All Forum Posts by: Dan V.

Quickbooks is pretty popular. Online version for mobility and accessibility, desktop if you don't want to pay monthly, both work well for bookkeeping needs. Setup of books and accounting procedure is the key. 

@Rheann Evers Your questions are between intermediate to advance level of RE accounting so I would recommend sitting with your accountant to figure these out or just let him/her set it up and handle these types of transactions for you. 

HELOC should be set up in your book as credit card and transactions should be accounted for just like a credit card. So if you took out $40k then your cash will increase by $40K and your HELOC (credit card) will increase, think of it as a cash advance from credit card account. Interest should be recognized under HELOC account (will increase the HELOC balance), then any payment from bank to HELOC will be considered transfer (bank to credit card), to not double count the interest expense.

Fees associated with HELOC or purchase of property has different accounting & tax treatment depending on what is it for. Some of them can be expensed, while some needs to be capitalized. Again I would suggest you go over them with your accountant as these fees vary, so he can guide you through it. Good luck!

@Kenneth Westervelt At an accountant's perspective, commingling is strongly discouraged. A separate bank account is recommended, it does not have to be business, it can be under your personal name but set it up to use exclusively for your house hacking transactions (rent, utilities, repairs, mortgage, taxes, insurance, etc).  When I say exclusively, I mean do not deposit or pay anything associated to the house directly to/from a different account or pay/deposit personal transactions using your house hacking bank account. If you need to transfer funds between accounts, you can do so.  It will save you and your accountant headache comes time to put together the numbers. 

@Daniel Rutherford Recording HUD is not a simple entry so I recommend running it by your accountant to make sure you are categorizing them correctly.

But in general, here's how you should break it down. 

Property Costs (Fixed assets) [Debit]

• Purchase price
• Closing costs (not loan related like title fees, recording fees, etc)

Escrow EMD (Other Current Asset) [Credit] - EMD (will offset entry for EMD payment)

Mortgage Payable (Liability) [Credit] - Loan principal

Loan Costs (Other Asset) [Debit] - Closing costs (loan related, like lender fees, etc). This will be amortized over the loan period.

Escrow (T&I) [Debit] - Any escrow deposit required by lender at closing

Interest Expense [Debit] - Prepaid interest paid at closing

Insurance Expense [Debit] - Prepaid insurance paid at closing

Property Tax Expense [Debit/Credit] - Any property taxes paid at closing

Utilities Expense [Debit/Cred] - Any utilities paid at closing

Rent Income [Debit/Credit] - any rent proration

Security Deposit [Debit/Credit] - any tenant security deposit

Checking (or whatever account you use) [Debit/Credit] - cash payout or received at closing

There could be more to it but those are the items I can think of on top of my head. And yes it is recommended that this should be entered as a big journal entry. If your HUD settlement has debit and credit column, then you should enter it like that. Hope this helps!

@Account Closed I think to avoid confusion, you can just use Class-Subclass setup for both wholesale & flip, that way you don't have to worry about whether you should enter customer/job or not. So your setup will be:

Class

Wholesale 

Subclass

Wholesale Property address 1

Wholesale Property address 2

Class

Flip 

Subclass

Flip Property address 1

Flip Property Address 2

Since you asked anyway, should you still consider Class-Customer/Job setup, your setup will be:

Class - Wholesale - you will use this one class for all wholesale deals

Customer - You can use this to set up groupings for your wholesale deals like City, State, marketing medium (direct mail, referrals, etc). Or you can just create one customer for all wholesale and name it Wholesale customer.

Job - Property Address (this is where the individual property will be tracked for wholesale).

No apologies needed, you're doing the right thing!

Hmmm...I think you can assign a customer/job under the expense tab. As long as you see the Customer:Job field, that means the transaction can be assigned to job or customer. I don't think entering it as an item is necessary, you don't need more work. Try entering one under expense tab and then run a profit & loss by job to see if it will show At least for your wholesale, you will need to enter Customer/job and class for each transaction, this way you are tracking your transactions by class (wholesale business) and by customer (just to see how much you made for each deal). For the flip, you will only need to enter the class/sub-class and leave the customer blank. 

For the interior design business, I would recommend setting up a separate bank/credit card account and a separate QB file since that could have a different set of chart of accounts, different items/products etc. You don't want to have an overwhelming number of products/items and chart of accounts in your books. Just make sure you though, to track the intercompany transactions (due to, due from) properly if you are transferring funds between businesses. I would say for the interior design, tracking it as customer/job is more appropriate setup than using class/sub-class for each job. 

@Matthew Rembish   Quickbooks is a powerful software, if set up right, along with proper accounting procedure. Either version (desktop or online) will work and your decision will depend on your goals. 

Here are few pros & cons for each version if you are leaning towards QB:

Online

Pros: Accessible anytime, anywhere with internet and also has a mobile app. More flexibility in accountant/bookkeeper to use as more and more remote accountants prefer this version. Data is real time. 

Con: Costly. You will need Plus version which is $60/month. You can get discounts though, just ask your accountant. Also, you may need to have a separate subscription for each entity. 

Desktop

Pros: Cheaper. One time fee. You may need to update after few years as some features (like online banking) may not work for older versions. I also heard people like some customization options which is not available in online. You can use it for as many entities as you'd like. 

Cons: Limited access you need to have it installed on your computer. If you want other to have access, you will need to provide them a copy, or you will let them remote into your PC. There are available options for cloud hosting too, but with a fee of course. Potential data loss may also occur (computer crash) so make sure you do regular backup outside your pc. You may be limited to local accountants or somebody who supports your desktop version. 

Since you are going do a separate line of business (flip) I would recommend using the Class. Basically, Class is a feature in QB for tracking, filtering & reporting purposes, once it's activated, it will show as additional field in each transaction line (just like customer/job). 

Here's what I would recommend on the setup. Activate Class tracking, then track wholesale business in one class, flip as another class then each property as sub-class, and another for admin/general (not property specific). You can continue tracking the wholesale customers using customer/job, so you can still run report for each wholesale deal. 

Once you started using the Class I also recommend going back to the old transactions and assign class for each transaction so everything will be captured when you run reports.

For the flip, you don't have to track customer/job, class tracking is enough for each property, if you want to breakdown your costs, you can do that in the chart of accounts. 

@Timothy VanWingerden Here's an  IRS publication that will give you a general idea on "what to or not to" in a residential rental property on a tax perspective. You can find most of the answers to your questions in the publication. 

Of course, experts will have different interpretations on it, as others mentioned, depending on how aggressive or conservative they are, and also based on different factors and assumptions.

Bottom line, you can or you will, eventually, claim for all the allowable deductions, but sometimes the timing on when you will claim them makes a huge difference on your taxes. So read the above publication and sit with your CPA/tax professional to discuss the details and strategize based your goals. 

@Michael Plaks Thank you for the detailed explanation, truly appreciated!