One common 'niche' or specialized practice for Accountants, Bookkeepers, Consultants and ProAdvisors is 'Real Estate.' Like surgeons, who then have a sub-specialization of say 'Orthopedic' surgery, or 'Thoracic' surgery, an Accountant with a Real Estate niche may choose to sub-specialize in either 'Commercial' or 'Residential' real estate. The key is to always know the differences because they are not handled in the same method as we will see in this month's "Know Your Niche: Real Estate Accounting" feature.

Residential-First Software

As a commercial real estate business, you need tools that meet your unique needs. This means handling commercial accounting, complicated property management, and reporting on large, diverse portfolios, allowing you to work efficiently and focus on growth.

 If your business still relies on QuickBooks alongside a residential real estate-focused software, you’re not making use of any of these key tools. Read on to discover why this setup is the worst-case scenario for a commercial real estate business and discover a powerful alternative.

How are Residential and Commercial Real Estate Different?

While residential and commercial real estate do have many similarities, it’s crucial to understand the differences. As a business owner or investor, your day-to-day tasks and challenges in residential real estate will be very different from those in commercial real estate.

Residential real estate businesses:

• Often own smaller numbers of properties including houses, condos, and apartment buildings
• Manage basic lease tracking
• Stay on top of regular upkeep and maintenance for tenant homes
• Handle communications with a tenant base of individuals and families

Commercial real estate businesses:

• Often own larger portfolios including retail, industrial, warehouse, healthcare, and a variety of other property types
• Track complex leases, including gross and triple-net (NNN) lease types
• Manage maintenance for specialized and industrial equipment for diverse tenants
• Handle communications with a tenant base of other businesses

Why Can’t Residential-First Software Meet Commercial Real Estate Needs?

While residential-first software may meet some commercial real estate needs, it’s unlikely to handle everything. This is because the two real estate types are too different. Residential real estate businesses, for example, do not use complicated NNN leases or perform common area maintenance (CAM) reconciliation each year. Nor do residential leases have built-in annual lease escalations. Therefore, residential software isn’t built to perform these tasks.

 However, NNN leases, CAM reconciliation, and annual escalations are crucial parts of commercial real estate. You need accounting and property management software built to handle larger portfolios and more complex accounting needs.

Drawbacks of Disconnected Systems

It makes sense to use software that is designed for your type of business. But why are disconnected systems such a big issue in commercial real estate? After all, it’s not easy to find software that can do everything you need: accounting, maintenance, tenant communications, and more. Many businesses rely on QuickBooks for accounting and another platform for property management as they actively work to automate their operations.

But while it’s true that you might need more than one platform to handle all these things, those platforms must integrate smoothly and share key data automatically. Below, we’ll explore how disconnected systems hold your business back.

Double-Entry Errors

When your property management and accounting platforms don’t sync, you’re forced to enter all essential financial information twice. That means you’re twice as likely to run into simple human error from typos or forgetfulness, leaving your team unsure what the correct number is or where to find it. If not caught, basic errors like this turn processes like CAM reconciliation into drawn-out nightmares.

Plus, there is often a delay in closing out the books in one system and manually bringing them into QuickBooks, creating additional confusion about what is accurate. Dealing with outdated, awkward systems like this risks additional work, incorrect calculations, and even the loss of tenant trust.

Lack of Updates and Visibility Across Platforms

When your platforms synchronize properly, information updates automatically everywhere. When they don’t, your visibility is limited. You’ll only ever be able to see part of the financial picture at a time. In this situation, it’s not easy to make strategic decisions about your portfolio as a whole.

In addition, without integration, programs may not update automatically. This leaves you without the latest and best tools to manage your commercial real estate business. And if only one platform updates, it might leave another behind, making it even harder to work across disconnected systems as layouts and functions change.

Higher Price, Lower Productivity

When you use disconnected platforms, you pay more to do less. Paying for two platforms that don’t work well together forces you to pick up the slack with awkward manual workarounds. This solution isn’t efficient for your time or your budget.

 As mentioned above, though, you might really need two platforms to handle all of your accounting and property management tasks. Many programs that offer both of these in a single place actually have limited functionality on one or both sides. In this case, it’s likely worth paying for two programs if they sync up smoothly. Look for property management software that features two-way integration with QuickBooks to get the most for your money.

The Solution: Integrated Commercial Property Management Software

If the situations above sound familiar, you might wonder what the alternative is. You might even believe that you can work with your current setup because it's familiar to your team, even if it comes with issues. However, it’s worth learning a new system when it means upgrading to software that improves efficiency and visibility across your entire portfolio.

Integrated property management software like STRATAFOLIO syncs in both directions with QuickBooks Desktop or Online, ensuring your data is always up to date and accurate across both platforms. You can leverage your existing QuickBooks account for powerful accounting tools while taking advantage of the commercial real estate-focused aspects of property management software. Key tools include 1-click CAM reconciliation, NNN and other complex lease tracking, efficient lease escalation management, and a variety of reports that let you see the big picture or zoom into a single property.