Accounting Practices for Rental Properties vs. Flips

[Matthew B.]

I have some fun accounting questions I'm hoping someone can answer.

So I'm pretty sure when I purchase a house to flip, it is recorded as inventory, then expensed as cost of goods sold when the house is sold. All of the other rehab costs are recorded as cost of goods sold as well.

When I purchase a rental, I believe it is recorded as a fixed asset, separated into building and land accounts proportionately for depreciation purposes.

Here's where I have questions. Any improvements done to the property prior to renting it are considered improvements to capital? Total money invested in the property would be fixed assets (land + building) plus capital improvements? Any work done after renting (i.e. fixing the tenant's toilet) would be expenses?

I'm just trying to get some clarification since I've seen a lot of conflicting information. I use Quickbooks Online to keep records and I want to make sure I am recording things properly.