How to Record Mortgage Payments in Quickbooks Online

[@Incomedigs]

Check out my end to end Quickbooks Training. www.incomedigs.com/reab ($50 off w/ code KZbin50)

[@twistedgamingtg2632]

ur channel is legit a godsend

[@Incomedigs]

I can't believe I didn't see this two years ago! Long overdue thank you for watching!

[@mike2959]

When I look at the P&L in QB for my properties, the bottom line profit dollar amount, my question is because only interest $ is on the p&L as a expense but the principal payments get booked to the liability line on the balance sheet and isn't listed with the expenses, is the dollar amount for net profit on the P&L really correct then?

[@Incomedigs]

Hi! Thanks for watching! Technically...yes...but I 100% get your question and the confusion. Technically, the amt paid toward principal of the loan is NOT an expense and is not considered for Net Income. The main reason for this is the standardization of a P&L Statement. If you consider two properties: 1 paid in cash and 1 financed....to analyze the P&L of each, it would not make sense to include the principal payback on a monthly P&L statement. The report you are looking for is Cashflow Statement. The cashflow statement takes the info from the NOI (net operating income) and adds a layer of the other cashflow going into and out of the business. In your case, you'll have your NOI as the top line, then a negative amount for the principal paid to the loan...giving you net cashflow. Hope this makes sense! We go into this and so much more in our end to end course: Real Estate Accounting Bootcamp: bit.ly/reabcourse

[@vle6268]

How do I record a new mortgage (refi not a purchase mortgage)?

[@Incomedigs]

Hey! Thanks for watching! We have a specific video for this: kzbin.info/www/bejne/moG9hKF_iZWGh5I We also discuss this strategy in great detail in our end to end course: Real Estate Accounting Bootcamp. Definitely check it out !

[@SLCKaled]

SUBED!!! thank you so much! this vid was pefect!

[@Incomedigs]

Thanks so much for watching!

[@inishturkisland]

Thank you. Our business just made its first mortgage payment today. This was such a great and simple explanation

[@Incomedigs]

Thanks for watching!

[@jsco2289]

Good stuff. I like QBO.. you can connect the bank and it will help pull these payments automated.

[@Incomedigs]

Yes! The only hiccup is that you will need to separate out the interest and principal.

[@reneeguitteau1979]

Thank you. That was awesome

[@Incomedigs]

Thank you! Feel free to check out our super-comprehensive...end to end course: www.incomedigs.com/reab2

[@Really_Brooks]

Thanks, got what I needed. Just wondering why you have tax and insurance as a current asset and not expenses?

[@Incomedigs]

We are paying cash into an escrow account....At this moment we are not incurring the expense. The bank holds onto our funds until a tax/ insurance bill is due. At that point...when a tax bill is due, the bank pays the taxes on our behalf. At that point we record a journal entry to debit the tax expense and credit the escrow account.

[@Really_Brooks]

@@Incomedigs Thank you

[@user-ev8fr8iw6b]

Thank you! This is great!

[@Incomedigs]

Glad it was helpful!

[@davevaz5002]

Thanks for showing how to properly setup escrow payments in Quickbooks but that is only one part of the equation, no one online shows how to adjust the escrow account for the annual taxes and insurance when paid by the mortgage company.

[@Incomedigs]

Hi there...thanks for watching! We actually do teach this in our end to end course: bit.ly/reabcourse Here's a quick outline: At the end of the year you'll receive a mortgage statements indicating the amount paid by your mortgage company toward tax and insurance. You will take this information and make the following journal entry: Property Tax: $$$ Debit Property Insurance: $$$$ Debit T&I Escrow: $$$$ (Total of the above) Credit You can also likely get a detailed escrow statement from the bank. This will include the details of the payments...including dates. This statement will also likely show interest made on escrow. The interest would be recorded as: Interest Income: $$$ Credit T&I Escrow: $$$ Debit Hope that helps!

[@nickjackson8056]

love your content! i need some guidance on structuring this way. Inside our business we are running with multi member LLC and track partner distributions and contributions which has a separate account in the chart of accounts, with structuring your books this way how would you go about tracking those funds. would you just track with just the account or would you break it down further by creating a class or something along those lines? any info is greatly appreciated!

[@Incomedigs]

Hi! Thanks for watching! For partners...i would typically recommend separating out sub-accounts for each owner's equity. This will allow you to easily track the investment and the draws to/ from each partner. We discuss this in great detail with some unique examples in our end to end course. Definitely recommend checking out REAB: www.incomedigs.com/reab

[@user-iv6ty3cd5i]

Wife of an unorganized flipping realtor here. We’ve flipped 2 homes and not recorded the first thing. We do all work ourselves. Which quickbooks should we buy? I know…basic -probably no brainer question!

[@Incomedigs]

Hi There! Thanks for reaching out! If you just have the two homes...and maybe ~1-2 per year, you can probably get away with QBO Essentials. You can always upgrade to QBP Plus if/ when you begin scaling.

[@user-iv6ty3cd5i]

@@Incomedigs I ended up simply going with excel for now. Ty for replying !! 😊

[@lyndseygordon4882]

I love your videos! I have a client that owns vacation rentals. What is the best way for them to track initial deposit $, usually made months in advance at the time of booking and then attach it to the payment made at the time of occupancy? I hope I worded this clearly :)

[@Incomedigs]

Hi Lindsey! Thanks for watching! Technically, the best way to deal with this would be to treat the deposit as a current liability on the balance sheet (not income). Then, when the occupancy starts, you could use a journal entry to Debit the Liability and Credit Income. As far as attaching it to the payment at the time of occupancy....if you were invoicing the tenant, you could have a line item for the full amount of occupancy and then a second line which credits the deposit (a negative amt). That all being said, my experience with short term rentals is that the above is just too complicated for the high volume of transactions. It is probably easier to the do the following: - Record the deposit as income. Use "Customer" to identify the property/ tenant - When the Balance is due, receive that marginal income and record it as such. Still here, if invoicing, you could use a line item for the total balance and then subtract out the deposit.

[@cartagenadaniel1973]

Do you have a video on purchasing/accounting setup? Like where does the down payment go? or I did some upgrades as soon as I bought the house etc.

[@Incomedigs]

Hey Daniel...this video is the start of a series where I dive into purchase, renovation, etc: kzbin.info/www/bejne/hYLWeamlfsp6a7c Also, we discuss the overall workflow in great detail in our end to end course: www.incomedigs.com/reab2

[@PhilXC_]

How do I record Interest received from an Escrow Account if it never hit your bank account. It's just an escrow account.

[@Incomedigs]

Hey Phil! Great question...you'll handle this with a journal entry. Debit your Escrow account and Credit "Interest Income". We go over this and more in great detail in our end to end course: www.incomedigs.com/reab2

[@SLCKaled]

how would I automate this taks if I am doing biweekly payments?

[@Incomedigs]

Hi! I suggest creating 2 recurring transactions. 1 at the Beginning of the month and 1 at the end. Make them basically identical...with the same principal/ interest amounts. At the end of a reporting period (e.g. quarter, year, etc)...use a journal entry to "move" extra interest over to principal.

[@bluegemproperties2333]

Thanks for the content. I thought I saw a video you did on another method to record mortgage payments at year end. The method used a simple "mortgage payment" each month that included that total principle plus interest. Then you did a journal entry at year end to split the total principle and total interest. Do I remember correctly? Can you tell me where I can find that video?

[@Incomedigs]

Hey! Yes...that method works great! I believe that video lives in our end to end course: Real Estate Accounting Bootcamp (may have been on KZbin previously). I can explain it a bit here. Generally, what you are doing is saving time throughout the year. Let's say your total mortgage payment is $800. We know that every month the split between interest and principal changes. E.g.: Mo 1 - Interest = $250, Principal = $550; Mo 2 - Interest = 235, Principal = $565...etc. We COULD go into each month and update the amount of principal and interest. That is fine...but time consuming (especially if you have many loans). The strategy you are referencing is as follows: Use a recurring transaction to log every month's payment the same: E.g. every month is Interest = 250; Principal = 550. This will take care of the payment...the cash leaving your business. Then, at the end of the year, reference your YE mortgage statement. This will tell you how much you paid interest for the year. The $ from the bank will certainly be different from yours. E.g. your books say you paid 250 x 12 = 3,000 in interest. Your bank may say you paid 2,650. We can use a JE to correct our books: Date: 12/31/20xX (last day of the year) Interest - 350 (Credit) Principal - 350 (Debit) This will ensure our YE balances exactly match our bank. We've also saved a ton of time by not having to go into each monthly transaction to separate out the exact amt of principal and interest.

[@erikagorman432]

How do you log additional principal payments? As owner equity / owner contribution, or still as a mortgage payment?

[@Incomedigs]

Hi Erika...an additional principal payment will be simple: You can create an expense (or categorize from the bank feed). The category you use is just the Loan account from your COA. This will take the additional principal off your loan.

[@joshdees]

Can you do a video on Subject To Acquisition and Wrap Around Mortgage Payments?

[@Incomedigs]

Hey Joshua...thanks for watching! Yes...we will add it to the queue! In general though, you would add the property to your fixed assets (Debit)...you would then credit the balance of the loan at the time of purchase.

[@joshdees]

@@Incomedigs awesome, thanks so much

[@RCugs]

Currently exploring the use of quick books as a rental real estate investor who uses a property management company. I'm concerned with the manual effort it takes to do this. With 10+ mortgages all on auto pay... that's 120 payments that all need to be updated by me or outsourced. Has QB really just not found a way to automate this? Pre loading an amortization schedule for the Principle and interest at least?

[@Incomedigs]

Hey Robert...thanks for watching. I know, right!? Seems like such a useful "plug-in". I am currently not aware of any way to do this in QBO. There might be a third party app that can help with it...but I am not yet aware of anything. I agree..major bummer. This is a huge task.

[@RCugs]

@@Incomedigs Really appreciate this video, the others and your response. I cant seem to find what I'm looking for in regards to the whole concept of rental assets and the mortgage pay down. Does QB show your debt burn down, you're net worth/equity per home, ect with respect to these things? Do you happen have a video that shows all that? (or even willing to connect to chat about it?)

[@Incomedigs]

@@RCugs Yes! The key here is to keep a generic COA and use a 2nd dimension (e.g. Class) to differentiate between properties. When you record a mortgage payment to the account: "1st Position Mortgage", you will also indicate the specific property via class. You can then draw up a balance sheet and display columns as classes. This will show you the Value of the Assets - Liabilities giving you a net equity. Keep in mind that this is book value only. You would not update QBO with increasing/ decreasing market value. This video demonstrates the idea of a "2 dimensional chart of accounts" kzbin.info/www/bejne/qIG5hJZ6p5iZb9U

[@srfintime]

@@Incomedigs Seems like I can't indicate a specific property to a mortgage payment under "1st Position Mortgage" using customers. Am I doing it wrong or is that an advantage of using classes?

[@Incomedigs]

@@srfintime Thanks for watching! You should be able to indicate a customer to any account. Sometimes the Label of the field is a bit confusing. In a journal entry, you would use the "Name" field. On expenses you would have a specific field labelled "Customer". Ensure that you have turned on this feature. In account & settings, under expenses, you are able to toggle on/ off having the Customer field available in expenses.

[@sherriephillips703]

Do you add the additioanl lines as a sub account to the conventional mortgage or are they their own account?

[@Incomedigs]

Hi! Thanks for watching. You could potential list out each mortgage as a sub account. However, you could also take advantage of the "2-dimensional" COA method in which you have 1 single conventional loan account and you use class/ customer to differentiate property. I demonstrate in this video: kzbin.info/www/bejne/qIG5hJZ6p5iZb9U Definitely worth checkin gout our end to end course: www.incomedigs.com/reab3

[@sherriephillips703]

@@Incomedigs I don’t think I worded my question correctly. In the video you take the mortgage and break it down into principal, the escrow, and the interest payments. Should each of these be entered as a different “account” or as a sub account to the mortgage account?

[@Incomedigs]

@@sherriephillips703 Ahhh understood! Different accounts: 1. Mortgage (Liability) 2. Interest (COGS) 3. Escrow (Other Current Asset)

[@sherriephillips703]

@@Incomedigs thank you! Your video was so helpful!

[@laileneamparado4092]

Hi Sir, what if there are 2 mortgage lender? Should we set up them separately under the mortgage account title? Thanks for answering.

[@Incomedigs]

Hey there! You would want to set that up as two separate accounts. You would have one account for each mortgage.

[@laileneamparado4092]

@@Incomedigs Thank you

[@jorgefraga5045]

Can i ask a question? . can you split transactions into quickbooks desktop or only in quickbooks online ?

[@Incomedigs]

Hi Jorge! I am not an expert on QB Desktop...however I am certain that you can split transactions!

[@JuanDiegoChavez11]

9:03 adding taxes and insurance, is categorized as an asset and I assume because its going into escrow account you own, but when the taxes and insurance payments are made, how do you reconcile the cost into I am assuming cost of good services?

[@Incomedigs]

Hi Juan! Great question! You are correct: The T&I goes into an escrow account FOR NOW! Then, your bank makes those payments on your behalf. When that happens, you will create a journal entry which Debits the appropriate expense account (e.g. Property Tax) and credits this T&I escrow account. We discuss this strategy in great detail in our end to end course: Real Estate Accounting Bootcamp: bit.ly/reabcourse

[@brady167]

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[@Incomedigs]

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[@KC-yn9io]

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[@Incomedigs]

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[@KC-yn9io]

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