How to Best Track Renovation Costs and Profits for Multiple Managed Properties?
Member since 2024 · 5 posts · 4 votes
How to Best Track Renovation Costs and Profits for Multiple Managed Properties?
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In our experience, the BEST construction and rehab teams know and do the following:
A. There is a difference between project tracking and expense/profit tracking. A task management tool or simple checklist should help you get your projects done on time and within scope, while something like Quickbooks can capture your costs and inform you of your accounting. It's fine to track these in a separate system since...
B. Construction/Rehab Profits are projected up front, and protected during the work. These teams have clear underwriting showing them how much money they will make on a deal. The only time that expense/profit number should significantly change is if 1) They take too long (see A), 2) They do work outside the original scope (see A), 3) the original underwriting made bad assumptions about costs/profits, or 4) some act of god changes your exit. You should be able to keep all of these reasonably dialed in as long as...
C. You have the right people in the right seats doing the right tasks. If your construction team is great at project management ~ and then you pull them out of that seat to do expense data entry ~ you may be slowing them down and hurting your own profits. Have a bookkeeper help you track the costs on your projects while your construction team knocks out the project, and compare both sets of information to check for inconsistencies. Put controls in place so that your rehab team can't hit you with a surprise bill, or misappropriate funds. And finally...
D. Use tools and software that empower your team. If your bookkeeper and tax pro like Quickbooks, you should use that. AND ~ if they like Quickbooks, they should be able to clearly show you all of your information on a timely basis, answer all of your questions, and help you stay informed on your projects. I would avoid spreadsheets, since there's definitely a "too many cooks in the kitchen" problem with that approach.
The same thing goes for your construction/rehab teams. If they prefer simple printed checklists, Podio, Buildertrend, Clickup, whatever ~ you should use that AND that team should be able to keep you very up to date on the projects using those solutions.
The magic on this step is you - what information do you need, what steps need to be done and in what order, how are you communicating that, and how is it showing up in your scope of work. A great bookkeeping or rehab team will be able to advise you a bit on this, but your active involvement in managing and reviewing those team is how you'll get the best results.
As far as "profits from ownership" ~ See B. You should have a general idea of this from your underwriting, whether it's a flip or a BRRRR
6 Replies
- Rental Property Investor · Bow, NH · Member since 2016 · 216 posts · 185 votes2y
1. If I understand your question you are asking about tracking cost and timeline for property reno? I will use a Gantt chart that I make in Excel to track timelines and QuickBooks to track costs. the Gantt really makes your project visual and you can see what tasks rely on the completion of other tasks. I used to use Stessa for financials....but it broke with the more properties and more accounts I linked to it. They don't appear to employ real people in their customer service dept and I don't have the patience for Bots.....
2. I pay an accountant well to make sure I have as little profit as possible :)
For a small operation Google Sheets could work. I choose to use QuickBooks. You can assign classes to each of your properties to break them out separately on on your reports. A concern about Google Sheets is the more hands you have entering data the more chance for errors. I just get invoices for any expenses and drop in QBO....it works great for me with 5 properties and a business.
Good luck.
- Rental Property Investor · Bow, NH · Member since 2016 · 216 posts · 185 votes2y
After posting I saw in your profile you are a software engineer.....What would be REALLY cool...
If you could develop an easy to use Gantt chart software (Think Microsoft Project, but WAY easier to use) that was designed specifically for Real Estate reno / BRRRR. I'm thinking something that could auto populate industry average estimates on time for certain tasks based on the inputs of the work. For example Drywall living room could have an input for sq ft and you could get a base line estimate. It would require tweaking but I suspect you could get close on a lot of it.......just something I have been thinking about for a while and a guy like you could probably create something pretty cool!! Or maybe it already exists, Idk.
In our experience, the BEST construction and rehab teams know and do the following:
A. There is a difference between project tracking and expense/profit tracking. A task management tool or simple checklist should help you get your projects done on time and within scope, while something like Quickbooks can capture your costs and inform you of your accounting. It's fine to track these in a separate system since...
B. Construction/Rehab Profits are projected up front, and protected during the work. These teams have clear underwriting showing them how much money they will make on a deal. The only time that expense/profit number should significantly change is if 1) They take too long (see A), 2) They do work outside the original scope (see A), 3) the original underwriting made bad assumptions about costs/profits, or 4) some act of god changes your exit. You should be able to keep all of these reasonably dialed in as long as...
C. You have the right people in the right seats doing the right tasks. If your construction team is great at project management ~ and then you pull them out of that seat to do expense data entry ~ you may be slowing them down and hurting your own profits. Have a bookkeeper help you track the costs on your projects while your construction team knocks out the project, and compare both sets of information to check for inconsistencies. Put controls in place so that your rehab team can't hit you with a surprise bill, or misappropriate funds. And finally...
D. Use tools and software that empower your team. If your bookkeeper and tax pro like Quickbooks, you should use that. AND ~ if they like Quickbooks, they should be able to clearly show you all of your information on a timely basis, answer all of your questions, and help you stay informed on your projects. I would avoid spreadsheets, since there's definitely a "too many cooks in the kitchen" problem with that approach.
The same thing goes for your construction/rehab teams. If they prefer simple printed checklists, Podio, Buildertrend, Clickup, whatever ~ you should use that AND that team should be able to keep you very up to date on the projects using those solutions.The magic on this step is you - what information do you need, what steps need to be done and in what order, how are you communicating that, and how is it showing up in your scope of work. A great bookkeeping or rehab team will be able to advise you a bit on this, but your active involvement in managing and reviewing those team is how you'll get the best results.
As far as "profits from ownership" ~ See B. You should have a general idea of this from your underwriting, whether it's a flip or a BRRRR
- 2yBasit SiddiqiBusiness MemberAccountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes
If the properties are managed by a third party management company, 90% of the income / expenses should be summarized by the PM Company.
You should be able to get a year to date statement providing you a summary.
I wouldn't go crazy with an accounting software but instead use excel.
The other items likely paid for you outside of the PM company are mortgage interest, taxes, insurance, travel to the property, etc.
Best of luck.
Basit Siddiqi CPA4.979 Reviews - 2yJake BakerBusiness MemberFlipper/Rehabber · San Diego, CA · Member since 2020 · 1k+ posts · 696 votes
I use QuickBooks Online for most of my clients. For most real estate investors, a Plus subscription is needed to have separated by class(property). It is the most popular software in the industry and all CPAs know how to navigate it which is nice.
QBO has a great projects tool that allows you to see all of your ongoing expenses for a particular project.
For my flipping business, I use a task management software (ClickUp) to manage my day to day tasks. QBO can pretty much do everything else for me.
BookkeepingRE - Bookkeeping for Real Estate & Service-Based Businesses52 Reviews @Mikhail Egorov, for your first few properties a Google sheet or excel will work just fine to keep up with your income and expenses per property. If you know what should and shouldn't be capitalized, you can get fancier with it. You could even create a free Stessa account if you want a software.
When you get past ~3-5 properties, I recommend QuickBooks Online. We use QBO exclusively for all of our REI Clients. We've found it has superior reporting features, integration features, and is overall more efficient to work within than other REI-specific software.
The downside is QBO is not set up for REI so you'll need to do that or work with an expert to ensure it is set up for your business appropriately.
Something else to keep in mind is your entity structure and how your entities file tax returns. As a general rule, each entity that files a separate tax return (partnership, s-corp, c-corp, etc) will need its own QBO subscription. If entities are disregarded/passthrough, you can keep up with more than 1 in a single QBO account using the location/business feature to keep track of them separately.
If you want to discuss any of this further, I'm happy to answer questions.
Best of luck!
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