How to Buy, Develop and Sell Vacant Land in Quickbooks Online

[@Incomedigs]

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

[@michellelou7517]

I love your vedios. You made very clear and valuable poionts. It's very helpful and I appreciate your time! Is this "Project" function in QB desktop also? Thanks

[@Incomedigs]

Hi Michelle! Yes...the "Project" is referred to as a "Job" in QB Desktop.

[@encrypted_pathan]

Thank you for all the explanation. Can you do a video on buying a vacant land, divided it into different lots/units and then sell it per lot/unit base method.

[@Incomedigs]

Hi there! Thanks for watching! I don't have anything on that...yet! However, we could talk it through a bit. First, I recommend following the general example within this video...however, with a slight modification: When "Rehabbing" or constructing the new units, you can separate out your costs to "Unit" by using either a class or sub-class. Or, you could keep everything all as one throughout the renovation and then "separate them out" at then end. In either case, you'll need an additional dimension to capture the "unit". You could potentially make each unit a "sub-project". Or, you could keep the Project general and use "Class" to differentiate by unit. Then, as each unit sells, you'll be able to recognize that specific revenue against the pro-rated/ separated out costs by unit. This would come in the form of a profit & loss w/ Class as the columns on the report. Definitely something we could explore within the Real Estate Accounting Bootcamp Community. I definitely recommend checking it out: www.incomedigs.com/reab2

[@fiverrpro9167]

Like your videos could you make video on e-commerce and QuickBooks

[@Incomedigs]

Hey There...thanks for watching! I don't have much direct experience on e-commerce in QBO. If/ when I have some clients with this business setup, I'll be sure to upload specific videos!

[@shawna9786]

This is a great set up but I am not on that version of QB and now I am trying to record the sale of the lot and the house. Do you have a simpler video?

[@Incomedigs]

Hi Shawna...I demonstrate within QBO Plus. On lower versions, you would not have the "Projects" portal. However, you will still be able to track the flip against COGS and then switch things over to the balance sheet.

[@bcuber9443]

Thank you so much for your video! How would you handle a tract of land that was separated into multiple plots, and then sold? Would you set each plot up as a project?

[@Incomedigs]

Hi! Thanks for watching! Yes, I think that approach makes sense. Perhaps you could use the general "LOT" as the customer and then create projects for each sub-lot.

[@loansbydanr8451]

Great video! If the client owns the land and has the construction loan, how do you record the invoice payment draws from the customer?

[@Incomedigs]

Hi! Thanks for watching! This is actually quite simple. As the builder, you will likely incur costs along the way (site work, foundation, framing etc). Record those draws as you typically would...then invoice the customer per a determined invoice/ draw schedule. We have a separate course specifically on managing books for a building business. Check it out here: www.incomedigs.com/bba (KZbin50 for 50 off!)

[@loansbydanr8451]

Thanks! Do you still move it over to the balance sheet as work in progress after a period of time? Also do you use the construction escrow for the draws?@@Incomedigs

[@Incomedigs]

@@loansbydanr8451 Hi! Up to you! You can move to the balance sheet at any point in time...certainly by the end of the year if the project is still ongoing. Its all up to you as to whether you want the project showing up on your balance sheet or all to stay on the P&L. For me, having a super negative P&L throughout the year is not ideal...it skews the business financials. Therefore, I'll make a transfer at the end of each month. And yes..you use the construction escrow for draws. As you receive funds from the bank, you credit construction escrow and debit your bank account.

[@stacyann89]

Can you elaborate on why we don't moving holding costs to the balance sheet at year-end? I have several properties with over $30K combined in holding costs.

[@Incomedigs]

Hi Stacy! In this example, it is simply to keep the project "together". You likely are able to deduct the 30K in holding costs in the year they were incurred (check w/ your CPA of course). Items like property tax, insurance, interest, etc....You are probably fine to keep these on your P&L and deduct i the year they were incurred. However, some investors like to see the whole project as one. If we move everything to the balance sheet at year's end...and then back to COGS when we sell...we can see the entire project profitability in one place.

[@jeannegalvin4071]

Thank you for the videos- they're great! Question- what expenses do we expense vs capitalize? My client is starting a land investment / development business and they have incurred and will continue to incur normal business expenses (email, website, phone, office supplies etc.) I believe it is correct to expense these items as opposed to capitalizing but the business will show losses year after year until the land is sold. Is there any problem with showing annual losses regularly which would be for any year that there is no sale?

[@Incomedigs]

Hi Jeanne...thanks for watching! Although I am not a CPA...in my experience, you are correct. You would log the normal admin expenses as losses. As long as the business is operating, you can deduct these losses in the year they were incurred.

[@rarbona06]

Is there a way to record the sale that shows the actual sales price/revenue on the P&L, rather than the profit?

[@Incomedigs]

Yes! In order to do this you would need to remove any/ all of the property value from the balance sheet and put it into the P&L. Instead of tracking the purchase as an "asset" you would track the purchase as COGS The amt you record as "Realized Gains" is Sales Price - Basis on the balance sheet. Therefore, if your basis is 0...your realized gains = Sales Price

[@rarbona06]

@@Incomedigs Worked perfectly! Thank you!

[@Incomedigs]

@@rarbona06 Yes! Love when that happens! Thanks for watching...let me know if there is anything else I can help with. Don't forget about our end to end course: www.incomedigs.com/reab Thanks!

[@rarbona06]

In the case of refinancing the loan prior to selling the new construction, would you create a new journal entry based off the refinance HUD?

[@Incomedigs]

Hey Ricardo...thanks for watching! A refinance is just like the Sale of a property...but a lot simpler. You would do NOTHING with the asset on your books. All you are doing is wiping out one loan, replacing with another...and recording closing costs. We have a video on the "BRRR" strategy that will show how to refinance: kzbin.info/www/bejne/moG9hKF_iZWGh5I Also keep in mind our end to end course...We discuss many many many examples of refinancing: kzbin.info/www/bejne/moG9hKF_iZWGh5I

[@rarbona06]

@@Incomedigs Thank you for all the info and the answer!

[@amyoconnor4589]

Thank you so much for this! What do you do if the Interest Reserve gets paid throughout the whole project. Like paying interest monthly. Do you just put it to holding costs each month? Increasing it? Instead of recording the entire 60k at once (which would totally overstate it)?

[@Incomedigs]

Hi Amy! Thanks for watching! If you pay interest monthly...yes! You would simply record those expenses, as incurred. I actually separate out Debt Servicing from Holding Costs. Important to think of the balance of a loan as different from interest. If you receive a loan for 60K, this is going to go on your balance sheet as a liability. The interest you pay on that loan is an expense. So if you receive a 60K loan at the start of the project...record that as a liability when you receive it. Then, as you make interest payments, record those as expenses...to a Debt Servicing Category.

[@amyoconnor2787]

@@Incomedigs yes!! You’re the best!!

[@efliteinc.2511]

Your HUD example indicates taxes "paid by the seller" but my HUD indicates taxes "not paid by seller" so do I enter those into COGS as negative holding costs or would it be best to simply reduce the Purchase Price?

[@Incomedigs]

Hey There! Do not reduce the purchase price....simply add those items to the opposite debit/ credit. So, if the seller credited taxes to you..you would use the "Credit Column" (negative expense)...if you had to pay taxes, you would use the debit column.

[@davidmorrison4130]

Thanks so much for the videos. Very informative. I'm a little bit confused though. Using this approach, the P&L will show your project profit of the $53,350, but not the Gross sales of $235k and the COGS of $181,650. I get that the project reporting provides that information, but for GAAP purposes, are you not required to gross up your sales and show gross profit (net of COGS) on the P&L?

[@Incomedigs]

Hi David, remember that any reporting we show in QBO is for our business purposes first and foremost. We want to deliver reporting that helps us make key decisions about our business. QBO is also a great tool for preparing for taxes....but I do not treat tax prep as the primary purpose of my QBO setup. To that end, you can and should use whichever reporting method makes the most sense for your business. You could certainly use a journal entry to adjust the figures so that the $235K shows fully as revenue...this is completely fine. I just do not find the extra step helpful. Your accountant may suggest this is what you do when reporting your cap gains on your taxes. This is completely fine. Allow them to make that adjustment...you can choose to mirror that in QBO if it helps.

[@shawna9786]

Also - when you talk about moving the expenses off of P&L and over to Balance Sheet - can you go more into that? Since I don't have projects, my expenses are all paid by vendor and then catagorized by specialty to track and then tagged to track expenses. We are upgrading the software to do it your way in 2023 (thank God) but in the mean time - for year end - what do I need to move over?

[@Incomedigs]

Hey Shawna! The "transfer" is a way of "moving" the balances from your COGS to your Balance Sheet. This is done in the following way: Journal Entry - Date = End of the year or end of the project COGS - $$$ Credit Inventory - Flips in Progress (Asset) - $$$ Debit We go into this in great detail in our end to end course: www.incomedigs.com/reab2

[@shawna9786]

@@Incomedigs Thank you! I was curious if you had a list of Chart of Accounts that you utilize. I am following your example and you are very quick on what you are using. Our QB is new so I am having to set up accounts as we go. I am definitely going to check out your end to end course.

[@Incomedigs]

@@shawna9786 Yes! You can download here! www.incomedigs.com/chart-of-accounts

[@estebanpabon7654]

Hi I downloaded the Charts of Accounts and i does not have the numbers that use here for the land, building etc. Do you have an updated chart accounts or do you just used a custom one for this video?

[@Incomedigs]

Hey Esteban...I just used a custom COA for this video. You can certainly modify the version you downloaded!

[@AlexandrosFereos]

Is customer job the equivalent function for project in desktop version? Which version of QuickBooks desktop includes all the functionality to do this? Pro, Premiere, or enterprise. thx. I got desktop pro-2016. Also, if we pay expenses for a group of flats being constructed as a building how do we allocate the expenses for each flat and show separate income report for each sale? It would be good to see this in your video. thx

[@Incomedigs]

Hi Alexandros. Thanks for watching! I'm not an expert on QB Desktop...however, I believe you are correct that "Customer Job" is the equivalent on desktop. For the separate flats, you could allocate a "class" to each specific flat. Within the income/ expenses you can then split transactions by class.

[@AlexandrosFereos]

@@Incomedigs Would you handle the manufactured flats as inventory items? or fixed assets. For example, someone builds flats to sell them but later he chose to rent them. Will they be current assets or fixed assets?

[@Incomedigs]

@@AlexandrosFereos Hi there! Good question....the good news is that you can easily move those items on your balance sheet per advice/ guidance from your CPA. In general, Current Assets are assets that would typically be moved within 1 year. Therefore, when those assets are converted into long term rental...you would probably want to move them over to Fixed Assets.