Quickbooks - Accounting for expenses when property not purchased?

5 Replies

I recently bought a property (using BRRRR strategy) but we had an offer in on one that just didn't work out after inspection. I'm using classes in Quickbooks to keep track of my properties but how do I classify the expenses for the property we didn't buy? Thanks!

I think - and I might be wrong - that you have to carry that as a startup cost for your next purchase. That is, you can capitalize it in your net purchase, as it was part of searching for the home you ultimately did buy.

If you have an entity that prospects for properties, maybe you can expense it sooner. Hopefully a CPA will chime in.

You didn't actually buy the property, right?  It fell through, is that correct?  What all did you pay out?  

Treat this as a normal expense account.  

List the people you paid money to in order to assess the property,  as vendors, and pay them as you would any normal vendor via the checks you wrote to them. 

In the memo field just list this expense was to purchase a property at such and such a street, but it didn't pass inspection.

Sometimes we over think ourselves.  (I have a habit of doing that myself) 

Nancy Neville 

It depends.

If the property that you ended up not buying is both the same asset class (residential/commercial) AND ALSO is in the same geographic area as where you are currently investing, you can write this off as "Expenses for Properties not Purchased".  

I put these in a "General/Admin/Other" Class in QuickBooks.

If the property not purchased does not satisfy both the asset class and location requirements, then you technically need to push that expense off into a balance sheet account and wait until you do invest in that asset class/location.  The expense will then become part of the basis of that property.

That's the technical answer.

Realistically, if we're talking about a small amount for Lost Earnest Money or inspection, many people either roll that into the basis of whatever property they buy next, or expense it as I've outlined above.

Here is a suggestion for real estate investors flippers using QuickBooks-

You should have four main stages in QuickBooks as Class:

  1. - Leads
  2. - Rehab
  3. - Sold
  4. - Overhead expenses

Keep track of each property expenses immaterial you buy or do not close the lead.

As each property progresses in the stage, change the subclass of the property. You will know how to account for expenses on each stage and view reports.

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