All Forum Posts by: Andrew Taylor

@Simon W. Just now got to a stopping point where I could look at the chart you posted. I appreciate you taking the time to do that. I want to make sure I understand what you're saying.

• Prepaid interest and insurance are both assets?
• Closing cost is an asset? What do you mean by "this can amortized"?
• Construction holdback - what do you mean by "hard/soft cost reqs"? My HML is for LTV plus 100% of rehab budget.
• Assignment fee - What do you mean by "this can be amortized"? Why do you recommend this as a closing cost vs. part of the purchase price?
• Due to owner - Do you mean I (personally) am loaning the LLC the down payment money? My wife and I assumed it was a capital contribution but I guess it could be a loan. Is that what you're getting at?
• Building - are you referring to the house (asset) itself?

I am happy to send you the closing statement if it will help you answer any of these questions - again, I really appreciate your taking the time to help.

Also wanted to point out, I got a phone call from Gita Faust this morning. We scheduled an online meeting for Monday morning to review my issues, so hopefully that'll work out some of the kinks in my system. Turns out they really prefer telephone or online meetings for support, whereas I prefer email/chat, so we had a disconnect there.

It seems to me that accounting for flips would be simpler than accounting for rentals. There are only a few of each transaction type, right?

• Expenses
• Pre-purchase costs
• Rehab costs
• Holding costs
• Sales costs
• Incomes
• Cash at closing
• Construction draws
• Income from sale of home

I understand this can get infinitely more complex, but for a beginner with a single flip, isn't this pretty much it? There's no depreciation (if I understand the whole short- vs. long-term capital gains thing correctly).

Money only comes from one of three places (in my scenario): out of my personal bank account (owner's capital contribution), from a construction draw (??), or from the sale of the home at the end (??). There might be the odd backcharge or returned material credit, but those are simple enough to account for.

Money only goes to one of a few places (again, this is in my personal scenario): the title company, a material supplier, a labor supplier, or a service provider (electricity, water, porta-potty, etc.).

Am I on the right track so far?

Mike, I have read your book twice and my wife is reading it now. I stumbled across your website a while back while researching this topic. I didn't realize you were the same Mike Butler.

To be honest, though, your setup is too rich for my blood. I might be willing to pay that before all is said and done, but I'm not there yet. Thank you for the offer, though.

Frankly I'm stunned there's not an app for this. There are a bunch of accounting apps that can kinda sorta be coerced into it, but there's nothing designed specifically for house flipping. (David, I'm aware of your offerings. Flipperforce is a promising start but not quite ready for everyday use; and HFS is great but not an app.) 

Part of the problem is not knowing what questions to ask. I don't even know what I don't know. I'm using Kashoo now, which seems to have a good balance of "easy to use" vs. "cost per month." I can set up projects and assign transactions to a given project, but then that seems to defeat the purpose of having separate accounts set up for 123 Main - Closing, 123 Main - Rehab, etc. So do I use the projects feature and then just set up individual expense accounts for things like framing material, trim labor, electric service, and sales commission? Or do I use both the projects feature and individual accounts, with or without individual expense categories?

This is what currently has me confused. I know you two aren't Kashoo support personnel - I'm just asking the universe in general.

Gita, I appreciate you responding here. Unfortunately, I've reached out to your company several times and not gotten satisfactory answers. Your book does go into great detail about every single feature and menu option in QB, but it doesn't walk a new user through the process nearly as effortlessly as you seem to think it does. (Fair warning, I was a technical writer in a past life, so I'm probably a little pickier about how-to books than your typical reader.)

Here are two actual responses from your tech support staff:

"Our book sections and chapters are organized in a way that you would run your business. Does that make sense?

- Did you enter the property name?

- Did you enter the earnest deposit

- Did you enter the closing doc details - HUD? Circle back to the Table of Content and take one step at a time.

If you look at the list you are going to get very overwhelmed, when you are entering the transaction, just start typing why you spend the money, and you will make the selection.

To view the Chart of Accounts: Click on Lists > Chart of Accounts

To view the Lists: Click on Lists > List..."

Here's another:

"Overhead is very similar to your company name so you may see a real estate accounting just right click on it and edit the name to your company name so alternatively you can use overhead or your company name for all the income and expenses that are not related to a specific property hope that makes sense."

When trying to make sense of something as complicated as construction accounting and QB, having to decipher cryptic support responses is just a bridge too far (for me, anyway).

Thanks, @Carl Fischer. I've got Gita's book, and frankly, it wasn't much help. She might know everything there is to know about QB, but she needs an editor in a bad way.

Haven't tried Mike Butler but I'll give him a search.

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.

This sounds like a fantastically bad idea, but if you do it, I hope you post progress here so we can all watch.

@Geoffrey Jones That's a little outside my wheelhouse, but I'd say you're looking at something in the ballpark of $180-220/SF. That puts construction costs at $900k-$1.2M. I'm sure there are some high-end builders around here who can get you closer to an actual number.