Tracking Rehab Expenses in Quickbooks Online - Part 1

[@Incomedigs]

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

[@badace2]

This is a great video - I cannot believe there are so few views on it. It's been really challenging to find any information on this at all. This video is labeled as Part 1, do you have a Part 2?

[@Incomedigs]

Hi Luke! Thanks for reaching out...it looks like Part 2 was deleted from the channel! I apologize....I'll put it in the queue to post before the year's end.

[@Incomedigs]

Hey Lukas! Thanks for your patience...please see Part 2!: kzbin.info/www/bejne/jKvPhaKslK-boMU

[@danielkentproperties]

Great videos and explanation of how to setup QB Online for Rental Properties! Love them! My question is, I setup Products and Services for my rehab costs. How do you recommend to track refunds or returns for those services? For example, I gave a deposit to an electrician, who then could not complete the work. So his down payment shows up in my "Electrical" product and services. How can I refund that deposit to that product and service? I can only get it to show up as "Not Specified" when I run a P&L report sorted by Products and Services. TIA!

[@Incomedigs]

Hi Daniel...thanks for watching! How are you recording the refund? Have you tried recording a "Vendor Credit" for the refund that you received? Within the Vendor Credit Dialogue, you should be able to indicate the product/ service and the amount. Give that a try and let me know. Feel free to reach out directly at [e-mail].

[@danielkentproperties]

@@Incomedigs Thanks Nick! The only problem I am having is connecting the Vendor Credit, to the deposit that is in my register. I will try to figure that out but any advice would be great!

[@TikoBlane]

I'm not sure exactly where you started. My real estate business consist of wholesaling and rentals. Mainly wholesaling but I currently have one rental and plan to do more. How do I separate the rental expenses & income versus wholesaling expenses/profits? BTW I'm using the QBO simple start plan, the cheapest one. I think its $20 per month. Can I do what I'm asking on that plan. BTW I don't need to send invoices to renters. Thanks. I subbed!

[@adamnonnenmacher7774]

I’m pretty sure products/services are supposed to only map to income accounts. Why don’t you just create an asset account for improvements. Improvements are an expense (aka capital expense) that increases cost basis of the property and can also be depreciated I think.

[@Incomedigs]

Hi Adam...thanks for your question. Sure...you can track improvements to your balance sheet. We teach that approach. Products/ Service are indeed designed to be used for both Income AND Expenses...hence QBO gives you the option to select one or the other. Using Products/ Services provides 1 extra layer of detail for drill down reporting. It does not replace your COA. Whether you are tracking your rehab expenses to the P&L or to the Balance sheet, Products/ Services can map to either.

[@nancyalgernon880]

I was wondering how to record non construction costs such as Countertops, lights, etc. Are these types of costs considered expenses or an asset to the property. This property has four units; 3 rental and 1 VRBO. Also, should each unit be separate as far as accounting goes? Thank you so much!

[@Incomedigs]

Hi Nancy...thanks for the question! If you are making improvements for the long term, you would potentially want to put these onto your balance sheet under fixed assets. If this is the case, you could setup your categories (countertops, lighting, etc) as Products/ Services and map them to a "CapEx" account on your Balance Sheet. That way, all transactions that are logged to those products/ services will fall on your balance sheet. Does that make sense?

[@davidhammond6163]

I love this method and I have begun to implement it. I do remodeling and flipping. However, I categorize all of my transactions in QBO by linking my bank account transactions. When I work through those transactions to "confirm" them, I only have options for category and customer. There's no way I can afford the time to manually enter every business expense the way you do in the video. Is there a workaround or something I'm missing? For now, I'm just sticking to general categories (contractors, job supplies, etc). I'm pretty sure the categories correspond to the expense accounts in my chart of accounts. Thanks!

[@Incomedigs]

Hi David...thanks for watching! You touch on my absolute biggest annoyance with QBO!!!! You cannot use Products/ Services within the Banking Feed. Its ridiculous! I hope they change that soon...but for now....2 options: 1. Continue what you are doing to quickly "clear" the banking feed. Categorize to the expense/ cogs account, indicate the vendor, project, etc. You would then need to build in a process by which you drill down into those categories, open the transactions and add the product/ service info. 2. Proactively create the transactions "manually" by clicking "New->Expense". This will allow you to use Products/ Services. Then, as the transactions hit your bank feed, you simply match them. Personally, I use option 2. I know...extra work for sure. However, I've used this annoyance to build in a bit of a "double check" for my assistant who is doing my bookkeeping. As our team incurs expenses, they provide receipts (currently in slack...but you could use the QBO receipts feature). Viv, my assistant, will then proactively add the expense in QBO using products/ services. Then, in 1-2 days, when they hit my bank/ credit card, she simply matches them. If there are items in the bank feed w/o a match...we know there is an error! Either we don't have the receipt...meaning we need to get on the team to submit them....or there was a mistake with the expense entry. Either way its a nice "double check" to ensure we are as close to 100% compliant with our receipts/ bookkeeping process.

[@britthodgeable]

Hi, all of your videos are super helpful, I've subscribed and have been binging. I was wondering why you are categorizing these construction costs as Expenses, while in other videos you categorized capex as COGS. Is this for tax purposes?

[@Incomedigs]

Hi there! Thanks for watching! Yes! I toggle between COGS, Expenses, CapEX etc because different businesses have different reporting needs. Generally, CapEx should be added to your balance sheet as a fixed asset...to be depreciated. However, sometimes when we are flipping, we want to see these CapEx expenses on our P&L...thus we tag them as expenses or COGS. All strategies can be reversed via a journal entry at year's end. We cove these reconciling entries in ou end to end course: incomedigs.com/reab. One other point: Make sure we are not confusing the Transaction type of "Expenses" with the COA Category for expense. Just because we are creating an "expense" transaction does not mean that the money spent will be allocated to an Expenses COA. We can choose an account that is COGS, Fixed Asset, etc. Typically I will map my Products/ Services either to Fixed Assets (Balance Sheet) or COGS (Profit & Loss)

[@georgepapanastasiou7941]

@@Incomedigs HI Nick. I just started following your videos. We are speculation builders. I've created the Products and Services in line with the NAHB codes and pointed the Item Expense drop down field to a WIP Asset Account to be able to track the increasing basis of each project. The question I have now is how do would I handle the purchase and sale HUD statements? Should I create a Journal entry as you have shown in your other videos and enter those to the same WIP account? If I do how can I get the details of that HUD to show on reports broken out by category (Bank Fee, Property Tax, Realtor Fees, etc...). Should I instead create a zero dollar check and create additional products and services for these items?

[@Incomedigs]

@@georgepapanastasiou7941 Thanks for watching! If you are looking to break out those expense types (bank fee, etc)...then yes, you would need to use a check/ expense transaction for the closing. You can mix products/ services with standard "category" allocations. This will allow you to tell the entire story of the hud in 1 single transaction.

[@markschuemann7967]

If I pay a contractor for lets say roofing labor as a expense, it does not allow for 1099s to be produced or tracked for that contractor. Do you address this later? Ideas?

[@Incomedigs]

Hi Mark, thanks for the question! You mark your chart of accounts as “1099” when you set up your 1099s. Qbo will ask you which accounts should be tagged to which 1099 boxes. As long as your roofing labor expense maps to an account tagged as 1099, you should be all set. Does that make sense?

[@markschuemann7967]

Thanks I will train up and get back to you. Also it seems COGS shows in the gross profit vs Net. I like that better.

[@dunbarterraceneighborhoodu3530]

Do / Can you track flips and rentals in one QBO account or do they need to be separate for tax? If separate, can you do a podcast on why?

[@Incomedigs]

Hello, you should decide how many QBO accounts to have based on your entity structure. Technically, you should have a separate account for each legal entity. However, there are some workaround using Location tracking that allow you to use 1 account for everything.

[@Incomedigs]

Hey! You can certainly track in the same QBO account...especially if the properties are owned by the same entity! You would only keep them separate if you have separate entities (LLCs, Corps, etc).

[@ulgenmelissamarpessabell1441]

Do any of your videos cover scouting for HOA /CDD fees from ALTA and on going basis ?

[@Incomedigs]

Hi Melissa...thanks for watching and thanks for the question! Not sure if we have anything on that specific topic, However, you could probably handle this with recurring transactions. I suggest creating an expense...typical to a monthly HOA fee. After saving, click "Make Recurring". You can then set a schedule so that this expense hits your books on a regular cadence. In the meantime, I'll add this to our queue of videos to record.

[@elizabethgravely7156]

Thank you for the video. Question: Instead of a product, could you just do a sub-account, e.g., could electrical roughing be a sub-account of construction costs? If not, could you explain why? Also, why do you say the accounting method has to be cash not accrual?

[@Incomedigs]

Hi Elizabeth...thanks for the question! Yes! You certainly can have sub accounts. You just have to keep in mind that this can make your P&L quite lengthy. Of course you can "collapse" the sub accounts so they don't show...but you would have to do this every time. I think it depends on how many sub accounts you have...If you have 10-20...subaccounts are probably fine. If you use the NAHB accounts, you will have well over 100. Likely not practical to have as sub accounts. My mention of Cash-based accounting is in reference to tax reporting. The IRS requires you report cash-based. In my business, I use accrual for my day to day..and toggle to cash for tax reports. Hope that helps!

[@SponkADonk]

Will you be doing the next video on QuickBooks? Been looking everywhere for more specific help in different areas of REI in QuickBooks.

[@Incomedigs]

What are some specific topics you would like covered?

[@Incomedigs]

Hey! Thanks for your patience...please see part 2 here: kzbin.info/www/bejne/jKvPhaKslK-boMU

[@colinmiller3112]

What quickbooks service do you pay for? Is it the self-employed or small business?

[@Incomedigs]

Hi Collin, I typically suggest QBO Plus

[@stephaniehunziker2821]

How do I set up a category for new appliances for my apartments?

[@Incomedigs]

HI Stephanie...thanks for watching. An appliances (oven, refrigerator, dishwasher, etc) would almost always be logged as an "Asset" and then depreciated (typically on a 5 year life-span www.irs.gov/publications/p527#en_US_2018_publink1000219065). I recommend creating a sub-account under your "Buildings" account to log all your Capital Improvements. Within this account, you may want to create additional sub accounts for the different types of improvements to be depreciated. For example: "Appliances". Then, to record the purchase of new appliances, you can simply create an expense, and indicate the new "Appliance" category you just created. You could also use a journal entry and Debit the Appliances account and Credit the Bank/ CC account you used to pay for the appliances. Does that make sense?