How do you all have QuickBooks set up for flipping?

Question

Hi!At the strong recommendation of multiple folks on here and my accountant I bought QuickBooks. My main confusion lies in how to set it up for flipping? How have you all done this? Any advice at all is very much appreciated!!Thank you!!

Jeffrey Bibby · Answer

Make a fixed asset account for each property and sub accounts for the purchase price and expenses. Make an income account gain/loss on sale of property and sub accounts Gross Proceeds from sale and Cost of Property Sold. When flip is complete need to wipe out all property asset accounts to cost of property sold with a journal entry after putting in your closing statement entries. It gets a little involved and believe others may do it differently.

Will Barnard · Answer

Again, this is all way off base here and could confuse or misguide others. First off, we are discussing flips, not rentals in this thread. Second, any loan for a flip does not preclude you from selling it before a year or forcing you to live in it for a year. In fact, most loans obtained for these purposes are non owner occupied loans and they may have pre-payment penalties, but that is getting way off base for this conversation.Lets stick to the topic at hand which is about how to set up QB for flip projects.

Will Barnard · Answer

There are no states in the union that have laws precluding anyone from selling a rental property or flip Property without having lived in it for one year. Additionally, the original poster is talking about flips and not rentals. There is tax law that states that rental property held for the purpose of long term (1 year plus) and so held at least that long, at sale, the tax is at capital gains rates and not ordinary income like flips or rentals held less than one year. There are also exceptions to the rule as well which one needs to consult their tax pro on.@Jeffrey Bibby gave a very solid example of how to set up a quickbooks file for a flip. Mine is not exact to that but very similar. Additionally, I would add that you should use “classes” for your QB accounting which allows you to assign a class to each property and a class for itemized expenses within each property. This way, you can do a search and find what you spent on one project vs another or how much you spent on rough framing on one project vs another.

Account Closed · Answer

I should have elaborated a little more on the part about living in the home.If you got a loan for purchase, it will depend on the terms of your loan. Some loan packages require staying in the home for a period of time. Also some newer developments - for a brand new home - the contract may have language stating that the home cannot be sold for a period of time - this is to prevent too many investors selling too quickly thus impacting the integrity of the development.Therefore, yes you can sell it at anytime, however, it all depends on how you purchased it. By cash, a loan, etc., Nancy Neville

Account Closed · Answer

I see that Jeffrey was typing as I was typing. Nancy Neville

Account Closed · Answer

Depending on your State Law, some must live inside the rental for a year in order to sell it (flip it). So check your state laws. Next, rental property is called a fixed asset. You will want to list the property (purchase price (costs) of the property) as a fixed asset. And any upgrades to it you will want to list as a fixed asset as well. (but make it a sub-account of the property so that the expenses to fix up the property will be added to the total cost of the property in the fixed asset account of QuickBooks). QuickBooks adds this to you automatically when you do this through the Fixed Asset Account in your Chart of Accounts and by listing your expenses as a sub-account. Then when you sell the property you will sell it as a Cost of Goods sold, (General Journal Entry) which will deduct your expenses from the sale of the house, lowering the profit made from that house,For Example:Let's say you purchased a house for $35,000.00 and you fixed it up and the total amount of money you spent to fix it up was $7,000.00. So far your expenses for this house equaled $42,000.00. You put it up for sale and sell it for $100,000.00. Well, you really didn't make $100,000.00 on this house because you spent $42,000.00 to buy it and fix it up. By making the fixed asset now a Cost of Good Sold, QuickBooks deducts the $42,000.00 in expenses from the $100,000.00 (the selling price) leaving you with an actual profit of $58,000.00, which is what you will pay taxes on. Not the $100,000.00. So this is very crucial, because who wants to pay higher taxes when you really didn't make that much money at all. Right?Nancy Neville

Suzie Kelly · Answer

Hi, I am a bookkeeper that just acquired a new client who flips real estate. Would anyone have a sample of the correct way to set up the chart of accounts? I use quick-books pro 2016 & 2017.