top of page

Real Estate

The real estate industry, which accounts for over 15% of the US GDP, faces key accounting challenges such as revenue recognition, depreciation, capitalization, valuations, tax treatment, and sales accounting. QMK Consulting can help real estate businesses address these issues by developing customized revenue recognition policies, forecasting and budgeting, tax planning strategies, technology integration, accounting staffing and advisory, and financial reporting. Their services aim to become a value-added partner in the complex accounting world, ensuring accurate performance and minimizing tax liabilities.

About the Industry

The real estate industry plays a major role in the US economy. It represented over 15% of GDP as of 2022. The housing market fluctuates but has seen steady price appreciation over the past decade due to high demand and low mortgage rates. Key players in real estate include brokers, agents, property managers, developers, and institutional investors like Real Estate Investment Trusts (REITs). Major companies like Zillow, Redfin, and provide online listings and tools for connecting buyers and sellers. Real estate also drives growth in related sectors like lending, construction, home improvement, and more. Demographic and migration patterns create hot real estate markets predominantly in Southeastern and Southwestern urban centers, though midsize Midwest cities have also seen real estate booms. As both a place to live and an investment vehicle, real estate retains immense importance across America.

Key accounting challenges

 Here are some of the key accounting challenges faced by real estate businesses in the USA:

1. Revenue recognition - Determining when to recognize revenues from long-term real estate projects is complex under accounting standards. This includes issues around percentage of completion versus completed contract methods.

2. Depreciation - Estimating the useful lives and residual values of buildings and improvements for depreciation purposes involves significant judgment. This impacts reported profits.

3. Capitalization - Deciding what costs should be capitalized rather than expensed during development requires nuanced analysis around interest, taxes, and indirect costs allocation.

4. Valuations - Real estate assets must be properly valued annually or upon significant market shifts. Choosing between various valuation methodologies like comparables, income approach, or cost approach is challenging.

5. Tax treatment - Tax laws create complex asset capitalization, depreciation, and carryforward provisions that companies must navigate carefully. For example, rules around passive activity losses.

6. Accounting for sales - Structuring sales as asset sales versus entity interest sales has major implications around goodwill, transferred assets, and taxes owed.

As a capital intensive industry with multi-year projects and irregular transactions, real estate accounting requires expertise to accurately reflect performance. Software and third-party accountants are leaned on heavily to tackle these complex issues.

How can QMK Consulting solve these challenges

 QMK Consulting can help real estate businesses address these accounting challenges in several key ways:

1. Revenue Recognition Policies - We can work with clients to develop customized revenue recognition policies and procedures tailored to their specific projects and business practices in adherence with the latest accounting standards.

2. Forecasting & Budgeting - Our team of real estate accountants can provide detailed financial modeling for projects to facilitate better decision making through enhanced long-term forecasts and budgets.

3. Tax Planning Strategies - We stay on top of the latest tax laws and work closely with clients to develop tax efficient project structures, financing approaches, and disposition strategies to minimize tax liabilities.

4. Technology Integration - We can recommend real estate specific accounting/ERP software to better track projects and integrate information to produce financials, ensure accurate reporting, and enhance analytics capabilities.

5. Accounting Staffing & Advisory - We offer part-time CFO services, bookkeeping assistance, accountants, and financial analysts well-versed in technical real estate accounting issues to supplement clients' existing staff.

6. Financial Reporting - We can handles all aspects of external financial reporting for privately held or publicly traded real estate enterprises to take this administrative burden off management.

With customized advisory services and accounting staff support, QMK aims to become a value-added partner to real estate businesses navigating the industry's complex accounting world.

bottom of page