I've searched both here, on google and youtube - but I'm seeing so many different takes and just getting more and more confused. This website and the users here are often the best resource in the industry so I figured I should ask (and if you have a link to a recent thread here that already covered the topic - please share).
Long story short: I'm tired of trying (and failing) to control my accounting using google spreadsheets, I tried using Stessa last year but they were not reliable, and with my recent TX real estate license I figured I should just get my entire accounting in order and use a proper tool. Everyone were recommending Quickbooks Plus so I opened an account.
From past experience, I know that it's better to set it up properly from the get-go instead of doing OJT, hence this thread.
Generally speaking: my household got multiple businesses - I got a real estate transactions income, the wife got interior design income, and both of us got rental properties. I'm planning to differentiate between the three using the locations feature on QB.
I think I got a good grasp of how to manage our businesses, but the rentals are giving me a harder time.
My current plan is to define a class per rental property, and assign my tenants as customers (when they pay rent). But I'm not sure how to go about creating a proper Chart of Accounts.
I'd like to have IRS Schedule E form as the type of expenses, but I'm not sure what is the Account Type and the Detail Type I should utilize.
And generally speaking, I'd love to learn from those who use this tool - how do you use it? Any best-practices I should get familiar with?
Ideally you should be using a different QuickBooks account for each business. If I read your thread correctly it sounds like you are running three businesses, at the very least one bank account for each business.
Chart of accounts can be tricky. Feel free to send me a dm with specific questions and I will do my best to help you out.
Thanks for your reply, I'm using different accounts per business and do not commingle the funds.
I think that leveraging the class/location feature in Quickbooks can be good enough to differentiate the accounting aspect of the three.
Currently, I decided to setup the properties as customers, and the tenants as sub-customers of their respected property(=parent customer). Not sure I even need the granularity of the tenant information since I don't bill them using Quickbooks though...
@Or Y. Generally you want to setup tenants as "Job" under "Customer."
@Or Y. As recommended, you should have a separate QB account for each business, however, it is still possible to track them under one QB account if that's your preference. It seems like you are on the right track on the setup. You can set up your chart of accounts to track the different income for the rental (ie Rent, application fee, late fee, pet fee, etc.), expenses like tax, insurance, interest, repairs, turnover expenses, and also the usual admin & overhead expenses. Also you will need to set up the fixed assets, taxes & insurance escrow (if any), loans and security deposit account.
As others have mentioned, it is normally preferred to have a separate file for each business.
Can you have everything in one...sure it will likely be overkill as you would have multiple classes.
Are you using quickbooks desktop or quickbooks online?
If you are using desktop, you can create as many files without paying an additional fee.
If you are using online, there is a separate fee for each file set up
Regarding chart of accounts - I find it that most people have difficulty with balance sheet transactions - I.E. paying for a mortgage payment and having to properly break it out between principal payment, interest and escrow.
If you do not want to issue bills or care about tracking tenant information in quickbooks, recording them as customers/jobs is likely overkill.
Just report the amount of money that comes in as rental income and report the proper class.
@Soh Tanaka is there a specific benefit of having a tenant as "job" rather than a sub-customer? Thanks for pointing that out to me.
@Basit Siddiqi I'm using QB Online (Plus version), I wasn't able to figure out how exactly to define the mortgage, and due to the fact I've refi'ed a couple of them it sounds too complex to create... I thought of just classifying them all as mortgage payments (creating a new type of account), and then at EOY to take the mortgages' statements and retrieve the amount of interest paid, along with prop taxes and insurance paid from escrow accounts.
Is there a better way of doing it? I'm not sure what is the correct approach that will be both accurate and also simple enough to setup. I'm usually good with numbers but this thing is rather awkward for me to set-up... Thanks for all the help!
Doing the reconciliation at the end of the year is fine if you don't need the breakout throughout the year or need to generate monthly statements.
Have you considered Quickbooks desktop? It will likely save you a lot of money compared to Quickbooks online Plus.
I think quickbooks online plus runs at $70 a month(after the 3 month introductory rate).
That is about $840 a year
Compare that to quickbooks desktop which is like a $200 one time payment.
Contact Nancy Neville - she is a "Quickbooks for rental guru" and has written several step-by-step books on the topic. She used to be on these boards, but I haven't seen her post for a while. You can try to contact her at Nancy178atcomcast.net
Some of her books are:
@Dan V. is right. There often some overlooked accounts that can get messy if not set up correctly from the outset. Don't let the Fixed Asset account and loan account fall through the cracks.
@Or Y. To be honest, I don't know. I didn't even know that you can have a "sub-customer." Every book that I read about using QuickBooks for rental properties said to use "Job" for tenants.