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Accounting for house flippers
Hello BP community,
For house flippers doing consistent deals, what tool(s) do you use for accounting? I've tried QB (admittedly, didn't try for long) and it didn't seem to be a good fit. Seemed like QB would be good for a rental, but since with flips you have to capitalize every cost and everything is essentially on the balance sheet (versus the P&L) it didn't seem to work properly. Now, I manually export CC and bank statements into CSV files and then separate each transaction where it needs to go. I do at the end of each year and really dread it. It is super tedious and hurts my brain.
For instance, we bought/sold 5 flips last year so we have 5 "buckets" each transaction could fall in PLUS our general office expenses (Google ads, Propstream, DealSimple, etc.)
I manually go through every transaction to drop in the right "bucket" to figure out our profit for each deal and then I give to my CPA. Is there an easier way to do this? I've done this for years now and feel there has got to be a better way.
Quote from @Marty Boardman:
That is correct. I do not break them down into categories, however I explain what work was done in the memo line so if I want to know later I can print the report and add to an Excel spreadsheet.
Attached are screenshots of a sold property. There are 2 journal entries for this. I also included the P&L so you can see how it looks once I take the house off the books.
Hey Marty, the pictures are not loading on here. Any chance you could send the screenshots again, or send direct to me? I am doing a flip now and trying to wrap my head around the bookkeeping. I purchase some of the materials myself and provide them to my contractor and some I am paying my contractor for material and labor. Not sure if you would separate the items I am purchasing or they all go into "WIP"
@Owen Fogarty I just give my customers a Google Sheet template to do the accounting for flip income and expenses. Happy to share if you're interested.
Accounting systems are great: QB, Stessa, Digb but the reality is you want to track a few things at a high level, this will make your life a lot easier when you sell/need to report income/loss, and accounting systems won't always make this easy.
I use QBO for all of my flip bookkeeping clients. We track flips on the P&L in the following accounts:
Flips - Sales Price, Flips - Purchase Price, Flips - Acquisition Costs, Flips - Rehab Costs, Flips - Holding Costs, and Flips - Selling Costs
If the project isn't sold by the end of the year, we book a journal entry to move it from the P&L to the Balance Sheet. Some of my clients want to track at a more detailed level in which case we use the projects module to track at the same level of detail as the rehab budget.
@William Harvey, somehow just seeing this post years later... What did you end up going with and how do you like it?
We use QuickBooks Online exclusively for all of our REI Clients (including House Flippers). I use it for my personal portfolio as well. We've found it has superior reporting features, integration features, and is overall more efficient to work within than other REI-specific software.
The downside is QBO is not set up for REI so you'll need to do that or work with an expert to ensure it is set up for your business appropriately. This may be where your initial disconnect was.
Something else to keep in mind is your entity structure and how your entities file tax returns. As a general rule, each entity that files a separate tax return (partnership, s-corp, c-corp, etc) will need its own QBO subscription. If entities are disregarded, you can keep up with more than 1 in a single QBO account using the location/business feature to keep track of them separately. This will save you on subscription costs.
If you're still struggling with any of these topics I'm happy to workshop some solutions with you (for free).
Hope you're doing well and best of luck!