I’ve seen QB pros mention tracking flips by either Class or Customer:Job? Is there a consensus as to which is the best way? What are the pros and cons of either method? Thanks for any input!
Retired Landlord/Author · Commerce Township, MI · Member since 2012 · 1k+ posts · 1k+ votes
7y
I like to use the Class Feature of QuickBooks because QuickBooks will keep track of every thing you do to that property via the Class Feature.
When you use the Customer:Job feature of QuickBooks this only relates to CUSTOMERS, thus the word Customer:Job.
Remember that anything to do with the Customer Center is regarded as INCOME. So you don't want to use Customer:Job in any way dealing with property expenses
I use the Customer:Job feature only for Reimbursable Expenses. Meaning, if a tenant left damages and I have to pay my Handyman now, and I want the Tenant to pay me back, I then use the Customer:Job feature on the check that I write to my handyman.. This then tells QuickBooks to bill my tenant for these charges. When I click on that Tenants name in the Customer Center, that Bill (Invoice) is waiting for this tenant. All I have to do is print it out and send it to him or her.
The Bottom Line is that you want to utilize the class feature where you can take all your income and expenses and assign it to a class, that individual property, then run a Profit and Loss Report by Class whenever you need to.
When you are doing flips, you want to list your property as a Fixed Asset Account in your Chart of Accounts and then add all expenses as a sub account of that flip, (WIP Work in Progress) and link all expenses to that property (listed as a Class) in QuickBooks, thus the reason to use the Class feature.
Take that property and also enter it as a Fixed Asset Item. Here is where you can enter in everything you want to know about this property. What you paid for it. When you purchased it. Land Description. Square Feet. Whatever you want to know.
Retired Landlord/Author · Commerce Township, MI · Member since 2012 · 1k+ posts · 1k+ votes
7y
I like to use the Class Feature of QuickBooks because QuickBooks will keep track of every thing you do to that property via the Class Feature.
When you use the Customer:Job feature of QuickBooks this only relates to CUSTOMERS, thus the word Customer:Job.
Remember that anything to do with the Customer Center is regarded as INCOME. So you don't want to use Customer:Job in any way dealing with property expenses
I use the Customer:Job feature only for Reimbursable Expenses. Meaning, if a tenant left damages and I have to pay my Handyman now, and I want the Tenant to pay me back, I then use the Customer:Job feature on the check that I write to my handyman.. This then tells QuickBooks to bill my tenant for these charges. When I click on that Tenants name in the Customer Center, that Bill (Invoice) is waiting for this tenant. All I have to do is print it out and send it to him or her.
The Bottom Line is that you want to utilize the class feature where you can take all your income and expenses and assign it to a class, that individual property, then run a Profit and Loss Report by Class whenever you need to.
When you are doing flips, you want to list your property as a Fixed Asset Account in your Chart of Accounts and then add all expenses as a sub account of that flip, (WIP Work in Progress) and link all expenses to that property (listed as a Class) in QuickBooks, thus the reason to use the Class feature.
Take that property and also enter it as a Fixed Asset Item. Here is where you can enter in everything you want to know about this property. What you paid for it. When you purchased it. Land Description. Square Feet. Whatever you want to know.
Thank you so much for the excellent explanation @Account Closed !!
Are you suggesting to list the flip as a Fixed Asset instead of Current Asset? Are there functional advantages to listing it this way? Because the property is held for less than a year, it would technically be considered a Current Asset, but I’m less concerned about strict terminology as I am with having the program function optimally.
Retired Landlord/Author · Commerce Township, MI · Member since 2012 · 1k+ posts · 1k+ votes
7y
The answer is that you need to setup your properties as a Fixed Asset Account in your Chart of Accounts and also in the Fixed Asset Items List.
What's great about QuickBooks is that it will tell you if you are choosing the correct category.
Fixed Assets are for Buildings, land, etc., that you plan to keep for a year or more.
Other Current Assets are for smaller things. Items you can cash in within a year.
Security Deposits are Liabilities we may owe when our tenants leave. However, Security Deposits are listed in QuickBooks as an Other Asset Account instead of an Other Current Liability Account.
However, in our Industry, in our case, we would use the Other Current Liability Account for our Security Deposits and not the Other Asset accounts as QuickBooks Suggests. The Other Current Liability Account is actually an Escrow Account where we will hold the Tenants Security Deposit until it's time to pay it back, if they have been good! :)
The terminology in this case helps you keep all your assets separated from each other. Fixed Assets are depreciated. Other assets are not. Example Fixed Assets are land, buildings, computer's Carpeting, etc. Items that depreciate and hopefully for our properties appreciate.
When you get the functions correctly in your head it's easier to use QuickBooks than just throw something into a category that is called an Asset. Your Balance Sheet shows you all your Assets. The breakdown by category assets on your Balance Sheet just helps to keep your book balanced and for you to know what assets you should sell or keep.
Real Estate Consultant · Norfolk, VA · Member since 2017 · 342 posts · 200 votes
7y
@Kelly Cruz I prefer tracking the flipped properties as Class. Customer:Job is commonly used for job costing, ideal for business which requires breaking down components of the project like manufacturing or construction projects.
The setup of the property in chart of account depends on your intention. If your sole intention is to sell the property once you fixed it then you are considered a dealer therefore, you should set up the properties as Inventory then move it to COGS once sold. If you decided to hold the property as rental, then it should be classified as Fixed assets.