Stessa and Wave are 2 of the best-known names for real estate investors looking for accounting software.
Both companies offer free, cloud-based accounting software, and at first glance may appear to do pretty much the same thing. But after taking a closer look at both services, it’s easier to use Stessa for rental property than general purpose business software like Wave.
In this article, we’ll take a closer look at how Stessa and Wave work, along with important things investors should know before signing up for free.
- Both Stessa and Wave are free, cloud-based accounting systems.
- Stessa is designed specifically for real estate investors, while Wave is designed for all types of small-business users.
- While Wave can be used for rental property, the software lacks certain functionality, such as creating real estate portfolios or generating real-estate-specific reports, such as a tenant rent roll and capital expense report.
How Stessa and Wave work
Stessa and Wave both offer free, cloud-based accounting software. While both systems can be used to track income and expenses and generate financial reports, there are key differences between the two companies.
Stessa is designed specifically for rental property owners, so there’s little learning curve involved to set up a free Stessa account and automatically track rental property performance. Investors can track single-family rentals (SFRs), residential multifamily property, and short-term vacation rentals for individual properties and entire real estate portfolios.
Wave is general-purpose accounting software designed for all types of small-business users. While Wave can be adapted for a real estate business, a user must understand basic bookkeeping and accounting concepts before software can be used for rental property accounting. Real estate investors who own more than one rental property may also find Wave cumbersome to use because property performance can’t be tracked at the portfolio level.
Let’s take a look at more of the differences between Stessa and Wave, including the main features and benefits specifically for real estate investors, to help you decide which is the best accounting software for your rental property.
Offered by Roofstock, Stessa is free, cloud-based software specifically designed for investors who own SFRs, residential multifamily properties, and short-term vacation rentals. More than 100,000 investors have registered to use Stessa to track nearly 200,000 properties valued at over $50 billion.
Launched in 2016, Stessa helps both beginning and experienced real estate investors make more informed decisions about rental property in their portfolios. Stessa makes it very easy to track rental property income, expenses, assets, liabilities, and important documents, such as leases and closing statements, all in one place.
Users can track property performance at the portfolio and property level via a comprehensive dashboard, generate real-estate-specific financial reports, export tax-ready financials, and use resources from the Stessa Tax Center to make tax time a breeze.
Stessa is ranked as the best accounting software for landlords by Landlord Gurus, a company that provides advice to landlords and real estate investors. Stessa was awarded the top rating for rental property accounting and reporting software based on key criteria such as income and expense tracking, financial reporting, bank integration, and tax preparation.
Investors can track an unlimited number of individual rental properties and entire real estate portfolios using Stessa.
Because Stessa is specifically designed for rental property, investors can easily generate financial reports, including income statements, capital expense reports, net cash flow statements, tenant rent rolls, and real estate balance sheets—with assets and liabilities updated in real time—to provide a more accurate idea of owner’s equity.
Other key features of Stessa include:
- Use a comprehensive performance dashboard to monitor an unlimited number of rental properties at the portfolio and property levels.
- Sync business, bank, and mortgage accounts to automatically track income and expenses and create a trail important to real estate investors.
- Generate reports, including income and cash flow statements, capital expense reports, tenant rent rolls, and real estate balance sheets with assets, liabilities, and owner’s equity updated in real time.
- Export tax-ready financials and access the Stessa Tax Center for a free tax package and free state-specific tax resources.
- Tenant contact info
- Occupancy info (unit number, beds, baths, pets, roommates, and more)
- Monthly rental rate
- Unpaid rent balance, if any
- Security deposit amount
- Move-in and move-out date
- Lease expiration
- Purchase and sale documents
- Leases, addendums, renewals, and tenant screening docs
- Mortgages and loan paperwork
- Landlord insurance policies
- Vendor invoices from contractors and repair providers
Stessa stress test
A stress test is a risk management tool used to analyze rental property performance using different scenarios, such as extended periods of vacancy or varying levels of rental income. The stress test feature on Stessa simplifies running various rent collection scenarios on property and portfolio levels to better understand the potential effects on cash flow:
- Learn how a change in rent collection volume could affect cash balances.
- Learn the break-even point of a property by comparing different revenue and expense scenarios.
- Download your Stessa stress test to Excel to manipulate other values and variables.
Advantages of Stessa
- The tool is free.
- It works with SFRs, multifamily properties, and short-term vacation rentals.
- You can automate income and expense tracking by linking bank and mortgage accounts.
- You can access Android and iOS apps to upload receipts and track expenses on the go.
- You can use a comprehensive dashboard to monitor portfolio and property performance at a glance.
- You can generate financial reports and export tax-ready financials.
- You can receive personalized recommendations based on portfolio structure and investment strategy.
- You can maximize potential profits through smart money management.
- You can access optional premium services for a fee, including rent analysis and market research.
Disadvantages of Stessa
- There is currently no portal or dashboard for tenants to directly make a rent payment or view notices or lease documents.
- There is no option for tenant maintenance requests online.
- Stessa is not general-purpose business software, and it’s unsuitable for non-real estate uses.
Wave is free, cloud-based, general-purpose small-business accounting software launched in 2010 and headquartered in Toronto, Canada.
In the company’s first few years in business, Wave Payroll, Wave Payments, and Wave Invoicing were launched to add more utility to the basic Wave Accounting software. While Wave Accounting and Invoicing are free to use, Wave Payments charges a fee for each transaction, while Payroll has a monthly base fee.
H&R Block acquired Wave in 2019, and, the following year, the company launched Wave Money, a mobile wallet application to pay bills and transfer funds. According to a 2017 press release, Wave has attracted more than 2.5 million users globally to its software.
Although Wave is not specifically designed for real estate investors, it is possible to use the software for basic bookkeeping functions. Investors who have the time to learn how to “tweak” Wave for real estate use can use it for recording income and expenses, paying bills, and generating a limited number of reports, such as an income statement, payables and receivables aging, and balance sheet.
Using Wave for real estate
Investors who have a basic understanding of bookkeeping can use Wave for real estate accounting, even though the software isn’t specifically designed for rental properties. But before signing up for a free Wave account, there are a few limitations to be aware of:
Wave Accounting uses different wording than real estate investors do, because the software is designed for general business use. For example, a rental property is called a company, and a tenant is called a customer.
Using different terminology to describe basic real estate terms isn’t a difficult obstacle to overcome, but it does force a user to conform to Wave’s system.
Each rental property has to be set up as a separate company within a Wave account, with individual bank accounts, tenant/customer lists, income and expenses, and charts of accounts.
While Wave is functional for one rental property, the software can quickly become cumbersome for investors who want to eventually add more properties, because Wave can’t generate consolidated reports for an entire real estate portfolio.
It is possible to set up multiple rental properties/companies using the same Wave account, but an investor should be prepared to jump back and forth between individual properties to get a macro view of portfolio performance.
Depreciation is a noncash expense that rental property owners claim each year to reduce taxable net income. While some items, such as carpeting and appliances, can be depreciated over 5 years, real property is depreciated over 27.5 year. For example, if a house has a cost basis of $110,000 (excluding the lot or land value), the depreciation expense would be $4,000 per year.
Accounting software specifically designed for rental property investors, such as Stessa, automatically update property market value, cost basis, and depreciation on the real estate balance sheet. However, because Wave is designed for virtually any small-business owner, recording depreciation expense is a little more complex.
Real estate investors who use Wave for rental property accounting must manually record depreciation using the follow steps:
- Add an Accumulated Depreciation account under the Depreciation & Amortization subcategory on the Chart of Accounts.
- Add a Journal Transaction for the annual depreciation expense under Accounting Transactions.
- Debit the amount of depreciation as an expense in the Depreciation Category.
- Credit the same amount of depreciation in the Accumulated Depreciation Category.
Here’s a summary of the main features of Wave Accounting, including the Invoicing, Payments, and Payroll modules:
- Connect unlimited bank and credit card accounts.
- Track unlimited income and expenses.
- Customize income and expense categories on the chart of accounts.
- Automatically sync data from the Invoicing, Payments, and Payroll modules.
- Use the dashboard to monitor cash balances and invoice status.
- Generate accounting reports, such as profit and loss and cash flow.
- Reconcile payments automatically when Wave Payments is used to collect tenant rent payments.
- Enjoy Wave Payments’ acceptance of all major credit cards and ACH payments.
- Receive payments in 2 to 7 business days, depending on which payment is used.
- Set up recurring billing and automatic payments for monthly tenant rent invoicing.
- Know when invoices sent via email have been viewed.
- Set automatic payment reminders for tenants and follow-up invoicing if the rent is past due.
- Use Wave Payroll to pay independent contractors, issue 1099 forms, pay employees, and generate year-end W-2s.
Advantages of Wave
Wave may be a good match for people looking for free business accounting software or an alternative to QuickBooks or Quicken. Some of the main advantages of Wave include:
- Free accounting and invoicing
- Easy set-up for users who understand basic bookkeeping and accounting
- Automatically recorded income and expense transactions from linked bank and credit card accounts
- Generation of various financial reports, including cash flow, profit and loss statement, and balance sheet
- iOS and Android apps for sending invoices
- Payment and Payroll modules that can be added for additional functionality (with recurring fees)
Disadvantages of Wave
Wave is not specifically designed for real estate investors, and there are some limitations to using Wave for rental property. Some of the main disadvantages to Wave include:
- Real estate investors must adapt to Wave’s terminology, such as calling a tenant a customer and a property a company.
- Because each rental property is a separate company, reporting for multiple properties can’t be consolidated at the portfolio level.
- While basic financial reports, such as profit and loss, cash flow, and balance sheet, can be generated with Wave, the software lacks real-estate-specific reporting capabilities like a tenant rent roll and capital expense reporting.
- Property values and real estate depreciation must be manually entered in Wave, which may increase the risk of overstating or underestimating assets, liabilities, and owner’s equity.
- Wave Payments allows a tenant to make a partial rent payment, which can impact cash flow and create potential problems for a landlord who is dealing with a past-due tenant or processing an eviction.
- There is no feature for storing and organizing real estate documents online with Wave.
Stessa vs. Wave: How to decide?
Stessa and Wave can both be used to track rental property income and expenses, depreciation, and assets and liabilities. However, Wave lacks some of the basic features that real estate investors look for in accounting software. For example, users have to manually enter real estate depreciation and property values on the balance sheet and can’t easily generate a capital expense report or tenant rent roll with Wave.
Compared to Wave, Stessa is a better fit for rental property accounting software because Stessa was designed by and for real estate investors.
Setting up a free account with Stessa is quick and easy. After entering a property address and linking business bank accounts, financial performance of individual properties and entire portfolios immediately appears on the comprehensive dashboard. Investors can generate real-estate-specific reports and store and organize documents online.
When tax time rolls around, the Stessa Tax Center is a one-stop shop to claim free tax resources, including a 2022 Tax Guide, a suite of tax resources created with The Real Estate CPA, and a TurboTax discount exclusively for members of the Stessa Community.