Toolbox: Xero for property investors

Slick accounting for property investors

Price: $49 per month first entity and then $10 thereafter*
Overall rating: 2 out of 5
Website: www.xero.com

Xero is a slick online accounting package, which has been adapted for use by property investors, property managers and real estate agents.

It allows landlords to automate the tasks that they previously did manually and keep track of rents, disbursements and more.

As an online system there is no need to download software to your computer or keep your valuable data on a hard drive, which might die. If you allow others such as your accountant or mortgage broker access, they can automatically see the accounting status of a property, properties or all the properties within a LAQC.

The set up process was straightforward and I didn’t encounter any huge difficulties. It involves going through a short sign-up process, clicking on an email link and then adding an “organisation”, which is effectively an LAQC, or trust in the case of landlords. Property managers set up a trust and landlords could have access to the data relating to their properties, providing they pay a monthly fee, or the property manager charges for this.

It was necessary as a landlord to download a CSV file containing a standard chart of accounts for property investing, although if I hadn’t chanced upon the “Property Investor Guide” on Xero’s website I may not have realised this and set up accounts manually.

Once set up, landlords then assign tracking details to each property, and then need to establish recurring invoices for the rent. Expenses such as maintenance, rates, and so on can be entered as individual items or a recurring cost.

One feature I particularly liked is that bank statements are imported automatically overnight. Then it is a matter of reconciling payments, many of which the system recognises automatically.

Most competing products can import bank statements, but it’s a manual process and unless you’re super organised you could miss a day or two or even a week and get behind with tenants who aren’t paying rent on time.

Advantages
·    Can be accessed anywhere in the world on virtually any Internet connected PC
·    Small business owners can run their accounts through this system as well as their properties. Likewise, an investor running an LAQC for buy and hold properties and another entity such as a trading trust, can have separate entities
·    The data belongs to the account holder and as a result Xero says it will provide it to any customer who wants to move on
·    Because it’s online you can invite other people including your accountant or even mortgage broker to access your financial data
·    Unlimited access to email help, covered in your monthly fee.

Disadvantages
·    The software is leased, not bought, so there is a monthly charge
·    It lacks full property management software functionality such as a diary, contacts, pre-populated forms such as rental agreements and 10-day notices
·    The report centre isn’t tailored to property investors
·    There is nowhere to upload photos etcetera and other data from inspections, 10-day notices, and Tenancy Tribunal hearings
·    The help centre is aimed at regular businesses, not property investment. For example property investors don’t typically have “expense claims” or “business credit cards”
·    It can’t currently import contacts from other programmes such as Microsoft Outlook or Access.

I’ve rated this product down. There’s no doubt it’s slick and easy to use, but it’s an accounting package, not a full property management package. It doesn’t have the features that a property manager needs such as property inspections, tenant and prospects’ details, specialist reports like the Rent Summary report in the Department of Building and Housing’s format.

The software is a work in progress says Xero’s founder Rod Drury, a well-known IT-entrepreneur who won a World Class New Zealand award in 2008 and was NS Hi-Tech Entrepreneur of the Year in 2006 and again in 2007.

But there are some features that benefit property investors, such as:

·    The ability to add and remove chunks from the “Dashboard”. Landlords want to see outstanding rent payments at a glance, not necessarily money going out or money coming in
·    A check box during the set up process for landlords so that the features needed automatically load.

Call me paranoid, but one downside I detected was that there is nothing stopping the Inland Revenue Department approaching Xero and asking for access to property investors’ accounts. The IRD can do this for individual investors directly, but Xero’s entire system would be a much easier target, giving it access potentially to hundreds or thousands of investors’ accounts on one server.

Xero’s main competitors for property investment management are PC Property Manager and RentMaster.

*The first LAQC or company is charged at $49 a month. Each subsequent entity is $25 a month if it is GST registered, or $10 for non-GST registered ones such as LAQCs.

Contact: 0800 GET XERO (0800 438 9376)
System requirements: Internet access.

Verdict: Slick accounting and property management software
Pros: Easy to set up and use
Cons: It is not a full property management package