QuickBooks Tips for Real Estate Rental Property Businesses
It’s important to have effective bookkeeping processes for any business, but different businesses have unique needs that you need to consider when you’re creating your bookkeeping processes.
Real Estate Investment Rental Property Bookkeeping Needs
There are a few specific needs that a real estate investment rental property business will have.
Income from tenants – Tracking income is important in any business, but in a real estate investment business with rental properties, this usually should be done in a specific way. You won’t usually invoice tenants individually for their rent payment each month. Also, you may want to group tenants by the building or sections of buildings that they live in.
Tracking profitability by building – In addition to tracking income on a building-by-building basis, you may also want to track expenses by building. This enables you to track the profitability and cost of running each building, which can be helpful for your own analysis, or if you decide to sell individual buildings in the future
Configuring QuickBooks For A Real Estate Rental Property Business
You can use a couple of specific features within QuickBooks, to structure QuickBooks to meet the needs of your real estate business.
Grouping tenants by building – Within QuickBooks, you can set up customers in a hierarchical structure. Tenants can be a sub-customer under a specific building, or you can use classes within QuickBooks to segment customers by building.
- By grouping tenants within QuickBooks, using sub-customer or classes structures, you can effectively run reports on a building-by-building basis.
Tracking expenses by building – Similar to grouping customers by building, you can also group expenses by building within QuickBooks. You can do this by using specific expense accounts or different classes within QuickBooks, for expenses that you enter into QuickBooks.
- For example, if you had a plumbing bill sent by your plumbing vendor that was for work done on two separate buildings, when you enter that payment within QuickBooks you can split that payment to appropriately note which portion of the payment should be allocated to each specific building.
Bookkeeping Workflow For Real Estate Businesses
In addition to configuring QuickBooks to track tenants and expenses by building, your monthly workflow can also be designed in a way to meet your real estate business needs.
Efficient collection of rent – One of the most important parts of running your real estate business is collecting rent in a timely manner.
- Using QuickBooks memorized transactions feature, you can automatically create an invoice within QuickBooks for each tenant, that then gets paid when you receive their rental payment.
- Although this invoice would not be sent directly to the tenants each month, it can be used to keep track automatically of which tenants have not paid their rent.
Tracking variable expenses – Variable expenses that you pass through to tenants, such as utilities or other related costs can be tracked within QuickBooks. By tracking these appropriately within QuickBooks on a building-by-building basis, you have the data you need to appropriately pass these expenses through to tenants. If you are not tracking these expenses effectively within QuickBooks, you may encounter a situation where a tenant questions the amount, and you don’t have the data you need to effectively communicate this expense to your tenant.
Use classes to allocate expenses to specific properties – When you pay your bills each month, be sure to enter them into QuickBooks as expenses, with multiple lines of classes to effectively allocate the expense between different buildings. This may not be needed on small transactions, but on large maintenance or other building expenses that apply to multiple properties, it’s important to allocate these appropriately within QuickBooks. This will enable you to have the data you need to effectively analyze building-by-building profitability.
Need Help Configuring Your QuickBooks
If you need help configuring QuickBooks for your real estate rental property business, contact Bernard today. There are specific best practices to follow for any QuickBooks project, but to get the most power out of QuickBooks for your real estate business, it’s important to work with an expert, such as Bernard.
You can also visit MissionBusinessPodcast.com for more insights that Bernard has been sharing with us in the previous episodes.