Need Some Help Setting Up Accounting System

[Andrew Taylor]

I need some help setting up an accounting system to manage a small flipping operation. I've been in construction for two decades, and I'm used to job costing software, but I'm having a hard time finding something that works well for flipping. I know QB can be massaged into working for flipping, but it doesn't seem ideal. I've tried several other solutions (spreadsheet, Airtable, QB, QBO, Xero, Zoho, a few apps) but, again, none of them seem geared toward flipping.

I've kinda sorta settled on Kashoo for tracking my stuff (for now, anyway). My question is, how do I set up my accounts/projects in a way that makes the most sense?

I *think* I've got four things to track with each flip:

• Purchase-related costs (closing costs, appraisals, surveys, etc.)
• Rehab costs
• Holding costs
• Costs related to sales (commissions etc., buyer concessions, etc.).

I'm wondering how to record my transactions so far. At closing, I had the following costs:

• $4,737.72 holding costs (prepaid interest, insurance)
• $13,335.09 closing costs (fees etc.)
• $79,061 construction holdback
• $22,000 assignment fee
• $311,521 loan amount
• $76,259.55 due from me

Now the tricky part: where do I slot-in all those expenses? Everything came out of my pocket, so I assume one half of each double-entry entry is "Contributed Capital". I think holding and closing costs are simply posted to the respective expense accounts (i.e. 123 Main - Holding, 123 Main - Purchase). I'm not sure what to do with construction holdback, assignment fee, etc. My understanding is that for flipping, all the costs go toward the cost basis (which I think is the short-term asset account for the property).

Any guidance you can give will be appreciated.

[David Robertson]

I'm oversimplifying this, but here are the most important things you need to track:

#1 Project Revenue/Expenses

In a flip there is revenue from re-selling the property & the cost of goods sold (expenses), which is used to calculate your project profitability (net income) for each project. Your total net income from properties sold in a given year is your taxable income which is typically taxed at your ordinary tax rate.

Revenue for flipping is easy to track because it is generally just one entry for the resale value of the property.

Expenses get a bit more complicated because you will likely have a 100+ transactions for purchasing materials, paying contractors, & paying utility bills.

For Expenses I track:

• Track Expenses by Vendor - Helpful for filing Vendor 1099s at the end of the year
• Track Expenses by Category (Purchase, Buying Costs, Holding Costs, Selling Costs, Financing Costs, Repairs (roofing, siding, painting, etc.) - Helpful for tracking actual expenses against my budget. Also if you decide to convert the property to a long-term rental the improvements may be added to your capital basis & depreciated over time.
• Track Expenses by Account - Helpful for reconciling bank accounts, credit card accounts & expense reimbursements

#2 Liabilities / Outstanding Loan Balances

If you are using outside funding, you will also want to keep track of your outstanding loan balances that you owe for each property.

You can do all of this in an Excel spreadsheet by just creating columns for Category, Vendor, & Accounts. Or there are also house flipping specific softwares for tracking project expenses.