors. That’s why my advice is to do it right the first time. Set up your books so that your investment accounts are separated from your personal and business accounts. Treat your investments seriously, as you would any business, not only because you will be taken more seriously this way, but also so that you can closely track where the money is coming from and where it’s going. It’s easier to track how well your investments are performing if they have their own accounts.
Plus, each investment you make is its own separate business, its own legal entity, and a separate account enables transparency for your bookkeeper, your accountant, and the IRS, should you happen to be audited. (And know that if you operate a business as a sole proprietor and handle real estate in your individual name you have a five times greater chance of an IRS audit than if you operate through an entity.)
Once your accounts are set up, the tax savings can begin. This is also the time to bring your bookkeeper and accountant on board to ensure the health of your finances, so you can grow your investments.
For more information on this, please read my book Loopholes of Real Estate.