All Forum Posts by: Account Closed

You need to setup your property as a Long Term Liability Account In your Chart of Accounts.

When you write a check to your Mortgage Company you will link the Principle to the rental in your Chart of Accounts Long Term Liability.

The rest of the chargers are enter in as regular Expenses Accounts in your Chart Accounts.

Nancy Neville

Gary Sowell:  It really isn't a good thing for anyone to try and enter in an entire years worth of data into any software program that one has just purchased and have it all come out 100% correct within a few days in order for it to be ready for January 1st.  

It's best just to give your CPA whatever you have, either from a previous software program you used, or from your shoe box and begin fresh using your NEW SOFTWARE PROGRAM, which I hope is QuickBooks. 

However, I would say 99% of people don't heed this advice and still try to enter in everything for the year at the last moment, and I'm sure they wished they hadn't in the long run.  Because what you do now, and what you don't know, will affect your accounts from this day forward.  If they are wrong, you will be wrong forever.

If you insist on doing it this way, you need to find a room in your house or office, lock the doors, turn off your phones, keep the kids from crying outside your door, and then FOCUS FOCUS FOCUS, on entering every transaction you ever did from January 1, 2018 to the day you begin USING QUICKBOOKS, which is probably today.  

Not only are you trying to enter all this data at the last moment, but you want to know how to do it which means you want to learn how to use QuickBooks.  You would have to learn how to use QuickBooks in order to do it today!

And, as much as I would love to help you out and give you all this advice, it's impossible for me to do that in a post.  It would take a book for me to tell you how to do all this, and even then it will take you time to setup everything and enter everything. 

My recommendation is to just give your accountant what you have, and begin using QuickBooks January 1, 2019.

I wish I could help you more, but there is too much information I would have to explain to you in order to answer your questions.  

Nancy Neville

Also your Customer Center should look like this

The Classes should look like this. 

You will link your expenses to the unit inside the apartment if it belongs to a tenant of that apartment.

If the expense belongs to the building you will link it to the building.  Thus, the Headers. 

Nancy Neville

Gary Sowell:

whenever you deposit money into your business account out of your own pocket, it is called an Investment and Draw Equity Account, in your Chart of Accounts. 

When you make up a deposit in Quickbooks you will link that payment into your Business Account to the Owners Investments and Draw Equity Account in your Chart of Accounts.

If you are paying yourself back this way, and not the Reimbursable Billing way that is what I recommend, then you would write a check to yourself or cash and link it to the Owners Investments and draws account.  

Nancy Neville

Use an INVOICE to bill your tenants for rent.  (Invoices show up as income)  If you don't use an Invoice, then that bill shows up as an Accounts Receivable Account.)  You want to be able to use your Profit and Loss Report by Class, which shows your income less expenses, therefore you need to Invoice your Tenants. (Or your Profit and Loss Report General)

You are responsible for your own payments to your mortgage company. Don't rely on payments from your tenants, you may be waiting a long time.  Keep your credit in good shape by paying your mortgage yourself.  You do that by setting up your Mortgage Company as a Vendor and then writing a check to the Vendor (or enter a bill for the vendor and pay later)

On the stub of your check assign each charge as it states on your statement. Therefore, Principle: $350.00, Interest $500.00, PMI $150.00, etc., These Charges must be linked to your Chart of Accounts.

Link all income and all expenses to the property in the Class Feature.  

Nancy Neville

The answer is that you need to setup your properties  as a Fixed Asset Account in your Chart of Accounts and also in the Fixed Asset Items List. 

What's great about QuickBooks is that it will tell you if you are choosing the correct category.

Fixed Assets are for Buildings, land, etc., that you plan to keep for a year or more.

Other Current Assets are for smaller things.  Items you can cash in within a year. 

Security Deposits are Liabilities we may owe when our tenants leave.  However, Security Deposits are listed in QuickBooks as an Other Asset Account instead of an Other Current Liability Account.  

However,  in our Industry, in our case, we would use the Other Current Liability Account for our Security Deposits and not the Other Asset accounts as QuickBooks Suggests.  The Other Current Liability Account is actually an Escrow Account where we will hold the Tenants Security Deposit until it's time to pay it back, if they have been good!  :)

The terminology in this case helps you keep all your assets separated from each other.  Fixed Assets are depreciated.  Other assets are not. Example Fixed Assets are land, buildings, computer's Carpeting, etc.  Items that depreciate and hopefully for our properties appreciate.  

When you get the functions correctly in your head it's easier to use QuickBooks than just throw something into a category that is called an Asset.  Your Balance Sheet shows you all your Assets.  The breakdown by category assets on your Balance Sheet just helps to keep your book balanced and for you to know what assets you should sell or keep. 

Nancy Neville

I like to use the Class Feature of QuickBooks because QuickBooks will keep track of every thing you do to that property via the Class Feature.

When you use the Customer:Job feature of QuickBooks this only relates to CUSTOMERS, thus the word Customer:Job.

Remember that anything to do with the Customer Center is regarded as INCOME. So you don't want to use Customer:Job in any way dealing with property expenses

I use the Customer:Job feature only for Reimbursable Expenses.  Meaning, if a tenant left damages and I have to pay my Handyman now, and I want the Tenant to pay me back, I then use the Customer:Job feature on the check that I write to my handyman..  This then tells  QuickBooks to bill my tenant for these charges.  When I click on that Tenants name in the Customer Center, that Bill (Invoice) is waiting for this tenant.  All I have to do is print it out and send it to him or her. 

The Bottom Line is that you want to utilize the class feature where you can take all your income and expenses and assign it to a class, that individual property, then run a Profit and Loss Report by Class whenever you need to. 

When you are doing flips, you want to list your property as a Fixed Asset Account in your Chart of Accounts and then add all expenses as a sub account of that flip, (WIP   Work in Progress) and link all expenses to that property (listed as a  Class) in QuickBooks, thus the reason to use the Class feature.

Take that property and also enter it as a Fixed Asset Item.  Here is where you can enter in everything you want to know about this property.  What you paid for it.  When you purchased it.  Land Description.  Square Feet.  Whatever you want to know. 

Nancy Neville

I'm going out on a limb here.  

Since each LLC has it's own company name and tax codes. Every accountant and every expert will tell you that you will need to setup each LLC in their own Company File, and I have for years been teaching people this as well. UNTIL today!

The above answer would be absolutely correct if YOU were going to file your taxes YOURSELF! But most landlords won't.  We will use a CPA or an Accountant and therefore we don't have to be that rigid.  

QUICKBOOKS IS YOUR VERY BEST FRIEND.  But us professionals have been making it more complicated.  So as of this date, as of now, I will be teaching it to where it will be easier for you to use. 

Basically when we search for a software program, we aren't thinking about using it to file our taxes ourselves. We want something to show us income  and expenses for each property, and what our bottom line is.  We count on our Tax person to take care of all the legal jumbo mumbo stuff, and it  is through THEIR software program that they submit the data we send THEM to the IRS.  

Therefore, based on making life easier for you and how you can use Quickbooks this is my answer.

You say you have some properties under your own name, and some under LLC's.

There is a class feature in QuickBooks that will keep track of everything for you and give you your bottom line per property and per LLC.

Click on Class (Make sure you turn on the Class Feature in QuickBooks Preference Section Accounting Section) and...

type in your Name as a header.

Example :     David Miracle  (Header)

                               1234 Angel Drive (listed  as a sub-class of David Miracle)

                               5678 Goodwill Circle  (Listed as a sub-class of David Miracle)  

You would do the same thing with all the LLC's.

Sunshine Investments (Header) First LLC

                              1624  Round Lake Drive  as a sub-class of Sunshine Investments 

                         Palmway Properties  (Header) 

                              5678   Palm Tree way as a sub class of Palmway Properties   

And on and on and on.

You could use the same  scenario for your business bank Account 

Example:

                Chase Bank   (Business Bank Account Header) in your Chart of Accounts 

                        David Miracle as a Sub Account of Chase Bank

                        SunShine Investments as a sub-account of Chase Bank

                        Palmway Properties as a sub-account of Chase Bank

Whenever you need to give your CPA data regarding the above properties you would do it via the Profit and Loss Class Report which gives a break down of income and expenses and your bottom line per property, per LLC...etc.

Profit and Loss Report by Class           Profit and Loss Report by Class                      Profit and Loss Report by Class

      David Miracle                                            SunShine Investments                                           Palmway Properties

The only problem doing it this way, is that you have to really be on your toes.  Because this entails linking everything you do to the correct accounts and properties.  

What the IRS wants to see is where the money came from. (Income)   What did you spend your money on (deductions)

And they want proof.  They don't care what software you use or how you use it.  Heck some people use just a piece of paper and a pencil and have for years, and has never been a problem. 

The bottom line is:

What do you need to see?

What do you want Quickbooks to do for you?

And how you can give all this information to your CPA or Accountant in order for them to DO YOUR TAXES!

And be able to have them file your taxes based on an orderly, logically, understandable break-down. 

And QuickBooks can do all this for you through organization,  and that is through Headers and Sub-accounts and Sub-Classes, and finalizing it by a Profit and Loss Report by Class.

Nancy Neville

If a tenant seems "iffy" get a CO-SIGNER.  They must also qualify just as much as the tenant has to qualify.

Nancy Neville

Actually QuickBooks Pro does all of that.  Premier is more expensive because it is geared to an Industry that does Inventory.  Since we do not do inventory (for sales) perhaps for keeping track of our stuff we buy for our rentals stored in our garage) we don't need QuickBooks Premier. 

Nancy Neville