How to setup Quickbooks for Personal Rental Portfolio

24 Replies

I officially started using quickbooks to help organize my accounting.  I wanted to share with you how I set it up, and was looking for feedback on how others may organize/account themselves.

1. I added my business banking/credit cards

2. Created "classes" which are essentially property address's (not units). I am debuting using "sub classes" for my individual units

3. Created "locations" which I separated my portfolio by state

4. Added my Property Managers as "clients"

5. Added my Payees as "Vendors"

6. Created my lists of "Expenses"  IE; Cap Ex, Property Management, Taxes, ETC

One issue which I will have is each month I get paid by my property managers in a lump sum, which includes all properties they manage (which I can go in each month, do some math, and "Split" which is time consuming. In addition, the property managers cover some of the expenses such as repairs, PM fees, etc. So, essentially my "Income" which quickbooks registers is more of a Net Income, prior to my expense; Which throws off my actual numbers. What is the best approach to circumvent this?

Hopefully this helps others who are looking at setting up a quickbooks online account, as well as myself.

@Josh Lewer As a CPA what is the best way for you to receive the income/expenses in regard to property management payments? Quickbooks shows the payment applied as income, but that amount already reflects some expenses taken out from Property Management. How do I circumvent this on records?

@Justin R. Rental income should be income net of expenses by property. At the end of the year your rental income should match what is provided by the mgmnt company. 

Any reason they do not break this out by property for you? 

My PMs do break down expenses on monthly owners statements. I’m trying to be efficient with my time, and logging in each month to readjust the actual gross income, and add in the variable expenses for each property, and categorizing each expense seems time consuming.

Just trying to figure out the most effective and efficient system.

Thank you!

Additionally, if I didn’t update the quickbooks income with the actual gross income received, I wouldn’t have accountability of expenses paid by my PMs, correct?

Basically Quickbooks wouldn’t see management fees, leasing fees, turnover costs, and repairs paid by PM.

As the owner of a bookkeeping firm and someone that uses QuickBooks all day, every day, I’m going to respectfully disagree with Josh. 

You book your gross rent and then put negative amounts in the deposit screen to reflect the expenses paid by your PM. Net deposit amount to your bank account should match the net check received by you. 

Your net income will be correct and OpEx will be correct when done this way. 

@Cathie Kovacs I will respectfully agree with your input!

My point of view was from @Justin R. wanting to take a more DIY approach. As he mentioned he wanted to be efficient in his time and I did not realize this breakout was given by his PM.

I agree that if you want OpEx correct you will need to subtract out the PM fees and other expenses paid from gross rent. Once you subtract out fees from the gross rent deposit QuickBooks will "auto match" it to your bank feed as Cathie mentioned. 

@Cathie Kovacs   and @Account Closed ","user_avatar":{"medium":{"url":"https://biggerpockets.s3.amazonaws.com/assets/avatar/no_avatar.svg"}}}" href="/users/JoshL122">@Account Closed Your reply was blank, Ill check out your webpage.

Thanks to all!

@Justin R. Congratulations on taking the next step for your business. In addition to what you already set up, you may also want to set up each property as a customer for rent tracking purposes. 

For the property management transactions, I recommend setting up a "bank account" and call it ABC (or whatevery the PM name). Then enter each transaction in your PM statement (rental income, repairs, PM fee, owner disbursement, etc.) like you do for a normal bank account. This way you will be able to capture the gross rent, expenses and disbursements properly. If you have multiple properties, you can create a bank sub-account for each property (assuming there's a separate statement for each property) for more granularity. Not the fastest way, but in my opinion, it's the proper way to track the PM transactions. 

Additional QBO tip (if you have not done so), you can change your customer label to "Tenant" using the Gear icon > Company > Customer label, then choose Tenant from the list in the dropdown. I think it's cool!

I use a 2005 version of that Software called Quicken Rental Property Manager prior to them bundling with QuickBooks.  I self manage my properties and put in each and every expense manually.  I spend 4-6 hours per week on my remote properties.  My accountant has no issues with the reports from QRPM.  I have trusted suppliers I work with and pay them immediately.  I enter each expense as a line item under each property.  My realtor helps with "boots on the ground" things, but I field most of the calls and hence know first about almost all expenses.  Invoices are emailed or texted and filed under each property on my PC.  (one thing I wish my older version of software had).  I may go back to a spreadsheet (Google Doc) when it's time for a new PC and the software cannot be installed.  I do not want all the overhead of Quickbooks.  I want something clean and simple and I'm not a fan of paying $150 for this functionality.

@Justin R. I was afraid of Quickbooks and had tried in the past. I decided last year I'd master it and use QBO. Once you get the hang of it, like you appeared to have done, it's not that bad.  Sometimes  I get busy and just can't get to it (or hate sitting in front of a computer with numbers) so I've used Upwork and hired someone to do that month. You can find really good bookkeepers at really good prices on there. 

You could create a property management reserve account and use that to capture the activity shown on the PM statement.  Create a journal entry for each owner statement.  Rental income credit, expenses debit, and the final line on the JE would be the addition to or subtraction from your property management reserve account.  When the disbursement comes into your checking account, you would use the PM reserve account as the account the money comes from.  Each month just make a copy of the JE and fill in the applicable expenses and income for the month.

for 12 properties in 2 states with 2 pm’s and self managed properties I find quicken works fine. 

I break out incoming checks per property as well as expenses. I then created a general expenses that isn’t property specific but is rental property related. Each property’s expenses are sub-divided in to taxes, insurance, pm fees, repairs, services and utilities. 

At the end fo the year I can show a report per property or for all properties with all income and all expenses or expenses broken down by category. 

If you have way more than 12 you might need quick books but it was overkill for a small portfolio like mine. I MIGHT spend 2 hours a month on it but probably closer to 1. 

I was glad to see this thread because I am considering using Quicken but I see that their "Home, Business & Rental Property 2018" software is only available in Windows....and I'm using a Mac. 

What do you Mac users prefer?

I own 5 rental properties, all self-managed in 3 different states.

@Bill Brandt you mentioned you use Quicken...what version? Windows? Mac?

Hello @Ashley Shearer . At this point I am only using classes; which are my properties by address. Perhaps next year I will add units as subclasses. This way is currently taking more time than I had originally planned. By the time I log into each of my property managers software, and breakdown each PM covered expense just to get my "net received from PM", it takes enough time.

If it wasn't for wanting to be "engaged" in my P & L's I would just get a bookkeeper!!

If i may add another suggestion. If you list each property as a "Customer" then you can add the tenants as a "job". From there, i create an automatic invoice for each tenant that generates automatically to show that they are due. As that tenant pays, you just click on "Receive Payments" and apply it to the auto generated invoice. 

The benefit of this is that you can quickly at a glance see who is late, print a statement for a tenant, etc. Because the invoices are auto generated, i don't need to take the time to enter them each month, and they are auto classed. HUGE time saver and it reduces the need for property management software.

as to the breaking down your units into sub categories, this is mostly helpful if you want to pull more detailed reports. I encourage you do take the time to do it as once it's set up you have no extra time sink into keeping it going. 

Hope this helps!

@Shane H. I have property managers for all of my properties; and not using this for tenants. I am just trying to track all my financials by property for accounting purposes. Thanks anyway!

Originally posted by @Justin R. :

@Shane Hughes I have property managers for all of my properties; and not using this for tenants. I am just trying to track all my financials by property for accounting purposes. Thanks anyway!

Ahh, my apologies. I saw that mentioned in your post but i didn't know if that was all or just some of your properties. 

This is a fantastic thread. This now March 14, 2020 and I am just now seeing this. Very helpful and insightful. I have 7 units in PA that I use a property manager for. I have the same question as @Justin R. I don't want to spend a crapload of hours on Quickbooks Online trying to breakdown the property manager's lump sum amount paid each month and what that's for. I've read a thread on the QBO forum and this is what their expert suggested to (hint: you must have the QBO plus version to create this)
Class-> Property
Customer-> units
Job-> Tenants
Items-> non- inventory or services like repairs and maintenance

@Justin R. I know it's been a year since you asked the question but I found the answer you were looking for. This guy explains how to take the statement from your property management and turn it into a reoccuring expense so that all you have to do is just match it up once a month instead of creating an itemized line item like you've suggested. I hope this helps. https://www.youtube.com/watch?v=4Mrtfp6ZxUc

@Viktor R.

Thanks for the share! I'll check it out.

I decided to go with a bookkeeper who specializes in QBO. This frees up my time and minimizes the risk of mistakes.