Why use Quickbooks for buy n' holds?

Question

The past days I'm researching ways to better systemize better my REI. So far since I have only 4 rentals the free version of RentecDirect works just fine, and if I decide to get the very affordable pro version I will be able to use more of their automated features. This will make my accounting pretty easy.

What I dont understand is why start using Quickbooks (with the added cost and the hassle of setting it up and learning it) in addition to the property management software when the software itself is capable to produce all necessary reports for your CPA and it provides you everything you need to run your PM business . In addition to that it cant be synchronized with Quickbooks, but again I dont understand the benefit...

Now as far as my fix and hold or sell there I do have an accounting nightmare and thats the reason I'm exploring QB...too many expenses in different categories plus the difference between improvement and repair that you need to have separated when you buy fix and hold...

Any hybrid investors out there that can help me with this??

Jeff Gates · Answer

In your situation QB is the answer, or Xero. ...... Most other Landlords are NOT in your situation.  ....... Any time you make investments in your properties at the extent you do, QB is the answer. ....... Let me be clear, with only annual maintenance QB is overkill. Too much work for a simple IRS Schedule E filing  (revenues and expense with one depreciation item).   .......... However you are investing in much more than repairs (capital investments) and this requires special  IRS documents, detailed accounting and depreciation for the long term useful life of those capital investments. A new roof is not repair, it is a capital investment. A new kitchen is not repair and is a capital investment. These are some examples where QB or Xero is required.

Gita Faust · Answer

@Pavlos Kasselouris

Let us break it down:

- if you are using a property management software and does everything you need - you do not need anything else. Simple.

But before you make that decision - You need to become a CFO of your company and determine how you can be more profitable. Doing so will help you understand what you need and which software to use.

Just hung up with Kathy CFO of commercial investment company employees 2.5 full time employee in the accounting department. By the 5th of the month they have all their accounting and financials ready for investors and equity partners. Currently they are using QuickBooks Enterprise and everyone is happy. Of course except the owner, otherwise I would not have got the call. Here is her side of the story - the owner was speaking to other investors and they all use Yardi and he wanted to switch.  After 20 minutes in the conversation I asked her to make a list and share with me:

- Ask the employees what is the most tedious work they do and recurring tasks

- Ask the employees what changes they should make in the office to make life easy

- List all the software they are using

- Here comes the most difficult questions:

--- Ask the owner why he wants to switch. Does he want to switch because the other investors are using Yardi. Does he want to be included in the "inner circle"?

--- What is he missing in the current software that he cannot get?

--- What does he forsee in gaining using Yardi?

--- How much money will they spend if they switch?

So the question is what are you missing in the process? What are you looking for? Are you using the software for your CPA or for you to determine what your equity is?

Here is why managers use a property management software and QuickBooks. Depending on the software pm software may not have the capability to reconcile bank accounts, print checks, attach documents, ACH payments, track flip and hold expenses, cost segregation, equity partners, your investments, draws and the list goes on.

To learn more about amortization and depreciation check out this link.

Allen Hayes · Answer

Hmm, honestly a lot of this sounds like your accountants are asking for you to put data in a format they can import to their accounting software during returns preparation. Some of the depreciation and amortization features sound nice I guess but probably takes as much to set up as a simple schedule on Excel.  If it works for you great, but I'd hesitate to recommend it to newbies with smaller portfolios.  I've got 27 units in 2 apartments and three SFH properties and I couldn't imagine dealing with QB for it.   I don't think QB sounds like a necessary package for this until I get an office worker to help with the day to day rent receipts and taking/making calls and even then it's mostly just to get some internal controls and "idiot proof" my processes. Just for the record I am a corporate accountant and my wife is a CPA so it might just be my comfort with accounting.

Brandon Hall · Answer

@Pavlos Kasselouris QB is the best accounting platform out there for developments, builds, and flips. Xero is best for rentals.

@Jeff Gates in my experience, Xero for flips is a bad idea. Xero does not offer inventory cost tracking nor do they allow for sub-accounts. Until this is added, I'd shy away from Xero for flippers and developers.

Simon W. · Answer

@John Thedford - correction Capital Improvements gets amortized :)

Equipment gets depreciated.

Gita Faust · Answer

Each software has it's pros and con. All you need to decide what your needs are and makes you happy. AND why

Remember those days - where everyone used paper, pencil and still made millions. There is nothing to stop one using excel or any software as to that matter.

Software is a tool to get instant financials and the accuracy depends on the person knowledge, expertise and also identifying and analyzing the data.

That financials should not be because of tax returns, it should be so you can be your own CFO.

We did not become experts overnight, we all took the time to learn, educate, research, test and then implement when buying or selling property.

Kimberly H. · Answer

@Pavlos Kasselouris From what I have seen, all accountants want people to use Quickbooks.  I didn't like the loss of functionality when I would be using it as compared to Quicken. Quicken makes downloading transactions really easy, Quickbooks doesn't, some companies won't download to Quickbooks, or require a fee to do so, and most of them only allowed up to the last month of transactions for Quickbooks. So, if you're not doing it monthly, there is going to be a gap where you will wind up having to enter transactions manually which is even more work. With Quicken on the other hand, you can download up to 3 months of transactions for free with all the banks and credit cards I use. So, I chose to make my daily bookkeeping less work and the one time accountant work more work, than the reverse.

Pavlos Kasselouris · Answer

@Jeff Gates and @Kimberly H.

My accountant proposed to me to start using it and I dont mind learning it, especially if it can streamline a lot  of the accounting, but like I said previous, its a big learning curve and I wanted to be sure its worth it before I make the effort.

Kimberly H. · Answer

It seems like all accountants want you to use QB, so I bought it. I hated it, because it didn't have some functionality that Quicken has, which is what I had been using. Went back to Quicken, from there I generate excel sheets to send the accountant.

Why use Quickbooks for buy n' holds?

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