Setting Up & Using Quickbooks Online for Rental Property

12 Replies

Hi Bigger Pockets,

I purchased a condo in the bay area this year living as an owner-occupant with housemates. While it's not a big fixer-upper, I am renovating - three steps in with BRR!

I need help with Quickbooks accounting for the rental property. The entry-level Quickbooks Online software itself is expensive $250/yr... that's not even adding up potential books/courses, CPA fees or personal tax filing software like Turbo Tax. Outrageous!

I am diligently saving/scanning/uploading receipts & importing transactions from a rental-specific-checking linked bank account.

I've found two websites that are supposed to help with Quickbooks for rental properties:

[OLD] https://landlordaccounting.com... only... $99)

[REALLY NEW] https://www.incomedigs.com/&nb... online, seems good but so new... also $600 for the bootcamp) 

These fees above include books/video courses & chart of accounts download but do not include any personal help with setting things up, in-person instruction, or ongoing maintenance.

Does anybody have any recommendations for setting up Quickbooks Online the right (and affordable) way? Any recommendations on CPAs? 

I'm not against spending $500 to do this right the first time but that just seems expensive for self-taught approach.

Thanks,

Ryan

Bookkeeping is one of the first things a business owner should outsource. If you don't see yourself as a business owner and just want a couple rentals, then who needs Quickbooks? Just open a new checking account and each month download the transactions as a CSV and use excel to keep track of the <10 transactions per month. There is free software online too, like Wave which gets a nod from a lot of folks with simple businesses

I recommend hiring a bookkeeper if you are going to scale. They are $35 - 60/hr but it saves you the time and headache of figuring out how to book a journal entry for a HUD what accounts to create... oh man it's a pain ha.

@Ryan Runchey If you are planning to scale up in the future, then QBO is a good option and you can start with the lower tier subscription for a single property, you can upgrade later when you acquire more properties. You're also doing the right thing having a separate bank account for the rental. Make sure to run all business-related transactions to this account and avoid commingling. There's not a lot of online tutorial for setting up QBO in real estate industry so your best bet is to hire professional to set up the books and the process and teach you how to use it. You are on the right track though!

@Ryan Runchey There is not really any good information out there on setting up Quickbooks online the right way for real estate investors. You are already ahead of other beginner investors by using a specific bank account just for the rental and uploading receipts. I would look into hiring a bookkeeper, as they can save you time and money in the long run. The biggest tip I can give is to use classes for each property that you have so you can see how each property is performing. 

The hardest part is getting set up in QB. I had an Accountant who specialized in real estate and was a real estate investor himself. If you do turn it over make sure you do this. It's like you wouldn't go to a foot doctor for a heart problem, no offense to foot doctors. After a while I decided to take it on myself and but needed training and there was a local QB trainer. I'm sure there are in San Jose as well. When I run into a problem or don't have time I outsource on Upwork.  

@Ryan Runchey

Aside from DIY approach and the outsourcing approach, there is a middle way, and it may be just be the golden path for many newer investors.

There are companies that will set up your account, customize it according to your needs, train you on how to maintain your own books, and help with support or troubleshooting when problems arise. 

This is not super expensive, nor is it super time-intensive. The key is finding a firm that can actually make the time for you.

@Allan Smith do you have a REI bookkeeper to recommend?

I’ve done my best with matching receipts to bank transactions but probably have 2-4 hours more work for a professional to wrap up 2019.

< 200 total bank transactions

1. Initial condo purchase JE using the closing disclosure

2. Separately tracking mortgage payments PIT

3. Properly assigning transactions to chart of accounts. I created COGS accounts to match the line items on IRS form 8825 to keep it simple but most of my transactions so far don’t seem to align with them (things like tool purchases, furniture and light fixtures, and a wall divider capital project).

4. ...

@Ryan Runchey

The bookkeeping for this specific property will likely be difficult.

This appears to be a househack as you purchased a personal residence but also have roommates to help with the rent.

As a result, a portion of the expenses as they relate to the house are personal in nature and non-deductible.
Items such as real estate taxes, mortgage interest, etc are all pro-rated.

On-top of that you are doing the BRRRR which indicates that there is rehab involved.
Portions of a rehab are currently deductible, capitalized or non-deductible

Currently deductible - payment for an area of the home that is a tenant area. The expense can not be an improvement unless it falls under the deminimis safe harbor

Capitalized - improvement that does not qualify as a deminimis safe harbor and it relates to tenant area.

Non-deductible - payment as it relates to personal residence area.

@Basit Siddiqi Thanks for the input! Correct, I have housemates to help with living expenses; however, I am not really using the BRRRR method because my renovations are cosmetic (changing light fixtures, furniture, paint, small fixes). I am living in the living room which is a living room by day and a place to rest at night, so still a shared space. Given these reasons, I'm assuming all improvements and spending should be deductible at the pro-rated amount.

Ryan,

Do you have a local university or community college?  Often these institutions will offer a month long class at night or weekends in topics of interest to the local community.  Mine has a life-long learning program offering over 140 classes in topics that include some popular software packsages.  cost per class varies, but nearly all are less than $100.  

If you get tired of Quickbooks online, you may want to consider Quicken Home and Business (about $150) and is available either as a cloud application or downloeadable as a desktop application.  Quicken has a built-in chart of accounts for a rental property activity.  It will amoritze loans and export your rental income and expense information to Turbotax.  TurboTax will handle your depreciation schedules.

I started out just using Excel spreadsheets to track my income and expenses, then migrated to Quicken in 2003.  I have looked at Quickbooks, and find Quicken for user more user-friendly and intuitive.  No matter which product you pick, there is a learning curve. I found the Quicken learning curve easier to overcome.

I've tried to learn QuickBooks numerous times and it never got better or easier over the many years it's been around.  I hate it.  

Since you only have the one investment so far, I suggest you go talk to a CPA and ask them what receipts you should keep track of, and then just let them do your taxes at the end of the year.

If you just want an idea of your income and expenses every month, I'd just create a simple Excel spreadsheet.

I just found that all the data entry into a program, let alone the time it takes to learn them actually cost too much time I'd rather spend doing something else.  I'd just use the money you'd spend on classes and software to pay the CPA first to consult on how to keep track of your expenses, and then to do your taxes for you at year end.

Updated about 1 year ago

Oh Ryan, I missed that you're trying to avoid paying a CPA 2-4 hours to complete your taxes. You know what? See about meeting with an IRS rep for free. I lived in Mexico for a year and had a part-time online business at the time and met with a traveling IRS rep, took her to lunch and she did my taxes for me for free. Wouldn't hurt to see if you could just sit down with a free IRS rep. The one I met with found a bunch of write-offs for me I didn't know about. Wouldn't hurt to find out if it's an option.