Can you manage bookkeeping for flipping by yourself?

Question

I am doing bookkeeping for my rental business and am interested in flipping business but can you bookkeep flipping business by yourself?

Of course you can always ask CPA to do everything but it is not cheap to hire them monthly and also I want to learn myself if I can do it.

Is there any special software for flipping business or do you use Quickbooks or something?

I would appreciate if BP users can share your experiences.

David Robertson · Answer

I think the biggest problem for most flippers is they just don't don't do any tracking at all during their rehab and wait until the end of the year to try to sort through their receipts and calculate profitability.

Accounting & financial tracking is much easier if you stay up to date with your books by either entering expenses each day or at the very least at the end of each week.

I'm oversimplifying this, but here are the most important things you need to track:

#1 Project Revenue/Expenses

In a flip there is revenue from re-selling the property & the cost of goods sold (expenses), which is used to calculate your project profitability (net income) for each project.  Your total net income from properties sold in a given year is your taxable income which is typically taxed at your ordinary tax rate.

In order to calculate your net income for a given year your number one priority should be to keep an accurate accounting of your project revenue & project expenses.

Revenue for flipping is easy to track because it is generally just one entry for the resale value of the property.

Expenses get a bit more complicated because you will likely have a 100+ transactions for purchasing materials, paying contractors, & paying utility bills.

For expenses I track:

• Track Expenses by Vendor - Helpful for filing Vendor 1099s at the end of the year
• Track Expenses by Category (Purchase, Buying Costs, Holding Costs, Selling Costs, Financing Costs, Repairs (roofing, siding, painting, etc.) - Helpful for tracking actual expenses against my budget.  Also if you decide to convert the property to a long-term rental the improvements may be added to your capital basis & depreciated over time.
• Track Expenses by Account - Helpful for reconciling bank accounts & credit card accounts
• Save receipts/invoices of contractors

#2 Liabilities / Outstanding Loan Balances

If you are using outside funding, you will also want to keep track of your outstanding loan balances that you owe for each property.

You can do all of this in an Excel spreadsheet by just creating columns for Category, Vendor, & Accounts.  Or there are also house flipping specific softwares for tracking project expenses.

Here's a spreadsheet example:

If you keep up with your project expenses in this format, I bet you will be better off than the vast majority of flippers.

Scott P. · Answer

Hi @Jake Kinoshita, I just use MS Money, which is no longer sold or supported by Microsoft.   I suppose if I wanted to move into the modern age I would probably use QuickBooks by Intuit.  (Many years ago I had some experience with Great Plains accounting software.)

I suppose I might do some things with Excel too.

If I was going to flip, I'd use Excel to tabulate budgets and to show a projection of what my costs were planned to be each month.  I might use it to list all expenses I was taking to a bank to "draw" a long for or maybe I'd use MS Money.

I'd enter all my expenses in Money as I do my normal personal expenses but I'd use a special category for them, like "Flip1" along with subcategories according to how the bank wanted to see a breakdown for for loan draw purposes.

Even if there was no loan, I'd still break down the costs this way to track against my budgets.

I don't have any W2 employees.  So payroll tax software isn't an issue for me.  I sub everything out.

Does that help?  Feel free to put @Scott P and I'll watch for a notice if you'd like me to share more thoughts.

Scott P. · Answer

I could do it.  I've done it for new construction and when hiring remodeling GCs but technically I've never flipped.

Basit Siddiqi · Answer

@Jake KinoshitaBuy and hold business is much different than the flipping business.They have a separate chart of accounts as items should be classified differently between the two businesses.You should be able to use any software to do the books for the flipping business. You may need to update the chart of accounts to do so. You may also need to upgrade the software so it allows for inventory.

Timmi Ryerson · Answer

I use Smart Property Systems which has a system specific to management of the buy and flip process.  It can also advertise for sale if you are not going to hold the flipped property or you can tenant and sell.  It is very flexible and the accounting system is good.  You are able to move properties from prepurchase due diligence period, to purchase and rehab then sale.

Jake Kinoshita · Answer

@Scott P.

Hi, thats great to know. I did some research but did you do Construction accounting by yourself? What kind of software did you use?

Can you manage bookkeeping for flipping by yourself?

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