Real Estate Accounting: Flips on your P&L or Balance Sheet (Part 1)

[@JonathandeMartimprey]

Quick help on the population of classes at 22:00 .... if you copy the whole class you can quickly paste then tab and it will populate quite quickly

[@Incomedigs]

Excellent!!! Thank you so much for the suggestion!

[@Flipworx-c2w]

Question: Sometimes we raise excess capital for a project and there is a surplus after all expenses on the HUD and that surplus is sent to our business account by title. I don't know how to balance the journal entry when considering I need to account for that surplus?

[@Incomedigs]

Hi! Thanks for watching! The surplus that is sent to your business account will just be recorded to the bank account...for now. You would then likely re-distribute back to the lender/ investor. At the time of the actual sale...you would simply recognize additional cash to your bank account.

[@llacey1906]

What is the benefit of using Product/Service for rehab costs vs using sub-categories of Flips-Rehab Costs? as sub-categories they show on the P&L report instead of having to drill down to Transaction Details by Product.

[@Incomedigs]

Hi! Good question! The main reason is that some builders might have 50+/ 100+/ 200+ cost codes! Not a great idea to list all of these on the profit and loss...Also, Products/ Services are the best mapping to cost codes in Buildertrend/ other outside project management software.

[@Jdellinger12]

How do you handle unused construction escrow funds? For example, we flipped a house. Raised 70,000 in construction escrow but only spend $3800 before we sold it. We did a "wholetail". How do you balance out the unused construction escrow on the balance sheet after it is sold?

[@Incomedigs]

Hi! The unused funds were likely deducted from the loan payoff. E.g. If your total loan is 370,000....300K for the house and 70K for construction. You only spend 38,000. That means you have an escrow balance of 32,000. With all that being said, you total loan payoff is likely 338.000. On the journal entry you would Debit 370K on the loan, and debit 32 k on the construction escrow. That 0's both out. We dive into this in great detail in our end to end course: Real Estate Accounting Bootcamp. Check it out here: bit.ly/3xaBohM Use code KZbin50 for $50 off!

[@jeanlikedenim]

Noooiiiicceeee So as a investor/developer do you do your own books?

[@Incomedigs]

Hey! I do...with the help of a VA. I would say that most of my investor students have a bookkeeper and/ or VA helping them out. My course teaches investors and their bookkeepers how to setup and manage their accounting books. Definitely check it out www.incomedigs.com/reab

[@AccountingOffice-z2s]

Hi! I can't find a video of yours that discusses this, but how would you go about keeping track of the estimated costs per property vs. the actual costs per property? When it's a set bill I can just add that for a future date, but when it's an estimated construction cost, how can I compare the two? I don't want to create a spreadsheet and enter each transaction twice. Any advise would be extremely appreciated. Thanks!

[@Incomedigs]

Hi! Thanks for watching! Unfortunately QBO is not very good at tracking estimated vs. actuals for projects. It does have a budgeting feature which works well on a "Big Picture" level...but not by project. You will need to use some sort of external reporting to track this. That does not mean you need to repeat transactions. You can sync with an external software (Buildertrend) or create a simple export to Google Sheet Process. Check out an example here: kzbin.info/www/bejne/qX_EnWdqlN58e6s

[@michaelcook9748]

I am not sure why you are booking the rehab related costs to Cost of Goods Sold on the P&L first, when you really want those cost to go into the inventory account on the balance sheet. What is the benefit of booking those rehab related costs to Cost of Good Sold on the P&L first? What is causing you to take the extra time to make the extra step of moving the costs from the P&L to the Balance Sheet when you could have just booked those cost directly into the Balance Sheet to begin with?

[@Incomedigs]

Hi Michael... good question! First, its definitely a matter of preference. You could definitely book everything directly to the balance sheet. The main reason I demo booking to the P&L is that the majority of flippers I work with want to see their flips in a project-based profit and loss statement: Sales Price - Purchase Price - Rehab etc etc. This is why we start with the P&l. If, for your business, you have no need to view your flips on the P&L...you can surely book everything directly to the balance sheet to begin with.

[@AccountingOffice-z2s]

Hi! I can't find a video of yours that addresses this, but I'm hoping you can help. I need a way to cross reference the projected amount a property would cost (by each vendor and as a whole) vs. the actual costs. Specifically if I'm going "under" or "over" budget. When looking into the estimate vs. actual reports on QB, it looks like those reports are geared towards contractors themselves and not investors. Any ideas?

[@Incomedigs]

Similar to the below response. No great way to do this in QBO itself. But you could export QBO data for powerful reporting: kzbin.info/www/bejne/qX_EnWdqlN58e6s

[@brittwalker6218]

Do you offer accounting services?

[@Incomedigs]

Hi! Unfortunately No. I am able to teach more people through KZbin and my courses...Within the course and the associated community, it is very likely you could network with a bookkeeper to help you out. We have many many accountants/ bookkeepers taking the course. www.incomedigs.com/reab