QuickBooks is a useful tool for real estate businesses. As real estate involves many types of businesses, your QB setup will depend on what the commercial venture you are working on. If you are a real estate agent, you have to compare various accounts to someone who is renting out properties or re-selling properties. In this blog, you will be guided on how to set up QuickBooks for Real Estate businesses.
What is QuickBooks for Real Estate Business and Chart of Accounts?
The starting point is the setting up of a chart of accounts irrespective of whether you are using the desktop or the online version of QB. The chart of accounts is a list of all accounts that QuickBooks uses to track your business data.
In the beginning, the need to set up cost accounts for your real estate accounting business is important. Even after you have chosen the right setup, there can still be accounts you are using that are excluded from the chart of accounts generated by QB.
For example, specific accounts such as residential sales or commercial sales which you are using, but you may have to modify your chart of accounts. Before adding any new accounts, examine the items in your present chart of accounts.
The following actions can be taken:
- Select the Accounting option which is found in the left side panel.
- Select Chart of Accounts, On doing this, you are most likely to view all active accounts in the form of a list.
- Verify the accounts that are already present in the system and the items you need to add.
Add New Accounts
Once the above steps are completed, by clicking the New button, you can add accounts. This button is in the green which is on the upper right side of your screen. On clicking New, the Account window is likely to pop out and will ask you for your account Type, detail type, and name of the account, among other things.
Step-by-Step Guide for Setting up QuickBooks For Real Estate, Industry Agents, Vendors
Here, are steps for setting up QuickBooks for real estate or rental properties. Setting up individual rental properties is an easy job but setting up in QuickBooks is quite difficult. So, follow these steps with supervision.
Setting up a rental property in QB Online
Here are the 8 crucial steps to set up a single-family rental in QB Online:
- Make a Company and give it a name, such as Pink City LLC or Orange Rental.
- Create a Chart of Accounts using Schedule E (Form 1040) and the Stessa Real Estate Balance Sheet as guides.
- List the rental property as a Fixed Asset on the Chart of Accounts so that depreciation can be hand-written and deducted at the end of each year and the property’s fair market value is easily updated.
- Each business account, including checking, savings, credit card fees, and mortgage accounts, should be added to the property.
- Configure the property as a Class, in most cases using the exact address, such as 1411 Orange Rental.
- Make the tenant a Customer, generally using the name(s) on the lease to make sure rental income and security deposits are credited rightly.
- Set up rental income as a product, then Create different types of rental revenue as Sub-Products: monthly rent, late fees, and pet fees.
- Set up recurring invoices for Rent Payments if you desire to send a bill to a tenant every month rather than using a free online rent payment service like TenantCloud or Zillow Rental Manager.
Multiple properties under one company
Here are some essential steps to set up QuickBooks For Real Estate or multiple properties under one company:
- Create and name a company such as Amazon Rentals.
- Set up a Chart of Accounts mentioning Schedule E (Form 1040) and the Stessa Real Estate Balance Sheet
- Each rental property is listed as an individual Fixed Asset so that property values can be regularly updated and depreciation is adjusted from each property.
- Add details of the credit card and other accounts used for receiving rent payments, paying operating disbursal, and financing each property
- Put together the SFR as a Class and assign it a name, such as 1411 Marine Drive.
- Put together the multifamily property as another Class and assign it a name, such as 2424 Bush Ave.
- Configure Sub-Classes under the multifamily Class for each unit of the property and assign the units names, such as 2424 Bush Ave.
- Make tenants as Customers by using the name or names on the rental agreement.
- Create sub-products for each type of rental income, and set up monthly rent, late fees, and parking fees as active sources of income.
How to Record Transactions for a Property Management Company?
If you are a property manager, you will be providing service to both, the owners of property and the tenants residing in the respective properties. In such a type of scenario, you will be creating and managing two company files:
- Rental property company: In this case, you collect rent, pay bills, and manage the property on behalf of the owner.
- Property management company: This is your own company where you get income for managing properties.
With the help of these two company files, the financial entries of the company are kept different from each other. Let us see how:
Making a Company File for a Rental Property Company
Set up vendors and tenants: This step helps in setting up the tenants and vendors. Vendors are those the company owes money or people who work for the company. The vendors tab will be used to add and track them. Tenant also known as a customer is set up by clicking on the New Customer & Job Button and choosing New Customer. The tenant’s name, contact information, and lease details can be entered in the suitable fields.
Also, you can read about how to pay vendors in Quickbooks Online.
- Set up accounts and items: This means selecting an account from the company chart of accounts to categorize expense type (or non-expense type) whereas ‘Item Details’ relates to adding an item from services and products such as the purchase of inventory items by unit price and quantity.
- Record security deposits: To keep a record of the rent the tenants pay, a security deposit account is created.
- Track the rent income: Upon receiving the rent, the property owner should record the total rent amount collected and match it with the total rent amount expected for that period.
- Record expenses for each property
- Pay the property owners
Making a Company File for a Property Management Company
In the property management company file, you track your business transactions. This is used to record your income and expenses for managing properties.
- Set up property owners as customers
- Set up accounts and items
- Record property management income
Conclusion
The real estate profession needs multiple tools to track accounts, manage, and finance your business and QB is adept at handling these. QuickBooks for Real Estate is the best option for new businesses or businesspeople and it is ideally suited where the company has multiple employees with many vendors and tenants.
Read More Articles:
