Quickbooks for Real Estate: Don’t Make this Mistake

[@Incomedigs]

Check out my End-to-End Quickbooks Training. www.incomedigs.com/reab ($50 off w/ code KZbin50) Link to Ultimate Chart of Accounts: www.incomedigs.com/chart-of-accounts

[@thuyduongnguyen2157]

Hi! Thanks for your precious knowledge. Do you have a video explaining more details about the usage of each account in CoA for real estate businesses?

[@Incomedigs]

Hey! Thanks so much for watching! Yes...we have so so many videos! Definitely subscribe and check out the channel home page. We have some specific playlists that will get you on the right path. ALSO...check out the end to end course. Real Estate Accounting Bootcamp is the full package. I teach my entire system in this course...we've been told...well worth the investment. www.incomedigs.com/reab ($50 off w/ code KZbin50)

[@mariateran221]

Thank you! this class is really helpful.

[@doveshouse]

I noticed a few developers that are exclusively flipping, not renting, do not capitalize the purchase of their properties but keep them as an expense on their P&L. As they explained to me "this is our business, we're not holding on to these properties long-term therefore we see it as an expense". It appears* that their CPA is OK with this... not sure if this is correct / advised and I'm not sure if the CPA is correct even though you would think he would be since, to a degree, he is on the hook if he is wrong.

[@Incomedigs]

Hi! Thanks for watching! Yes...when Flipping, you would often leave everything to the P&L. The main issue this presents would be at year end if the flip has not yet sold. If this is the case, you would want to "transfer" the COGS from the P&L over to the Balance sheet...likely into an "Inventory" account. You can then "move them back" at the start of the next year. We discuss this strategy in detail in our end to end bookkeeping course, Real Estate Accounting Bootcamp: www.incomedigs.com/reab

[@KBShark1]

Love using this set-up to quickly identify equity per property! How do you reconcile the mortgage account when all mortgages are lumped under the "Conventional 1st" category? Have you found an efficient way to do that?

[@stephenmauro1770]

i did make that mistake. can I pay you to just set up my real estate accounting on qbo?

[@Incomedigs]

Hi! Emailed separately!

[@xdbooboo1]

been binge watching all your vids. just got a client who does flips and has over 20 properties. this has helped a lot and going through all your vids. so helpful and appreciate the knowledge you are offering on this platform. I see on this video you now moved the property to Fixed Assets instead of COGS. just curious on why the change?

[@Incomedigs]

Thank you Shirley! So glad you are finding value in the content! Just a reminder to check out our end to end REI Accounting Course: Real Estate Accounting Bootcamp. We have many investors and bookkeepers in the course! www.incomedigs.com/reab2

[@wearemapleworks]

Great video, I'm all for a compact chart of accounts and love using the classes/locations features in QBO! Question: Why do you prefer Classes over Locations for rentals? The Balance Sheet always has this "unspecified" column for CASH/Credit Cards/AR/AP since it only processes Classes on detail items, not headers. If we use Locations, then we can show a true balance sheet per property. I value your opinion, thanks!

[@Incomedigs]

Hey Karen! Thanks for watching! True! Location is tracked at the transaction level, which enables a "clean" balance sheet...both "sides" of the transaction will track tot he location. This DOES NOT happen when you use classes....IF you track Class to each line of the transaction. So, you could accomplish the exact same benefit you get with Locations if you were to turn Class to "Track 1 class per transaction"....as opposed to "each line of a transaction". This would be equivalent....you would not have the Unspecified column. That is an option. The reason I use Class is b/c of flexibility and tracking multiple lines of a transaction. I often have expenses that cross multiple properties. I benefit from being able to split those expenses by class...something you cannot do with Location. I instead use Location to track transaction by entity. I have a method for including multiple business entities into 1 QBO subscription. For this method, Location works perfectly for the reasons you indicated! In short....Location will work just fine....you just don't have the ability to split transactions.

[@alishajoycole4263]

I would love to see your method of tracking two entities in one QBO account. I have a real estate firm client who just added a new office location and wants to separate them out in QBO. I’m looking for the best way to do this. Thanks!

[@Incomedigs]

@@alishajoycole4263 Thanks for watching! I have a video on tracking multiple entities in one QBO subscription: kzbin.info/www/bejne/q2nQnWSHrduCfJI WE also talk about this in great detail in our end to end course, real estate accounting bootcamp! bit.ly/reabcourse

[@hugadog1]

And, if I use "Customer" for each property, then how would I set up a Tenant? I'll still need to invocie tenants...

[@piracula7131]

Great video! I have two questions: 1) If I only have one property so far but will have another by the end of the year, can I start without class tracking and add it later after upgrading? 2) Will the QBO setup you teach work for short term rentals (nightly) via VRBO and Airbnb?

[@Incomedigs]

HI There! 1. Yes...you can certainly do this. It will be a bit of tedious work to update several transactions...but you can do this retroactively once you upgrade. 2. Yes, the QBO setup should work. Certainly from a Fixed asset standpoint, you would record LT properties the same as ST properties. With short term rentals, you may decide to add a few additional COGS accounts to account for specific expense categories...but all in all...the approach would be the same.

[@hugadog1]

I only have two rental properties -- is there a benefit to using QBOPlus in order to be able to use "Classes" for the properties vs. the less expesive basic QBO where I'd have to use "Customer" for each property?

[@Incomedigs]

Hi Linda...I personally like "Class". However, its probably not worth the extra cost w/ only two properties. You can certainly get away w/ the lower level of QBO and "Customer"

[@KarenZeigler-x2x]

Hi! How do you recommend I convert a chart of accounts for a client that just started with me that has done this the wrong way for over 20 properties. Can I move it all with a JE? It is gargantuan!

[@Incomedigs]

Yes! A Journal will do the trick! Take the balance sheet as of a specific date and begin to "move" balances from the old accounts to the new. You can do this with one single journal. Your goal will be to get the "wrong" accounts to 0. Once they are, you can make them inactive.

[@jjackson2844]

I just have the QuickBooks Simple Start version. I'm not yet ready to double the cost of QBO, but does your course offer techniques or instruction on using this version for RE accounting?

[@Incomedigs]

Hi! Sorry for the extreme delay! Yes...we do touch on how to utilize Simple Start. Of course not everything is possible but we do discuss!

[@onestoptechnologies7305]

Thank you for your videos! I have used QuickBooks a fair amount in the past for different service businesses, but I am trying to adapt it for my father who owns some properties. He recently purchased another property and I am trying to enter this purchase (and the others) as a Fixed Asset. QuickBooks tells me to use the Fixed Asset List, but I'm struggling to figure out the values for 1 Land (Tax Assessment Value of the Land?) , 2 Buildings - Original, 3 Purchase Closing Costs - Original & Amort, 4 CapEx - Original. I have all of the closing documents (price, loan amount, etc), but I was hoping there are simple formulas to determine these values, i.e. Closing Costs = Total Closing Debit - Agreed Price? Also, I'm trying to configure automatic invoices for him with CAM/NNN. How might a person incorporate those charges, aside from manually calculating them for each tenant monthly? I apologize in advance if my question is elementary. My background is in science/technology not finance, but I'm learning.

[@Incomedigs]

Hi there....thanks for watching! We have specific videos on recording the purchase of property. In fact, our very first video touches on this point: kzbin.info/www/bejne/hYLWeamlfsp6a7c We also cover all these questions in our comprehensive course: www.incomedigs.com/reab .

[@robertoldt]

Very helpful. Thank you for all your videos. How do you account for appreciation, especially in a BRRR situation where your building is now worth more. TIA

[@Incomedigs]

Hi Robert...thanks for watching! Technically, we should not account for appreciation in our accounting books. We will be tracking the "book value" only. It is possible to add equity to your balance sheet...you could add a sub-account for fixed assets: "Added Market Equity". You would need to offset that with an Equity account as well. The above strategy will do the trick...but you would not want to include that in your tax reports. It would simply be to manage and monitor your growing portfolio.

[@richardhuynh1662]

Do you already have a video that you explained how to enter the first Mortgage loan (1st position) so every following mortgage payment (principle) gets deducted from that loan?

[@Incomedigs]

Hey Richard...We have a video on recording mortgage payments! Check it out here: kzbin.info/www/bejne/Z3yYZ4d4ptGtrLs

[@elenorfleming2756]

This truly opened my eyes! Thank you so much for this! I have 2 follow up questions if i may. For clients that do not use plus or advance, you mentioned customers. Will customers work as effective as Classes? Also, I'm thinking this would be great for payroll with multiple locations to use classes for those with plus or advanced and customer for those with essential? Thank you in advance!

[@Incomedigs]

Hi Elenor....glad you found this useful! Customer will work just like Classes....certainly for journal entries. The issue you might have is that other transaction types do not have the "customer" field available in earlier versions of QBO. Some do...but not all. So your client might be stuck making journal entries when a typical "expense" would typically do. When it comes to Payroll....you will need to have a separate subscription for each business from which you pay employees. To my knowledge, there is no way to send payment from multiple different EINs within the same subscription. What I and most of my clients do is use a "parent" or "umbrella" account to be the face/ brand of the business....and also to run all payroll. This allows me to keep everything under one roof/ QBO subscription.

[@brother2nite]

@@Incomedigs I equally found the video eye-opening! Thank you!! To piggyback on @Elenor Fleming's question - could you not use product categories as classes? i.e., Real Estate, sub Property 1, sub Property 2, etc?

[@Incomedigs]

@@brother2nite Thanks for watching! You could do this...However, I find "sub-classes" to be cumbersome when it comes to reporting. QBO does not allow you to only show the "summary" in a report. So, when displaying all your classes as columsn, you will always have the parent class, all the sub classes, and then a total. It is completely fine...just be aware of the reporting.

[@wandajenkins4464]

Is there a video where you’re reconciling long term liabilities? I get classes but I can’t picture in my head how you’re individually reconciling each mortgage if they’re only separated by classes Am I overthinking it?

[@Incomedigs]

Hi Wanda....good question! I do not use QBO "Reconcile" feature for LT liabilities. I also do not link w/ the bank feed. To your point, you would not be able to reconcile the different loan accounts as they are, from QBO's perspective summarized into 1 total value. I would however reconcile on my own. I would take the YE balance of each loan...by class...and compare to the YE statements from my mortgage company. I find that mortgages are fine for this technique. There are typically a small # of transactions in a year...~12 or so. Therefore the reconcile is relatively straightforward.

[@aqildxb]

Extremly helpful

[@Incomedigs]

Thank You!

[@jorgefraga5045]

THis is a great video !thanks,

[@Incomedigs]

Thanks Jorge! Glad you liked the video!

[@10eightyx]

Loving This!!! I do have a question though, in doing this when I try and "Add" transactions from my Banking tab, I don't see a way to add an expense to a specific property "class". So when I am adding transactions how do I associate the expense?

[@10eightyx]

Never mind, I'm an idiot.... Class and Location just started showing up on my banking tab. Awesome video My man!!

[@Incomedigs]

@@10eightyx Great to hear! Thanks Randy!

[@KateLate____]

If I were re-making this video I'd show more of a Before and After at the start, then instructions afterwards. It was really hard to commit to watching this video not knowing what problem it was really addressing before diving into the solution.

[@Incomedigs]

Thank you Kate for the feedback! I will definitely consider that suggestion for future videos! - Nick

[@MagyarSHU]

Your videos have been AMAZINGLY helpful with setting up the books for my small BRRRR portfolio on QBO! Thank you for all the wonderful content :-) Regarding the Asset of "Asset: Added Market Value" that you touched on: would the correct offsetting account be something along the lines of "Owner's Equity: Unrealized Gain/Loss"?

[@Incomedigs]

Hi There...thanks for watching! Sure...some kind of equity account would do the trick. Personally, I reserve the term "Realized Gains" for actual revenue that I record on my P&L. This added market equity would not be something that you put on your p&L....nor that you report on your taxes. For that reason, I would use different verbiage. Something like: "Equity - Added Market Value" would work. As long as its an equity account, you should be fine.

[@danieljessen8009]

Great video! I do have a question. I'm a bookkeeper with a client who owns 40 different properties. I watched your 2019 video on customers vs classes and wondered if you think I should upgrade him to Plus or beyond just so we can track the 40 different properties?

[@Incomedigs]

Hey Daniel! If you are already using classes, and that process is working well...its probably a good idea to upgrade to keep the system consistent. Personally, I'm preferring classes more and more these days. It's probably the best move. However, if you are just getting the process started, Customers is an economical call...with even further room for growth. It will likely come down to this question: Is there another "attribute" that customers should be used for? Does this client of yours need to invoice customers ever? If so, we would probably want that available and not tied down to properties. If not, Customers is a viable, cheaper option.

[@bastiaandevries2844]

how would you record interest only private money for rental properties ?

[@Incomedigs]

Hi There! The interest-only loan would be listed as a liability. As you make interest payments, those payments will be categorized as Expense/ Cost of Goods sold!

[@karengrish]

Thanks for sharing this video! I'm a bookkeeper, and while I really like the look of the 2D balance sheet, I don't know how that would work when it comes to reconciling accounts. I reconcile the escrow and mortgage loan accounts once a quarter. How would you reconcile these accounts when all escrow or mortgage principal balances are all in the same account separated only by class? Or do you go over this in your course? Thanks!

[@Incomedigs]

Hi there! You are correct that you would not be able to use the "reconcile" feature within QBO. That being said, because the volume of transactions to these accounts are relatively minimal, I do it "manually". There are only a couple transactions per month...so we reconcile outside of the "reconcile" feature.

[@lizc6429]

Do permits go into CapEx?

[@Incomedigs]

Yes! All costs associated with construction can be considered part of CapEX

[@nsburden]

Hi Nick, Thanks so much for the information. I have been using Quicken with tags for the six or so properties my husband and I own, for the past 8 years and am now converting to Quickbooks Plus Online because we restructured our real estate holdings for asset protection and it is now a bit more complex! Do I need separate "books"- QBO subscriptions for each RE "holding company" and another for the C-Corp we set up last year for property management (to take advantage of deductions). We are a husband and wife, no employees, three RE holding companies, 1 C-corp and about 10 LLCs (each with a bank account) each holding a rental property which are disregarded entities to the three holding companies which are then disregarded entities to us (we each have a holding company plus a partnership holding company). Complicated? Can I utilize "classes" to distinguish the legal entities or what would you suggest? I was hoping to set up a consultation call but you are not taking any more at this time. Any help is very much appreciated! Thank you!

[@Incomedigs]

Hi Niobe! Thanks for reaching out. We can definitely set up a coaching call! Also, I highly recommend the end to end course: Real Estate Accounting Bootcamp. With the course, you get direct access to me within the community and live Q&As! To your question: I have a unique strategy for managing multiple business entities in one instance of QBO. I have an intro video on the topic here: kzbin.info/www/bejne/q2nQnWSHrduCfJI We discuss this strategy and the many nuances in great detail in the course. www.incomedigs.com/reab2

[@madasamycampbell5414]

This is a really great video! Thank you for making it. If a client has more than 40 properties (the limit for number of Classes in QBO Plus), but they really don't need/want to move up to QBO Advanced, would we just use Customers then and not use Classes?

[@Incomedigs]

Hi There! Yes...absolutely! Customers is the best alternative if you are reaching your class limit!

[@JenLoVe87]

Hi, how can I schedule a consultation call?

[@Incomedigs]

Hi Jenifer! You can schedule directly on our website: calendly.com/nickbaldo/1-on-1-coaching-session?month=2022-01

[@ryanandjoshkeeblerandfoltz7899]

Why aren't things just tagged?

[@Incomedigs]

Hey there! Tagging is a relatively new function w/i QBO. On the surface...it seems like a good solution. But, tagging has the following shortcomings: - Not every transaction type can be tagged (e.g. Journal entry) - Not every report can be segmented by tag - There is no warning if you create a transaction w/o a tag...leading to an increased chance of error.

[@saleemanwar1811]

I am a student from Pakistan. I want to enroll in BootCamp. But The price is high for me. I can pay 50%. But I can promise to pay the remaining 50% when I get my first real estate client.