Join our mailing list to receive the latest news and updates from our team.

You have Successfully Subscribed!

Tracking Your Finances Through Bookkeeping with Debbie Mullins

GDNI 32 | Bookkeeping


Every new business must start doing bookkeeping. Tracking your finances is necessary to keep all documents in order. Debbie Mullins of Cole Ten Group talks about the fundamentals of setting up your books at the early stage of your business for you to be able to save a lot of headache and time. It is important having a second eye and working through things as people tend to commit errors in their books. At the end of the day, every business must stand alone and should not co-mingle with personal stuff.

Listen to the podcast here:

Tracking Your Finances Through Bookkeeping with Debbie Mullins

We have a special guest. We have Debbie Mullins with ColeTen Group. We got Debbie on to talk about bookkeeping because there was a lot of discussions. There are a lot of Facebook groups and BiggerPockets and other groups just on people trying to arrange your books because a lot of individuals started doing more deals, especially in the circles that I am. A lot of times I would now say, “Talk to a bookkeeper.” Debbie, you do books not only for myself but a lot of other note investors out there so we want to bring you on and have you talk about some of the top do’s and don’ts with note investing.

Thank you. I’m excited to be here. I’m coming to you from Fort Worth depending on where you are. I’m excited to be here now.

Debbie is not an accountant so she’s not going to provide any advice on whether you should have an LLC or an S corporation or things along those lines. This is more geared toward if you’ve got a JV partner or just have things setting up your books and making sure you’re doing them properly. If you’re looking to have somebody do them, talk to Debbie. Looking at the books and the balance sheets and trying to get things to line up and stuff, it is a little confusing. Debbie, what are some of the things that you have seen in the past? I’m sure you’ve had people come to you after their books have been a little bit messy in some sense. I’m curious to some of the things that you see or some of the mistakes you see people make that are simple things to fix that if you start early enough when you’re doing your books, it can save you a lot of headache and time.

A lot of times you don’t start doing the bookkeeping until you’re well into learning about and getting involved in note investing. I certainly start working with clients who have been doing it for a year or two on their spreadsheet. They feel that they are large enough that they need to now work with a bookkeeper. It’s important that you get started with focusing on your books, whether it’s with a bookkeeper or not from day one because it is the most important part of your business. It guides every transaction that you ever make and any check that you ever write in any deposit that you ever received.

For people who aren’t ready to work full-time with a bookkeeper, we might do different levels to help investors. Sometimes I just set up the QuickBooks file initially and then turn it over to investors to work on themselves. There are times where I can just schedule half days for those people who are working on their books themselves. We look at your profit and loss and we look at your balance sheet and we make corrections. I’m doing that with you. You’ll learn a little bit along the way so that maybe the next quarter or in six months when we do it again, you could feel a little more comfortable with it.

I do the books monthly for investors as well. If you get to that level and then you become too busy to do it yourself, that’s a great time to hand it off to a bookkeeper. You’ll learn a lot along the way and you’d be surprised how detailed and nitty gritty it can get when we’re breaking out every transaction that you’ve ever made. With that in general, you are a business and so you want to also get that business structure set up. It sounds simple, but you need a business checking account, a business savings account, and a credit card. If you do get into rentals at all when you’re taking on properties, you need a separate savings trust account for any security deposit that you might be holding.

The most important is by having an account, you cannot or you should not commingle with any of your personal funds. If you do, there are always ways to get around that. This is a business and it needs to stand alone on itself. One of the most important things you can do to protect yourself is to fall into the W-9 and the 1099. There are always lots of questions about that. Every vendor that you work with, which is anyone that you pay, you should have a W-9 on file from them. It has their name, their address, what type of entity they are, they signed it and they date it, which means that any of the information they gave you that’s inaccurate falls on them and not on you. You’re going to use that W-9 information to process 1099.

How often should you get a W-9 from people?

Get your W-9 before you ever pay anyone a dime because you will never get it after you have paid them. It’s very challenging. The reason you have to have it falls into the Patriot Act. It means that the government wants you to be able to prove that you are working with a legitimate business. It wants to prove that you’re not just creating false companies and writing checks to pretend that it makes sense that you’re writing the check to yourself. The W-9 stands on its own. It helps with 1099 but people try to find it too much. On the W-9, you’re either putting your Social Security number or an EIN number. I see people only put the four digits of their Social or they’ll leave off their EIN number. If somebody cannot give you a W-9, then it’s someone you shouldn’t be working with. It is their name, address, company information. What type of entity they are and their Social Security number or their EIN number? If you think of that the opposite, is there any reason you could not do that to somebody? They should always be able to get that.

Even if you have somebody going to do clean out on a property or things like that, even if you find them on Craigslist, get a W-9 from them. I mention that because if they ever do stiff you and don’t do all the work and you paid them, you have the 1099 so at least they’re going to get wax for the taxes that you paid them.

If they lie and if it’s signed and dated, then the responsibility now falls on them and not you. The other side of that is the 1099. In 1099, there are different types. The is a great website. It gives you lots of information about how to file a 1099. You’re probably looking at 1099 miscellaneous and/or 1099 interests. Those are the two most common that you’re going to have to send to your vendor or JV partners. There’s a lot of criteria that goes into that. It depends on the type of entity. At S corporations and C corporations, you do not have to give 1099. With personal money and private money individuals, you do not get 1099 to them either. That’s one of the biggest shocks for most people.

If you don’t 1099 them, it’s up to them to report it on their taxes then.

Everyone is required to report their income, whether or not you received a 1099. The purpose of the 1099 is to send it to the person and most importantly, send it to the government and the IRS so they have a record of it. If that person then does not report the same income, they have a way to match it. If sent it in but somebody else doesn’t report that they received that money, then that’s a red flag for the IRS. The 1099 is a tool by the IRS because everyone is required to report income regardless.

We do have a question, “On W-9, if you’re buying a note from a hedge fund, do you need a W-9 from them because you’re giving them money, but it’s part of a transaction?” If I buy a note from ABC LLC as part of a transaction because typical salaries don’t give you a W-9. Is that okay? It’s like a real estate transaction where if you’re buying a note from somebody, do you need a W-9 from them for any reason?

Everyone is required to report their income, whether or not you received a 1099. Click To Tweet

Yes, I would get a W-9 and then you’re not going to be 1099 in that person more than likely. You’re getting the W-9 because you want to make sure it’s a legitimate company. If you think about large companies, they sometimes have a full-time person who is in charge of vendors. That’s their job. It’s their vendor manager. Just like everyone else, we had databases that we’re entering our contacts and their name, their address and their phone number. What I always tell people is, “I’m going to write you a check. Can you send me your W-9 so I can put you in my system because that gives me all the information I need to enter you in my system?” Yes, always get a W-9 from somebody.

The other question is, “How do you report expenses if you hire a VA outside of the US?” I know a lot of people go on websites like Upwork and hire somebody on those sites. How do you deal with that stuff?

Are there companies in the US that you’re paying and then they’re paying the virtual assistant?

Yes, Upwork take some money from me and they pay them and I get charged a fee.

You’re still working with a US company. There are so many online options and systems that you utilize and programs out there. You’re paying monthly fees to belong to those. Are you going to get a 1099 from one of those website vendors? Probably not. Technically they should be able to send it to you. More than likely, they’re a corporation or at least an S corporation and they’re not going to get a 1099 anyway. Here’s the best tip I can ever give you. Pay for everything that you possibly can pay with a credit card because anything you pay on a credit card does not have to be reported later on a 1099. The credit card companies are reporting that. If you do this credit card set up and as you continue to use it, your line of credit will keep increasing and you can use it for more and more items. I love it if you use lots of credit cards because at the end of the year, I don’t have to do as many 1099.

What about cash advances or PayPal? You don’t need to report either.

That’s a whole another section. In running a business, you should not be using PayPal, Venmo and third-party type vendors to make financial transactions. You are a business. You should be writing checks directly from your business to whomever. You should be getting deposits directly from whomever. We don’t always physically write checks anymore, but you should check with your banks. There’s bill pay, but their pay sometimes takes a long time if you get a check to somebody. They have ACH. It wires one account to another. In some business accounts, I’ve seen it is $0.19 per transaction. You just need that person’s routing information.

We do have another question that came through. This individual gave somebody some money as a private lender and that he would be sending them a 1099, but the loan came through their IRA. You don’t do 1099 and IRA, is that correct?

Yes, and that’s important. When you’re getting money from someone or you’re getting a deposit from someone and it comes to you from John Smith personal account, now he wants to say it’s from a trust, but it’s from his personal account. When you’re getting money directly from someone, the name that you’re getting the person from needs to be in the trust in that scenario.

Somebody mentioned that they heard from another individual who a bunch of us use an accountant that mentioned something about PayPal. W-9 is the kickoff what you get from every vendor. You’re talking about the 1099 interest and the 1099 miscellaneous.

I sent you an email, Chris with a link to the 1099 miscellaneous instruction.

One question I was going to jump back to was about people doing their books and things like that. Let’s say I’m an individual who I gave somebody money to invest in a deal. Should they also be doing the books as well for their own because it’s still a business? They’re not the lead manager, but they should still be doing your books as well. Is that correct?

Everyone needs a system to be tracking any of those financial transactions. The best way to do that is in a bookkeeping system versus a spreadsheet.

GDNI 32 | Bookkeeping
Bookkeeping: In running a business, you should not be using third-party type vendors to make financial transactions. You should be writing checks directly from your business to whomever.


Whether you do it in a spreadsheet or in some fashion, whether you are investing with somebody or the lead investor, you want to keep track of everything. Just don’t take your partner’s word for it at the end of the year of how much money you got or the accounting. Make sure your books matched theirs.

When you talk about that scenario, I see that you’re getting them money and then your hands off and they’re managing it. They have to have something in place to do that and something that you can trust.

We’ve gone through the initial W-9 and 1099. What are a few other things people should be aware of?

I also emailed you a link to the IRS Schedule C. If you’re at your computer, you can always Google that form and pull it up. If you’re an LLC, most of you will be reporting on a Schedule C for the profit and loss of your business. This is something I find that as people start working with a bookkeeper and thinking about their taxes, they start understanding how that money in their LLC is now going to affect them on their taxes. When someone takes the money out of the company, it’s an owner draw and people start thinking of that as a salary or that’s their income. That’s not the case. They think, “It’s $20,000 out of the company. That’s what I’m going to be taxed on.” That’s why you need a profit and loss statement because whatever that bottom dollar is at the bottom of your profit and loss, that’s your net income and that’s the total that’s going to be rolling onto your personal taxes. You can make $100,000 and if you only take out $20,000, it’s the $100,000 that’s going to carry over.

There are two types. You can do a cash-based or an accrual-based system for accounting. Each one meets the GAAP. Can you explain to somebody the difference between cash and accrual-based? I know in QuickBooks there are reports that you can run in different ways and a lot of people sometimes just get lost with that.

For the most part, you want to be cash based. It means that when the money comes out of your account, that’s when you recognize it. When money hits your account, that’s when you recognize it. At accrual, if I send an invoice to you today and today is March 7th, I’m going to recognize that income on March 7th even if you don’t pay me until April. That’s accrual. Cash is, when you pay me in April, that’s when I have income and I recognize it in April. Accrual accounting is a little more complicated to think about. Fewer people are cash-based especially small businesses.

I had somebody email me and say, “I had a property close on December 31st. I got the money on December 31st, but I didn’t pay off the people that are part of my venture on that until January 2nd. How is that treated?”

It’s very simple because that’s also where a lot of times you tied the money that your JV partner has given you to the asset directly. It’s just a separate liability. Someone has given you money and you owe that money back. On your balance sheet, that’s handled under liabilities, but the asset is handled separately. In that same scenario, you could have sold it and made money in December. What if you didn’t pay your JV partner until February? That’s okay because they’re not connected. Let’s say you sell all of the property or sell the notes and you get that money. Let’s say you have the asset, you have the holding costs and altogether you’re making $10,000. You’re making $5,000 and you’re giving your JV partner $5,000 if you’re splitting the profit. On December 31st, that’s going to get calculated and your books are going to show that you made $5,000. Your books are also going to show that you owe your JV partner $5,000 and that hits the balance sheet. Whenever you decide to pay them, that’s fine because it’s not hitting your profit.

I want to talk about balance sheets for a second because some people may have some questions on those. What are your favorite accounting tools? What do you use?

I use QuickBooks for the desktop. It’s very different than QuickBooks online. QuickBooks online tries to do too much for therefore, it’s hard and difficult for the end user to manipulate it or even understand what’s going on behind the scenes. The desktop version, you have complete control over, not to mention there’s a huge cost of savings because you only buy the desktop version once every three or four years and even longer unless you’re just forced to update for a CPA or something. If it’s online, there’s a chunky little monthly fee. I’m a pro-QuickBooks desktop version.

I want to talk about balance sheets. If you’ve never operated a business and seeing a balance sheet for the first time, it’s confusing. Your assets have to equal your liability plus your owner equity. Debbie, if you could just explain it in simple terms. If you get $25,000 from a JV partner and $20,000 goes to the seller and $5,000 goes to holding costs for additional expenses, do you mind just spending a few minutes explaining to people what that would look like on a balance sheet or where it would go? I know some people struggle with that.

A lot of people try to tie that transaction together, but it’s not. When you get the deposit from your JV partner of $20,000, maybe $10,000 of it is to buy the asset and $10,000 of it is to cover costs. That part of it is irrelevant. The $20,000 deposit from your JV partner gets coded to one place and that’s the liability.

Your books don’t care how that money separated. In reality, you owe that person $20,000 that they just gave you. That’s your liability.

Anything you pay on a credit card does not have to be reported on a 1099. Click To Tweet

It’s all by itself. It’s not tied to the asset. You pay $10,000 for the asset and you write that check to that person. I would say check, but you can wire it or whatever the vehicle is. When you purchase that asset, it gets coded as an asset at that time. It falls towards the top of your balance sheet under the assets and it will be a $10,000 check that you wrote to that person and it gets coded up there. You create another asset account to collect and gather all of the expenses that you’re spending on that asset. It’s all by itself in a holding cost.

From one of the deals that I have, I took the names out of it but I created a little balance sheet that I can share with people. I’ll put it in so you can see historical how the money comes in from somebody, how it goes to the seller, and then how money comes in from the servicing company. That’s something that I learned the hard way about breaking out principle and interest.

When you do have those performing notes, that is key. That’s when you start to learn how your money works. Every transaction that comes in from Madison, one deposit for Madison can be broken out into six or eight different areas. The principal, those on the assets. The interest may come to you as interest income. It may all go to the JV partner. Maybe you give it all to them. You may split the interest 50/50. Those are the transactions that you’ll spend the most time on.

One question that came up that is related to this is if you have an equity partner who pays a contractor directly and that’s part of the deal that that person’s going to get that money owed, can you explain how that gets input into your QuickBooks or into the system?

It’s important that if you are managing the asset, then you pay all the bills. I know that sometimes it’s easier than the JV partner giving you money and then you’re paying the bill. That’s how it’s going to get in your book. When you start doing things outside of your business account and that person is now paying a vendor and the money never hits your account, you’re going to have to start making a journal entry. Those become a higher level of bookkeeping. You can record them, but that’s a little higher level. The most important thing you can do is to make sure it can view. If you have the asset, then you are making all of the payments.

Have that equity partner cut you the check and then you write the check to the contractor?

From a bookkeeper, that is the hardest part of bookkeeping. Someone will say they bought an asset or the JV partner gave them $70,000 and we go for a month, I don’t even know about it because it never hit the books. How do you know it happened? You want that audit trail and everything should hit your business account.

On occasion, something like that happens. It’s not the end of the world. You just got to make sure that you’re communicating with your bookkeeper or whoever it is that’s doing this to make sure they put the journal entry in. If not, it’s going to completely throw your books way out of whack.

You’ll be talking about things that I won’t even know about because I never see it. Journal entries are part of the giving and that’s how you make adjustments. In the books, it’s a higher-level entry that you’re trying to make. If you don’t understand the basics of where you’re trying to make that journal entry, then it’s hard to create one. Everything can be captured even something as simple as you went out to dinner and you use your business debit card for a personal meal. Those things can all be coded. It just becomes an owner draw out of your business account. It’s the same thing if you accidentally use your personal card to pay for a business event, we can enter that in your books as well. There’s always a way to capture something. You just want it to be as straight forward as possible.

I jumped off-topic a little bit touching on balance sheets because if it’s your first time looking at balance sheets, sometimes they’re a little confusing. Sometimes looking at, “This is double accounting method making sure it’s an asset and liability.” It just was a little confusing in some sense. I just wanted to throw that out there for people.

When you get this $70,000 in that hits, people are like, “Where is the other side of that double entry?” You have the liability. The other side of it hits your bank account as a deposit and that is the other side of the transaction because your bank account is an asset. The deposit is hitting your assets. The liability is hitting the liability side and that’s how it stays balanced. That happens behind the scenes a little bit.

That sometimes can confuse people. You need to balance it off on the liability side. Some people again get confused a little bit. My recommendation for people is to go on YouTube and just watch a fifteen-minute video on comprehension of balance sheets or understanding balance sheets. It’s very informative to get a very high-level education on them from some videos and stuff. Would you agree?

Yes, there are a lot of great short simple tutorials out there. I emailed you the link to the Schedule C. If you’re at your own company and you want to pull the Schedule C up, it will just be a PDF. At the very center of it is our expense account. People get very creative in what they think that they can charge or deduct as a business expense. If you ever look at that Schedule C, you’re going to notice that there is not a field that can be filled in that says training. You spend a lot of time and money learning about notes and training. I just want to point out that technically, there is no expense category to train to be a note investor.

What about under 27A, other expenses?

GDNI 32 | Bookkeeping
Bookkeeping: If you are managing an asset, then you pay all the bills.


There are always others. For example, you pay $97 a month for Scott Carson. For me, I code them to computer and internet category. All of the online type services get captured under that computer category.

Where would the online services go on a Schedule C?

Online services are those under computer and the internet. The website is under computer and internet, maybe software and hardware. Computer expenses are very well-known in this day and age. Every business has computer-related expenses. If you’re going someplace for an expo or some type of event and you pay a registration fee, that gets coded as a travel expense. Under travel, I have air and hotel and I have registration fees. Those types of things can be captured under travel. There’s the big one where sometimes there are large $15,000 and $20,000 costs for different training programs. With the CPAs I work with, if they see those on your books, they code them as due from a shareholder. It means you owe the company that much money back. It can set there as a due from shareholder forever, but they don’t capture that as an expense. That would be a big red flag for the IRS to see $15,000 for training.

We have a question, “Why would a note be Schedule C?” It’s more for your business or your LLC because a Scheduled D, if I recall, is for capital gains and Schedule E is more for rental property. Is that correct?

Schedule E is just the profit and loss for your company. It’s not per note. It’s for your whole company. When you give your profit and loss to your CPA, the profit and loss has subcategories. It has the total for office supplies. It has the total for your telephone expense. It has the total for your computer expenses. That CPA takes those total and puts it on the Schedule C. The bottom dollar on that Schedule C is how much money did your company make? If it made $20,000, it’s what’s going to roll onto your personal taxes. Schedule C is not for a particular note, it’s for your company.

If you have a business, it’s recommended that you have a CPA do your returns and code this. One of the questions that come is for a note business, do you need a CPA that specializes in notes? Is it just like any other business that the expenses are categorized by the bookkeeper and the CPA, whether you are selling cars or buying or buying notes? Is there a difference?

I’ve had clients who use CPAs that were not real estate investing-focused. I was surprised by some of the questions that they would ask the person about their books. It’s helpful. If you’re giving them a profit and loss and a balance sheet and they see it, they are a CPA so they would see those assets and those liabilities and they should know or they can easily research how they should handle those on your taxes. The main reason I wanted you to see the Schedule C is that when I take over doing someone’s books, I find very creative accounts that have been created. There’s always one called reimbursement while there’s no such thing as an account cover reimbursement. I want to show people that if you’re going to do your own book, try to just keep things falling into those categories.

Is your thought to have no less categories or in trying to put things in or to have as many categories as possible?

There are standard accounts that we use in bookkeeping. It is streamlined. You do want your books to be clear, but these categories you’re seeing are most common and most commonly used. In your business and doing books for note investors, there aren’t many other categories that I would use than what you see right there.

I’m getting a lot of comments from people like, “I can’t believe that high-level bootcamp trainings are not deductible.”

This is something you want to do. It’s as if reading a self-published book. I’m a real estate agent as well and I have continuing education I have to take to keep my life. That is required training. When we just want to learn and better ourselves, that’s the fine line that you are walking.

If somebody went and took a college class on accounting or on finance to understand more about their books, that is self-education. I know you’re not an accountant and stuff, but I’m just curious about your thoughts on that.

It’s not a business system. It just helps you. Can that be deducted? It can because you can still roll it into something else and you can put it under other expenses training. If you’ve got $1,000 on your tax return, it’s not going to jump out. If you’re showing that your company has lost $5,000 overall and you have $4,000 in training, those things are going to stand out.

Everything that hits your bank account is your history. It's your audit trail. Click To Tweet

We have a question, “If it’s not deductible and it’s not a business contents, would you even 1099 the trainer?”

If it’s on your books and you have it as an expense on there, then you 1099 them. We Close Notes is an S corporation and they don’t get a 1099 anyway.

This is some very good content. It has been very note-focused. I find to be very valuable and I hope everyone finds it valuable as well.

It also sounds a lot like we’re running a business and not specifically for notes, but it is. It will guide your transactions and how you run your company. It’s out there and it is stuff that can be captured that I want to emphasize because it just helps you keep it in check as far as how much you spend and maybe even know that you just have an expense on your business.

One person talks about amortizing it over five or seven years. Take the training, spend $15,000 and take $2,000 this year, $2,000 next year over five or seven years. Have you heard that?

In bookkeeping, when you write the check, that’s when it hits your book. You wouldn’t have that ability if you’re doing bookkeeping.

It’s a good topic on Schedule C because people who are getting out have confusion on which schedule to use. If you’re an S corporation or a multi-member LLC, then you’ll be issuing K-1 and stuff which is something that you’re accounting does a little differently.

In an S corporation, the form that you can look at is 1120S. It does vary on the type of entity. There’s another thing I will mention since it’s almost time to pay taxes. Maybe you’re getting money back, but if you pay the IRS, you need to make sure you pay from your personal accounts and not your business account. Depending on the entity, do tweak that to your own situation. As you see on the Schedule C, there are taxes and licenses but that doesn’t mean income tax. The profit or loss of your company rolls onto your personal return and that’s the tax you’re paying. You’re paying your personal return tax for an LLC. You can take money out of there. If you have money in there, you can take a draw out of your business account to put it in your personal account, but you should pay from your personal account.

If you have a note business that is doing very well in a year and you know you’re going to be making money throughout the year, it’s my understanding that you should be paying Uncle Sam some money quarterly. If you’re making a quarter million dollars, by the third quarter you’ve only given them $5,000.

As someone who is self-employed, quarterly is the way to go. I know we’re getting close to the end of that hour and I know we weren’t specifically talking about how do we enter particular transactions. I do set up half day trainings where we work on just your books. Feel free to reach out and do that. It helps you feel more comfortable with what you’re doing.

People asked if you were local and stuff. Debbie is in Texas, but she works with people from all over the US. We’ll put that information in a little later.

That’s all the items I had on my list. I can do questions as long as you would like.

We have a question, “Is there a good way to document that you’re a real estate professional?” I know that has some implications with taxes and stuff.

It’s just the type of business that you set up just as a hairdresser sets up their business.

GDNI 32 | Bookkeeping
Bookkeeping: As someone who is self-employed, paying Uncle Sam quarterly is the way to go.


We had this conversation that I think people would find interesting to mention, “If somebody sells a partial note but collects the payment still and then issues the payment to the person who bought the partial, that’s treated very differently on your books.” It’s treated differently. If I sell twenty payments to somebody on a note, I’m still controlling the note. Madison sends me the money, the principal and interest payment from a performing note and then I’m giving an individual component to that. We talked about how all that goes on your P&L as earned versed interest.

What is the agreement with the person that has the interest sold?

If they were buying twenty payments that caught 50% of the interest, I just found that interesting how you have the interest earned and an interest expense and it all falls on your P&L.

It can be entered into the books in two different ways. You get the payment from Madison or whomever and the principal portion gets applied to the asset. This one deposit from Madison is going to have multiple lines. One is the principle and it gets applied to the asset and then you have the interest income. If it’s $100, I split it right on that transaction. I code to the $50 to interest income and that hit the profit and loss as the portion you are getting. I code $50 to a liability account for that person. When I write the check to that person for $50, that hits the liability account as well and zeros it out. I owe him $50 and I just paid him $50. The other way is you can do $100. All of it goes to interest income on your profit and loss, but then you have to turn around and just do a journal entry and move $50 of that to the liability.

I’m sure we have people on here who’s heads might be spinning. One question popped through and mentioned if they should use their title as a consultant versus a real estate investor.

If you’re consulting, you’re not providing any type of tangible product. Even though I know it is not tangible, but it’s a product as opposed to a service. I think you’d want to promote yourself as a real estate investor if you’re going to want to be dealing with the assets and liabilities because you want to build that reputation.

One other thing I want to mention to people is a tip. Debbie and I are still working through this and this was worth its weight in gold for everyone. At the end of the year, if you’re doing your books yourself, go back and balance your books based on the 1099 statements that you get from your vendors, especially your servicer. Debbie and I are working right now with a situation where the reports that we’re getting every month from the servicer got changed and they didn’t tell us. We’re trying to figure out a few interest payments and stuff. We’ve got the email but it was like, “What we sent you was right. What we sent you during the year is wrong.” Do you want to talk a little bit more about that, Debbie?

These service providers for the note industry are as new to it as a lot of people are. They made a lot of mistakes and that is one benefit of having a second eye and working through things. When you’re breaking things out to the nitty gritty and it doesn’t match a statement, that’s what you’re looking for. A lot of times you guys, you hate to deal with the bookkeeping side of it, which is completely understandable for most people. Look at the statement and you look at it for what it is. When you have to enter that and break it down dollar for dollar and it has to match everything, you’ll start seeing the errors that are out there. Sometimes you don’t know until the end of the year. I always have to have those official documents. I have to have a 1099 from them saying, “Here’s how much interest we paid you.” If QuickBooks doesn’t show the same amount, then we have to figure out why. That’s what Chris and I had been doing. Along the way they’re like, “We changed that.” Even if they tried to tell you, sometimes they just don’t have very good reporting and it’s not clear.

If I was doing my books by myself and was trying to figure that out, I would have lost my mind and I easily would have spent. I spent four hours just trying to help Debbie to understand it myself.

I said that that’s a benefit because I try on my end and I’m like, “If I just cannot get it to match, I’m feeling that I’m missing something.” I go to Chris and I’m like, “I cannot figure this one out. I don’t know why it doesn’t match.” That’s the cue that something is wrong along the way.

When you get a payment from your servicer, you sometimes get principal, you get interest and you might get late fees. When you code those, some go in assets and some go in liabilities. Is that correct? Can you talk about that a little bit?

These are multiline entries when those come in. I have a guy who got a check from Madison for $450. They kept $250 and they gave their JV partner $205. It’s not that simple because they were getting principal away. You shouldn’t get principal away until you get all of the principals back. You get the statement or you get the deposit from Madison and you’re breaking that out. One line is going to need the principal. If you pay $10,000 for your asset and you’re getting $20 in principal, you’re going to apply that to the asset. Now, the value of that note is $10,000 or $9,980 because now you’ve gotten $20 back. That’s just one portion of that deposit from Madison. You get the interest, maybe you split that, maybe you give it all to your JV partner. There’s also a line of late fee interest or an income that they had to pay if the borrower paid late. It’s treated very similar to interest income. It just depends on your agreement with your JV partner. Maybe you keep all of the late fee income and therefore you code that particular line to late fee income. Those are not interest income. It’s the late fee income.

That goes on the liability side on your balance sheet. You’ve got your principal at the top and bottom. The balance sheet at the top, you’ve got your principal, and then the interest and late fees and stuff go at the bottom of your liability. That was educational for me because I’m looking at like, “Madison paid me $500. Where is it?” I figured it would be all together and it’s separate. It takes a little learning curve to understand that.

People can get very creative in what they think that they can charge or deduct as a business expense. Click To Tweet

At the end of the year, they’re going to give you a 1099 interest that tells you how much interest they’ve given you, but that late fee income is not part of that. That’s why you break it out. It’s not just all income. It’s interest income and it’s late fee income.

Tell people how they should contact you.

I’m at

You mentioned that people can set up a 30-minute consult with you as well.

I don’t charge you just to call and say, “Do you think this is something you can help me with and we can schedule it for a later time?” That may sound a long time. I did three and a half hours and not four, but it goes very quickly.

Another question is, “Are you taking on new clients?”


Just so people understand the process, I’ll explain how I view it in and Debbie can chime in and explain a little bit of how the book’s quote should be done or how they get done. I use Wells Fargo. When the bank statements come out, those will get downloaded and you can give Debbie access to download them as well if you’re comfortable. She starts putting them into QuickBooks. Once she gets input in and then downloads the information from Madison and some of the other vendors that you give or provide her, during that month, she will send to you the balance sheet and the P&L. She’ll highlight the questions that she still has open that might need some response to it. At that point in time, you can either email her or if there’s something that might be a little quirky. Sometimes Debbie and I might just get on the phone for a half hour and go through them.

There’s one thing that I’ll tag along with that for people who are newer or also working with partners for the first time. You’ve got to remember that your books are always typically 30 days behind. This is based on how you should be paying when you want to give out quarterly distributions or however you do it. If a borrower makes a payment towards the end of January, you might not see that payment until the first or second week in February. You’re not doing your books and finalizing them until the middle of March. There is some lag. That’s one thing you should explain to people who you’re associated with if you’re paying them.

If I’m paying on March 1st and somebody made a payment on February 20th, that payment is not going to be included in that distribution. I just want to mention that because sometimes you might get a borrower to reinstate on a loan and you let your partner know and they’re like, “How come I haven’t got that yet?” Let’s say it happened on February 27th. Madison may not even have paid me yet. Let’s say Madison paid me today for that. My books aren’t going to be clear to know what the whole balance sheet for that asset is until a month from now. I just want to make sure people mentioned that.

I find that a lot of times. When I get phone calls from the people, they’re stressed because they don’t have bullets and they’re trying to report to a JV partner and pay them. There’s a panic in there. It’s not something that you should rush. If you try to pay more often than quarterly, then you are a trooper. With bookkeeping, it’s set up like that because you need affordable bookkeeping. For the most part, I’m allocating about a half a day a month for most clients depending on the size, but there’s a cost associated with that. If you’re wanting things quicker or you want a bookkeeper and do it every week for you, that’s an option for more timely but there’s always a price that comes with that.

It’s the best money well-spent. If you were trying to do this yourself, I guarantee you’d be spending at least four to eight hours per month. When you look at what you’re trying to do with your business and you’re trying to grow it and take those three days that you’re doing your books versus working on your business. Use an expert like Debbie who can get it done correctly and get it done in much less time. The cost pays for itself ten times over.

I try hard to make it very affordable. I should charge more because I have to work hard to get it done in the time that I allocate for it. It could be a great expense. I’m sure there are people out there who charge a lot. This is what I want to do. There’s a need in this area and it has to be affordable, especially when you’re just starting out.

I have multiple entities and others might have them as well because you might market with one entity and buying another. Even having the multiple entities and trying to understand. One of the things that I enjoy working with Debbie on is when I had questions like, “How should I pay for this in regard to making sure it matches in the books?” She mentioned about trying to pay directly and not having JVs pay. I used to have the JVs wire money directly. She was like, “No, you don’t want to do that.” The added value of that is so beneficial as well. We have a question, “What percentage of your business is made up of note investors?”

GDNI 32 | Bookkeeping
Bookkeeping: If you want things quicker or you want a bookkeeper to do it every week for you, that’s an option but there’s a price that comes with that.


Real estate investors are 95% of my business. A huge percentage of that is note investing.

I can name half a dozen people off top of my head that I know personally that used Debbie. One of them was the one who referred me to Debbie. There’s a lot of people who have been in this industry for several years and have done some amazing things and kicking ass out there that use Debbie. That just goes to show that if you were to list some of the people in this business who you highly respect and see them doing things properly, a lot of them I know are the ones who use Debbie. One other question is, “Should the JV be wiring money directly to your business account?”

They should send the money to you. That’s okay if they send it directly to the seller.

When we say you, it is your business not you personally.

Your JV partners should wire that money directly through your business.

That gets tracked when you download your bank statements. Typically, you’d have a corresponding wire that goes out the door. I don’t mark up notes. In my JV agreement, I have money how much acquisition was and holding costs and certain other things. If I’m buying it for $15,000, I got $15,000 coming in from somebody and you’ll see $15,000 going out the door. It might be broken up and stuff. Debbie, thank you very much for the extra time. People also mentioned about a website. Your website is If people want to reach out to Debbie, you can either contact her at or at

I’ve been extremely satisfied and that’s why I wanted to have her on the show. There have been a lot of questions from note investors who are scrambling to try and get their books done and have a lot of questions. I wanted to try to answer a lot of those as well as let people know that there are options out there because it is difficult to find real estate investor bookkeepers, especially those that understand notes. Most people with a note are like, “You’re buying the property so it’s rental income.” No, I’m buying a mortgage so it’s a loan. It can confuse people. The investor is not training the bookkeeper on the business. Debbie already knows that.

Thank you for all of that, Chris. If you are starting to stress about your taxes, do not rush them. Just file an extension and just make sure that you know all the money is organized and ready to go. When we’re talking about all of those transactions coming in and out of your business account, I’m working with people to do their 2016 books and their 2017 books and it is hard. Everything that hits your bank account is your history. It’s your audit trail. It just will make your life much easier.

I recommend that once you get to a certain level, you are very detailed. I use Wells Fargo. When I use the bill pay, I make sure in the comments that I put the code or the account or wherever it’s going. Even on deposits, I’ll put a $2,000 deposit in the bank or something and then three weeks later I’m like, “What was that for again? I can’t remember.” It’s important to just keep track of your finances. It’s part of the business that everyone hates to do because it’s as if keeping your organization and documents in order.

A lot of times, people don’t like to do it, but it’s necessary. While I was growing up, my mother was a bookkeeper working for an accountant. I remember she used to have to do it on big green sheets on the big legal pads. When you’re off by pennies and stuff, it would drive you nuts. Thank you for giving that education. It helps because I still remember some of it. It’s very educational. Thank you so much, Debbie. It’s a pleasure. If people want to reach out to her, we give contact information. Go out and do some good deeds. Thank you all.

Important Links: 

About Debbie Mullins

Are your books in order or do you hand your CPA a box full of receipts at tax time?
Do you have an accurate Profit & Loss Statement and Balance Sheet to provide to your lenders, partners, and CPA?

I provide affordable bookkeeping services for small businesses and the self-employed including and specializing in real estate investments and transactions.

Real estate investors, jewelry appraisers, speech therapists, wedding planners, contractors and more!


Love the show? Subscribe, rate, review, and share!

Join the Good Deeds Note Investing movement today:

Leave a Reply