Rental Property expense entries

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@oni9dave wrote:

Hello all,

I am having a huge headache in trying to input expenses for rental properties that I am tracking in Quickbooks. I have had people suggest using negative entries to account for the expenses when using the make deposits functions. I have also had suggestions on making a sales receipt and then using negative entries to back out expenses that way. Neither of them will allow me to do what is stumping me on the following scenario:

 

I have a property manager who manages the properties in question. So that means that every month I get a statement with all the income (rent, late charges etc) and correspondingly the expenses (management fees, mortgages that were paid by Prop. Manager on my behalf, repairs, etc). Easy so far.... However, I have started a new company file beginning in January of this year (to simplify my previous books, or so I thought) and I have had a unit that was vacated by a tenant, and therefore needed make ready repairs.

 

So herein lies my question and what is stumping me:

 

How am I supposed to enter all the repairs for this unit for the time frame (two months) that the property was vacant, and therefore no income for that individual property came in? This is your typical repairs, cleaning expenses, management fees etc. I have tried doing this on the make deposits feature (but as I found out, you can't make a negative deposit) I have tried doing this on the sales receipt function (and once again, you aren't allowed to make a negative overall sales receipt). So, what am I missing? Can someone please help me out? 

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Rental expenses should be recorded as expenses and are not dependent upon whether you have rental income. Rental income is recorded as revenue and is not dependent on whether you have expenses. These are two separate types of entries. Revenue is recorded by creating an invoice, sales order, or making a deposit. Expenses are recorded by entering bills, writing checks, or entering cc charges.

If you are trying to track your expenses for a particular property against the revenue received for that property, you could use the Class function in QB. Each property would be a different Class, which would allow you to run reports and see your P&L by property while still keeping the same account numbers for your expense types and revenue.

I am in process of setting up Company file for client that files (5) SCH E with his 1040.  He owns 5 Properties. I set up each as separate location instead of Customer.  When I post a deposit (manually) not on bank download yet,  I enter the location from the drop down list. I will do the same for Expenses.  when I choose P&L report by  location will that give me what I  need  OR should I change all the Locations to CLASS instead.  I want to make this simple and easy to run reports for the CPA/Tax Accountant  I did a transaction of deposit and expense, just to see the resulting report.  I don't want to "overdo" anything

thank you for the steps you use to record income and expenses for multiple Properties.  I have a question: Can I just eliminate the step of creating customer invoices.  Tenants pay the same every month.  I have set up Properties and record the income and expenses to each property. I do this manually as the bank account is not set up for download yet. The transactions are recorded through the Bank Register. I can still get the P&L for each property.  I appreciate you opinion on this

Cathy

There is not a property manager that collects any rents...the payments go directly to owner.  I guess I am looking for an"easy" way of recording transactions

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@cjd303 wrote:

I am in process of setting up Company file for client that files (5) SCH E with his 1040.  He owns 5 Properties. I set up each as separate location instead of Customer.  When I post a deposit (manually) not on bank download yet,  I enter the location from the drop down list. I will do the same for Expenses.  when I choose P&L report by  location will that give me what I  need  OR should I change all the Locations to CLASS instead.  I want to make this simple and easy to run reports for the CPA/Tax Accountant  I did a transaction of deposit and expense, just to see the resulting report.  I don't want to "overdo" anything

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It's better to use Class because you can split one Expense into different Classes on each line. Eg. You paid one payment to a plumber who billed for work done at 2 properties. You can't enter a different Location on each line.

The problem with entering income using a Deposit is that it does not show on the customer's ledger page, or sales reports. It shows only on the P&L. You should use an Invoice and then Receive Payment to accrue the income or just a Sales Receipt to record the income on the same date as the deposit

I added Property for each Property (Rental)

Deposit  to each property (5)

Expenses to each property (5)

CPA wants me to use class  which I know that will go to the Sch E

I already entered Jan

Can I just leave the PROPERTY 

 Set up CLASS

then enter transactions.

The tenants pay check every month ( no invoicing)

So how would the Report show P&L by Property AND Class???   Is that possible?

I will be having  phone conversation with CPA in the morning.

If I have to remove Properties and add Class for each I will rather If it works better fore her. I stopped at end of January because I want to have the Categories set up correctly.

thanks

Cathy

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@cjd303 wrote:

 

So how would the Report show P&L by Property AND Class???   Is that possible?

 

 

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There is no such concept as "Property" in QBO, and there is no "P&L by Property".  What do you mean by "Property"?  Is that a "Customer"?

It sounds like you set up a separate G/L Account for each property.

then you also set up a class for each property.

If yes, then I would suggest that you merge the G/L accounts for each property into one account (ie: merge "Repairs - Property 1" and "Repairs - Property 2" into "Repairs."

Before you do the merge, you will need to go into EVERY transaction and add the appropriate class.  It's easier to do this before you merge, as you can clearly see which class applies to the expense.

You cannot run a P&L by property using only the general ledger accounts, even if you have one per property.  You might be able to get some sort of custom report to work, but it would be a lot of work when you can just use the class function and run a P&L by class, with a class for each property. 

Mark Wagner, CPA

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@john-pero wrote:

Even though you may not receive 100% of the collected rent due to fact property manager is spending it on expenses for you you still must record 100% of the collected rentt as income. Since you are not depositing it all into your real bank account I suggest a clearing bank account. The clearing account is not real but can handle the transactions you need.

 

1. Record all rent through invoice or sales receipt. You can set up recurring invoices to even post early so you can give tenants a monthly statement prior to when rent is due.

2. Deposit all rent into clearing account. Move the actual net received from clearing to real bank account.

3. Record expenses paid by manager as coming from clearing account. The goal, unless pm keeps a reserve is to monthly get the clearing balance to zero.

 

In the world of rentals and tracking in QuickBooks you set up each property as a Customer. Each building is (in online) a customer of a customer (Jobs in desktop) and each unit and then tennat in turn a customer of a customer of a customer. You can nest 5 levels deep.  I also utilize Class Tracking since the reports of P&L by class give me more of what I need (in preparing columns on Schedule E) than P&L by Customer or Job

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After creating the invoices for the renter, and depositing the rent to the clearing account how do you best account for the rent invoice being paid from the clearing account? Do you issue a credit memo and apply the credit memo to the invoice? Would you do the same for the expenses?

Hi egarske,

There's no need to issue a credit memo to the invoice. Let me provide further explanation.

For any expenses incur, you can create an expense transaction and use the Wash/Clearing account in the Category column from there. Doing this help reduces the balance of the Wash account.

Then, create a bank transfer for the remaining balance from Wash account to your business bank account.

To create a Wash/Clearing account, please follow these steps:

1. Go to the Gear icon and Chart of Accounts.
2. On the Chart of Accounts page, click the New button.
3. Choose Bank for the Account Type. You may choose any detail type you want for your wash/clearing account.
4. Enter a name of the clearing account.
5. Make sure the Balance field is zero and click on Save and Close.

I'm linking an article for more information about transferring funds between accounts.

These steps will also apply to QuickBooks Desktop.

That'll do it. Leave a comment below if you have any questions. I'll do everything I can to answer them.

BizPro is here to help. Are you working in QuickBooks Online or Desktop? This should be any easy fix. We specialize in property management, vacation rental management and accounting for both. Having been a property manager, primarily in Commercial and Multifamily since 2003...we've seen it all. I freelance now, assisting investors and managers, consulting and managing their accounting. Feel free to message me back or tomorrow you can give me a call. I'd be happy to ask a few questions, answer yours and try to walk you thought it and get you back on track. This b.s. about negative entries will be in the past. The trick I've always used is I create a Job/Project (depending on if you're in QB Desktop or QBO) under the property you are tracking, and Job Cost the expenses for the vacancy, just like if it were a another tenant. I like to name those by the vacancy date. This way all of your costs are in one place If they are billable back to the last tenant, we can set it up to track that too. I get help here when I need it....Happy when I can help. Get in touch tomorrow, and I'll see if I can take away that headache! :-) Regards, Michelle Hunnewell, BizPro (located in the Pacific Time Zone, with an EST phone number) [removed by moderator] [removed]) email: [email address removed]

I am new with Quickbooks and QB online.

I have created accounts for Bank Charges in Chart of Accounts.  There are few properties using one bank account.  How do I record bank service charge?  It goes through Bank Charges and enter as an Expense but don't know how to handle CUSTOMER and CLASS.  This is bank charge so it has to be some kind of overhead.  Same thing with bank account interest, and bank account rebate, etc.

Thanks.

Welcome to the QuickBooks family, azimkarim.

You're right in recording bank service charge as an expense. As for handling class or customer, it depends. If it is for a job or customer, then you'll need to enter, if not you can leave it blank.

Moreover, in QuickBooks Online (QBO), the Project feature works like Job Costing in QuickBooks Desktop. This feature helps you to be organized and track all moving parts. On the other hand, you can also use the Class tracking feature to help track income, expenses, or profitability by business segment.

To have a better view, take a look at these articles:

• Get started with class tracking in QuickBooks Online
• Track your transactions by class
• Projects FAQ

If you have other questions concerning QuickBooks, let me know by commenting below. I’m here to help. Have a great day!

I am trying to setup a QB company that leases three units.  The leases are all triple net leases.  What is the best way to capture the leases individually for reporting purposes.  By class? location? job?

Each common area maintenance invoice will need to be split by the proper % of total.  The monthly rent is broken up between Monthly Rent amount and Additional Rent amount for CAM expenses that are passed to tenant.   I will need to be able to run reports to give to each tenant to show the monthly over/under from "Additional Rent amount"  

Hello there, @lauron.

Let me step in and assist you on how to track the lease for each tenant.

You can set up the tenants as customers, then add the unit as sub-customer. For the monthly rent, you can use location to separate transactions. Here's how:

Set up customer

1. Go to your Sales tab.
2. Choose Customer.
3. Click the New Customer button.
4. Enter your customer's information.
5. Hit Save once done.

Add sub-customer

1. Select the Sales tab, then Customer.
2. Hit the New Customer button.
3. Enter the customer's information.
4. Put a checkmark in the Is sub-customer box.
5. Find the parent customer in the Parent dropdown arrow. Note: Use the customer (tenant) as a parent customer.
6. Select the Bill with parent or Bill this customer.
7. Click the Save button.

Once done, you can set up classes to your rent. Please know that only admins in QuickBooks Plus and Advanced can create classes. If you want to upgrade to Plus or an Advanced product, you can visit this link: Upgrade your QuickBooks Online subscription.

Turn on the location feature

1. Go to the Gear icon.
2. Choose Account and settings.
3. Select the Advanced tab.
4. Click the pencil icon in the Categories section.
5. Turn on the Track Location.
6. Select the location label in the field.
7. Hit Save once done.

Set up location

1. Click the Setting icon.
2. Under the Lists column, select All List.
3. Choose Location.
4. Hit the New button.
5. Name the location.
6. Click the Save button.

You can use the Profit and Loss report by location this report provides you the payments for one location and deposit them as a group.

You may use this article in case you need help on how to edit or make the location inactive: Set up and use location tracking in QuickBooks Online.

If you have additional questions, please don't hesitate to leave a message in the comment section. I'm always around here in the Community to help. Take care, and have a great day.

I signed up for QBO Simple Start to find that I can't assign an expense to one of my 8 rental properties.

Online instructions were to go to settings, expenses, and enable billing. QBO Simple Start package requires that I upgrade to next package.  This is fundamental to any business (i.e. assign expense to something) so it appears QBO Simple Start is a bait just to force you to upgrade.  Any way to get around what I need to do and still be usable by my CPA who uses QB.

Hi, Omkara.

Thank you for reaching out to us here on the Community page. I can share with you some insights about the billable expense feature in QuickBooks Online.

Enabling the feature allows you to record and track billable expenses so your customers can reimburse the amounts when they receive their invoices. However, this option is only available for QuickBooks Online Plus and Advanced. For Simple Start, you can manually record your income and expenses (invoices, sales receipts, check, expense, and others) and put them in the correct accounts.

You may set up clearing accounts to transfer your money from one account to another. Here's how to add or create an account from your Chart of Accounts.

For more hints about billable expenses, you can check out this link: Enter billable expenses in QuickBooks Online.

Just in case you want to upgrade to a higher version of QBO, you may open this article as your guide: Upgrade or downgrade your QuickBooks Online subscription.

Please let me know how else I can help you with tracking your expenses in QuickBooks. I'm more than happy to provide additional assistance. Keep safe!