Apologies up front if this question is asked often. In utilizing the search feature, it does not segregate between forums, and it was hard to find the results that I'm looking for.
Situation is that I'm about to get going with my real estate investment endeavors, and I'm interested in better understanding how to adequately bookkeep for either one LLC and several properties inside that, or several LLCs (one per property). That said, would anyone be able to fill me in on how to manage "common" expenses that spread several properties in one LLC and/or that spread several LLCs. For example, if I purchase a subscription of something that assists me in book keeping, but I use it to bookkeep across several properties in one LLC or several LLCs/Properties, how would that expense get reflected when taxes are done?
Also, I recognize that this is likely a better question for a CPA, and so if you have any Houston based CPAs that you would recommend, I would greatly appreciate it.
Reach out to @Michael Plaks
He is an accountant in the Houston area and is active on this site.
Everyone's situation is a little different, but I can try to explain how I handled this situation. I started with Jaybird Properties LLC. It owns 97.5% of Jaybird Properties 2, 70% of Jaybird Properties 3 and 70% of Jaybird Properties 4 LLC since I brought in other investors to those subsequent deals.
My original entity (Jaybird Properties LLC) does the management so it absorbs the costs of property mgmt, accounting and property mgmt staff. I think this is the easiest way to take care of the accounting and keeping separate sets of books for each company.
I use my original LLC as the managing entity for the others. It owns the accounting and property management software.
Thank you both for your replies on this topic. I intend to move forward with the example that Jeff gave while also getting my CPA doves in a row.
@Andrew Ramirez - Congrats on jumping in!
I would interview a handful of CPA's in the market you are investing in. I invest in Columbus, OH (and am a CPA / REALTOR), and I talk with people often about tax strategies and investing options. You should look for someone who will be able to grow with you while your business scales.
Best of luck to you - get that first property!
I have QuickBooks online for each LLC. The llc could hold 10 properties and still be in one quickbooks account. In all reality separating expenses by property with in an llc is for reporting purposes only as they all filter into the llc tax return (I could be wrong). Honestly I would pay the couple hundred bucks for a bookkeeper to initially set up QuickBooks for you based on your situation and teach you how to record your expenses. For me each property in the llc is its own expense category then I have subaccounts under each property for the Schedule E categories. Then also need separately track cap ex etc.
@Andrew Ramirez We use a QBO account for each LLC (for property owned)...if the LLC owns multiple properties you'll need the advanced subscriptions...so, we setup a "class" for each property and a "class" for each unit (multifamily)...this is how we do it on the management side as well...managing multiple properties through a single LLC (you will also need liability accounts for operating expenses for each property)...the setup is advanced and I would suggest using a bookkeeper that works with real estate investors and property management. (I'd be happy to send you to my bookkeeper...shoot me a PM...she's virtual, so she can work anywhere) This setup is important for tracking P&L and other metrics across not only properties, but units (if investing in MF).