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Rental Property expense entries

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? 

Solved
Best answer 08-16-2017

Accepted Solutions
Established Community Backer ***

Re: Rental Property expense entries

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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13 Comments
Senior Explorer ***

Re: Rental Property expense entries


@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? 


 

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.

Established Community Backer ***

Re: Rental Property expense entries

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

View solution in original post

Frequent Explorer ***

Re: Rental Property expense entries

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

Frequent Explorer ***

Re: Rental Property expense entries

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

 

Frequent Explorer ***

Re: Rental Property expense entries

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

 

Established Community Backer ***

Re: Rental Property expense entries


@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


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

Frequent Explorer ***

Re: Rental Property expense entries

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

 

Established Community Backer ***

Re: Rental Property expense entries


@cjd303 wrote:

 

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

 

 


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"?

Super Contributor **

Re: Rental Property expense entries

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

Frequent Explorer *

Re: Rental Property expense entries


@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


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?

Moderator

Re: Rental Property expense entries

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.

Frequent Contributor *

Re: Rental Property expense entries

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]

Community Explorer **

Re: Rental Property expense entries

How would you track large repair transactions, if it is all for the same property? What account would you use for this tracking?

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