Originally posted by Jeffrey Koenig:
Is there a tutorial about using it for REI?
I am in the process of creating an interactive one for a private site. Unfortunately, I can't make it available here. But, I will answer any questions and help here independently of the content on the other site.
Originally posted by Mark Yuschak:
Thanks for the replies. Maybe I haven't given QB a fair shot so far...
To take my question to the next level... What do you for rehabs, specifically? Do you simply log all the receipts for Home Depot, contractors, etc.? Then, how about the initial cost of the property? What is that classified as?
Let's take it in steps.
First, a property purchase is entered into an asset account. That is where you record the initial purchase price with a corresponding entry in either a cash account, if you paid cash, or a liability account tracking any financing on the property. Obviously, I am leaving out some of the double entry minutia here but if needed we can get on the phone and walk through it together.
By definition a "rehab" is a capital improvement that increases the cost basis of the asset. Home Depot and the others are vendors who will give you invoices or receipts. The payments will be applied to the property asset account as a debit, increasing the balance.
Loans you owe are liability accounts joined at the hip to the property asset account. Well, not really, but double entry accounting makes it act that way. The interest is an expense account as well as things like PMI, property taxes, etc.
This is where it gets fun. The borrower is setup as a customer and the loan is a job for handling payments and it is also an asset so it ends up in an asset account too. The payments are applied to the appropriate accounts when they are received. Interest ends up in income, principal gets applied to the asset account reducing it and a corresponding entry to track the income part of the principal as income and another entry in the asset account of the property for the part of the cost you recovered in the payment. If you escrow funds for things like property taxes, insurance, etc, then it gets applied to the appropriate escrow account and then entries are made when the actual expenses are paid.
Set up this way, the reports are actually accurate without adjustment and your CPA will love you.
By the way, most of the movement between accounts should be setup as memorized transactions so that you just enter the receipt of a payment from your buyer for example and the other stuff flows through automatically.
