All Forum Posts by: Dan V.

@Jeremy Blackman Set up the property as Class and Customer, then set up each unit as sub-class and sub-customer. 

@James Feely You should set up your bookkeeping process to at least track the following:

1. Transactions by property or unit (if MFH)

2. PM transactions

3. Any other business transactions NOT processed thru PM, for example mortgage, insurance, admin expenses etc. paid directly from your business or personal bank account.

QB online is a popular bookkeeping software for tracking rental properties, whether self-managed or using PM. Some have also success using Excel, but you need to have a good background of both Excel & accounting to make it work. 

 These are considered owner contributions, enter them using journal entry debit expense account(s), credit Owner's contribution account. 

@John Lamb Quickbooks online is well known here and it has a phone app too. 

@Gary Sowell What version of Quickbooks are you using, online or desktop?

@Gary Sowell  

I’m setting up quickbooks and trying to figure out how to record a few things. -Rent do I set the up as a bill or invoice? - 

It's the best practice to create an invoice for the rent, for better tracking, 1) it will show in the customer's account and; 2) to keep track of any unpaid rents. 

when the renter does not pay so I have to pay to cover the mortgage payment how do I record my payment? I read you list it as owner contribution or something like that (how do I set that up) -when I pay the mortgage do I need to separate how the payment post? Example Principle, interest, escrow, etc... 

Regardless of whether the tenant pays the rent or not, you will still need to pay your mortgage, and yes, you will need to break the payments down into principal (liability), interest (expense), escrow (bank or other asset), etc. as these have different accounting and tax treatments. The other side of the entry depends on how you paid for it. If you paid the mortgage from the business bank account (assuming your property is under an LLC), then you will record the payment as "check" or "expense" transaction. If you paid the mortgage using an account not set up in Quickbooks (ie. personal account) then you will book the transaction as journal entry debit to principal, interest, escrow accounts, and credit to owner's contribution (equity) account. 

-when I have bills and repairs for an apartment how do I show the payment is for that appointment, when I enter them now it only allows to to select the address of the building in the class. 

That's the purpose of Class tracking. Setup each property as a Class and assign the property/class to each transaction. If you would like to find out how each property is doing, you can run a Profit & Loss by Class and it should show you the breakdown. 

Even if you are planning to handle the bookkeeping yourself, I still recommend reaching out to your accountant to help you at least set up your books and accounting process. It will cost you in the beginning but it will save you in the long run (an ounce of prevention, worth pound of cure!). Good luck!

@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. 

Know your average number of transactions per month and ask for a quote from few accounting/bookkeeping firms with REI background, on how much it will cost to set up and maintain the books. You can shop local or online.

 I agree with QBO and a good accountant/CPA to help you setup. Quickbooks Online has a mobile app so you can enter transactions thru your phone and attached receipt/documents to it. 

 Here's my approach:
I would just stick with 3 sub-accounts for partner equity account. 

• Partner Investments
• Partner Draws
• Partner Share in Profit/Loss (this will be used in allocating income or expenses)

As I have mentioned in my previous post, net income/loss rolls into Retained earnings account but I don't recommend booking an entry against Retained Earnings in QBO (harder to drill down) but instead create another equity account and call it Profit/Loss Distribution then book the entry against that account. 

Assume below is your P&L that you will need to allocate.

Sales                       $100

COGS                        $60

Gross Profit             $40

Expenses                 $10

Net Income             $30

The journal entry to allocate Net income to partners will be:

Debit Profit/Loss Distribution  $30

           Credit Partner 1 Share in Profit/Loss   $10

           Credit Partner 2 Share in Profit/Loss   $10

           Credit Partner 3 Share in Profit/Loss   $10

After the entry above your balance sheet will look like this:

Asset                                 $500

Liability                             $300

Equity

  Partners Investment    $170

  Partners Share in P/L      $30

  Retained Earnings           $30

  Profit/Loss Distribution  ($30)

Again the above will be my approach to your particular situation. Note that the Retained Earnings should completely offset the Profit/Loss Distribution account once the allocation to partners has been done. As you can see, there are different ways to track and record partners equity, but in your case, I think the more challenging part is figuring out what allocation percentage to use every time you do one. Good luck!