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Level 1

Home Flipping - Tracking Inventory & COGS

I run a business that buys, renovates and resells homes. Therefore, our primary sales income comes from the sale of these renovated properties. Because we buy and sell quickly, these properties are treated as inventory as opposed to fixed assets.

 

We need to be able to track each home as an individual inventory item that includes the purchase price, renovation costs and closing costs.  Upon the resale of each property, we need to assign the cost of each piece of inventory - cost of goods sold - to the sale of the property.

 

It is important for our company to be able to track the following items as separate costs of inventory that are assigned to each property because we need to track our profit margins for each individual property:

  • Purchase Price of Property
  • Closing Costs
  • Renovation Costs

What is the best way to track this using Quickbooks Online?

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Best answer May 12, 2020

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Community Champion

Home Flipping - Tracking Inventory & COGS

@jellis7  you are definitely treating flipping correctly, that you have no deductible expenses related to the houses being flipped, although you might have ordinary expenses such as tools, business liability insurance, office costs that do not have to be charged to each property. Projects as highlighted by @IntuitLily should do the trick, although class tracking (if you are on Plus) would also be a route to follow (but limited to a maximum of 40 classes)

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Moderator

Home Flipping - Tracking Inventory & COGS

Glad to see you in the Community, @jellis7.

 

I appreciate the details you've provided regarding these properties. If you're using QuickBooks Online, you can take advantage of the project feature to track income, expenses, and profitability. Once you've set up each property as a project, you can use the project cost and profitability tools to do job costing.

 

You can refer to the following articles for more information.

 

 

Keep me posted if you have follow-up questions. I'm here to help. Have a nice day.

Highlighted
Community Champion

Home Flipping - Tracking Inventory & COGS

@jellis7  you are definitely treating flipping correctly, that you have no deductible expenses related to the houses being flipped, although you might have ordinary expenses such as tools, business liability insurance, office costs that do not have to be charged to each property. Projects as highlighted by @IntuitLily should do the trick, although class tracking (if you are on Plus) would also be a route to follow (but limited to a maximum of 40 classes)

View solution in original post

Highlighted
Level 15

Home Flipping - Tracking Inventory & COGS


@jellis7 wrote:

I run a business that buys, renovates and resells homes. Therefore, our primary sales income comes from the sale of these renovated properties. Because we buy and sell quickly, these properties are treated as inventory as opposed to fixed assets.

 

We need to be able to track each home as an individual inventory item that includes the purchase price, renovation costs and closing costs.  Upon the resale of each property, we need to assign the cost of each piece of inventory - cost of goods sold - to the sale of the property.

 

It is important for our company to be able to track the following items as separate costs of inventory that are assigned to each property because we need to track our profit margins for each individual property:

  • Purchase Price of Property
  • Closing Costs
  • Renovation Costs

What is the best way to track this using Quickbooks Online?


Create a cash type bank account, named for the property address.  All costs for this property are posted to that property bank account.

 

when you are done with the renew and it is ready for sale, create the inventory item for that property, then "buy" the inventory item from a dummy vendor for the total amount in the property bank account.

 

Sell the inventory item, Inventory  items have three accounts 
expense = COGS
income = your sales income account
asset = inventory asset

 

 

After the inventory item is "purchased", rename the cash type bank account so that you know it can be used again for the next flip.

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Level 1

Home Flipping - Tracking Inventory & COGS

I have a similar situation. So, do I hold the house in inventory as an asset rather than record as an expense? So, to keep the math simple for me...If I buy a house for $10,000, add $5,000 in framing, $5,000 in siding, $5,000 in plumbing should that reflect on my balance sheet as an inventory asset valued at $25,000? 

 

I am not clear on how I book the expense for the labor and materials I am putting into the house while I stil hold it in inventory.

 

Hope that makes sense...

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