All Forum Posts by: Dan V.

Background: A company was operating in Santa Monica from 2016 thru August 2018, then they are moving to LA by end of this month.  The business license tax period runs from July 1 to June 30 so since they're still operating in Santa Monica for around 2 months, they were required to renew the license for another year. 

Question: Is the company entitled for a refund from City of Santa Monica since they only operated for 2 months in the city?

I will appreciate any input. 

@Shawn Coverdell I recommend having a professional review your QB setup and your accounting process. There are items you can automate in QB and also it tends to learn your transactions (ie. it will suggest the category based on the last transaction for a specific payee). I agree with others about using receipts as additional support in case of the audit but QB should provide you almost everything you need to file taxes and to analyze your business. Also, there could be a risk of missing some transactions if you're relying on receipts. 

Maybe your QB records are fine, you might just need somebody to show you what to look for and how to look at it. There's not a lot of QB tutorials that are specific to real estate industry but a good RE bookkeeper/accountant should be able to guide you to the right direction. 

Accounting is not just merely crunching numbers, it is the language of business. Hope you'll find the real benefit of it. 

If you use QBO, you can apply for a merchant account and accept online payment. You can email invoice that has the link to pay online or auto-draft customer's bank (free) or credit card (3%-4% fee). Both can be set up to automatically send the invoice or charge the account at a certain day of the month for an X number of times or by a certain date. Clearing period is around 3-5 days. 

-Should I have separate accounts for each property? 

No. One business bank account is enough and much more simple. As others suggested, do not mingle personal and business transactions. Some states require you to have a separate bank account for tenants security deposit, if not, one is fine.

-How or where do people scan in physical receipts? 

Some accounting software (like QBO) let you attach documents in the transaction.  There are also apps available but I prefer doing it directly in the accounting software or something that integrates with it. 

-What is the best way to calculate and keep track of all expenses and cash flow both monthly and yearly for each property?

A good accountant/bookkeeper and/or a good software. 

-What is the best system to be best prepared come tax season as far as having everything organized for my CPA and having the documentation I need in case of an audit?

I highly recommend using Quickbooks Online, especially if you are planning to use a remote bookkeeper or CPA.   As far as documentation, I recommend keeping electronic copies of at least all closing statements, loan docs/statements, and bank & credit card statements. Google Drive or Dropbox are some of the free cloud storage and can easily be shared with your accountant if needed whenever and whereever. If you will use an accounting firm, some have a client portal.

-Where are state specific lease agreements that I can access for land lording?

BP has those forms if you're a PRO member.

Goodluck!

If you are planning to use remote bookkeeper or CPA, I highly recommend, QBO. It's more costly but it's very convenient for every user and more efficient if set up properly. 

@Justin R. Congratulations on taking the next step for your business. In addition to what you already set up, you may also want to set up each property as a customer for rent tracking purposes. 

For the property management transactions, I recommend setting up a "bank account" and call it ABC (or whatevery the PM name). Then enter each transaction in your PM statement (rental income, repairs, PM fee, owner disbursement, etc.) like you do for a normal bank account. This way you will be able to capture the gross rent, expenses and disbursements properly. If you have multiple properties, you can create a bank sub-account for each property (assuming there's a separate statement for each property) for more granularity. Not the fastest way, but in my opinion, it's the proper way to track the PM transactions. 

Additional QBO tip (if you have not done so), you can change your customer label to "Tenant" using the Gear icon > Company > Customer label, then choose Tenant from the list in the dropdown. I think it's cool!

You can find local QBO pro advisor by searching in the pro advisor database here. Good luck on your search, hope you'll find the best fit for you. 

@Bryan Petrinec Simple way, book the full payment to your handyman of $1500 to Repair expense. Then, the payment for the return of $800, enter it as split (2 lines), one line to Security Deposit of $1000 and the second line as -$200 (yes, negative amount) to Repair Expense. You can be more specific on the description on each line item for future reference. 

Proper way (but more complicated), enter the handyman check of $1500 as split (2 lines), $1300 as repair expense (non-billable) and $200 as repair expense (billable). Then you will need to create an invoice in the customer account for the $200 billable expense. Then create a credit memo for the security deposit for $1000. Apply $200 of the credit memo to the billable expense invoice, then issue a refund check for the remaining $800 credit. 

If you are not properly tracking customer transaction (creating invoice or sales receipt) anyway, then I would just go the simple way. 

I agree with separating accounts for rental and personal. If you have second bank account and credit card account, if not, open new accounts, and use them exclusively for rental transactions. It will be difficult in the beginning but once you set up a system (ie deposit rents on a separate bank account, set up autopay on bills from the same account or separate credit card, etc) should be easier since most transactions are re-occurring. Doing so will also make your life easier once you decided to pull your numbers since you will just have to download the transactions from your bank/cc accounts, without having to go thru them and determine which is personal or rental. Good luck on your investment!

Hi Joshua, welcome to BP. There's one on Saturday in Norfolk. 

https://www.biggerpockets.com/forums/521/topics/550122-investors-of-hampton-roads-meetup