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Property Management Accounting with Quickbooks 2012 for Mac

Property Management Accounting with Quickbooks 2012 for Mac

As a real estate investor who self-manages, I have been using Quickbooks for all my property management accounting for close to ten years now. Now that I am up to 75 rental apartments and I also have real estate investors as property management clients, I am transitioning over to Propertyware, but Quickbooks has been great for me up to this point. The trick is, however, to set it up properly for your rental property portfolio and you will get no help for this Quickbook’s support staff or any Quickbooks “experts” unless they personally have property management experience. While Quickbooks is a great software platform that can be customized for any business, I have heard many complaints from friends and clients that after hiring a Quickbooks “expert” to set up their company, it didn’t fit their needs. I am a firm believer that in order to set up Quickbooks properly for any business, the person setting it up not only has to understand how Quickbooks works, but they must also have a thorough working knowledge of how the particular business processes transactions on a daily basis.

Property Management for Beginners with Quickbooks: Tenants, Vendors and Classes

If you are new to property management or a beginner with Quickbooks, that’s ok. What you need to remember is that as long as you can understand the overall concepts of how money flows in and out of your business and how to relate that to your Quickbooks “accounts”, you will be fine. As you progress with your understanding by using the software correctly, you will be able to build upon your experience and increase functionality beyond basic accounting. Two things to understand from the get go. Everybody who pays you money for the use of your product (rental apartments) will be set up in Quickbooks as Customers (your tenants). Anybody you pay money to, may it be a plumber, Home Depot or office supply store will be set up as a vendor. The second thing is you will want to be using a feature called “classes”. Each individual property will be class, and each apartment associated with that rental property will be a sub-class of the primary property. For example, if you own a two family house with the addresses of 32 Paradise Lane with apartments A and B, you would set up a class for 32 Paradise Lane and two sub-classes, Apartment A and Apartment B. Quickbooks will list them like this: 32 Paradise Lane

32 Paradise Lane:Apartment A

32 Paradise Lane:Apartment B

Class list for 6 apartments in Quickbooks for Mac 2012

Here is a screen shot of the class list in my Quickbooks for Mac 2012 for a building with six rental apartments. They share addresses on Magazine St and Third St in New Orleans, LA so I named the building Magazine/Third and then set up a sub-class for each individual apartment address.

The reason we use classes, which are different than accounts, is that Quickbooks allows to link any transaction whatsoever to a specific class. So whether it is a rent deposit from a tenant, a security deposit, a payment to a plumber or a mortgage payment while these transactions may be recorded in your checking account register along with transactions relating to other rental properties, they are now tagged to the specific property which will come in very handy when you are generating reports for your accountant or just searching for a transaction quickly to troubleshoot a possible error. Accounts: Bank Accounts, Income Accounts and Expense Accounts Of course you will want to set up at least one bank account. I find it much more efficient to use just one checking account for all my rental properties. This should suffice if you are an individual real estate investor or only operate under one partnership or LLC. You can also setup a sub-account under your bank account for each property, but i do not recommend this. The use of classes eliminates the need, and I have found that sub-accounts can lead to accounting errors that would not occur otherwise. Inside Quickbooks you can enter transactions directly into the account register or you can write individual checks:

Checking Account Register-Quickbooks for Mac 2012 Property Management

                                             Write Checks-Quickbooks for Mac 2012 Property Management  *……as you can see you can split one check between multiple classes and transactions, saving time and energy

Income and expense accounts are categories to which you want to reference on a regular basis. These can be building repairs, insurance, rental income or mortgage interest. These also can have sub-accounts so you may want to create an expense titled “Building Repairs” and add sub-accounts like labor, HVAC, or materials. Or where I live and do most of my business, the New Orleans real estate market, I have insurance sub-accounts titled “property”, “flood” and “liability”.

Generating Reports in Quickbooks for your Property Management Business

I am not going to generate a report and post it here as I am not interested in publicizing my personal financial information on the world wide web, but I will say that the report I use by far the most because it is best for reporting to my accountant with this property management setup is the Custom Summary Report. You can filter it by the class so you can show the income and expense by account for each property separately simply by applying that class to the report.

Advanced Property Management Accounting with Quickbooks

Over the years I have expanded the detail of how I track my rental real estate business in Quickbooks. Everything I have showed you in this post is enough get the ball rolling. However as you gain a better understanding of the software and property management, you will begin to add accounts, use split payments and other features to be more efficient. For example you may decide to have Quickbooks invoice your tenants automatically, creating an alert that rent is due and printing an invoice that you can mail toward the end of the month as a reminder.

One thing I now do that I love but had not done for years is I now track the principal reduction and the escrow account activity for my mortgages every month as I pay them. It is very encouraging for me to see how I am reducing principal and it motivates me to stay on top improving my interest rates and making prepayments on my mortgage loans. I find that the better job I do with my accounting, the more aware I am of how my business is doing and hence I can make better business decisions about my real estate portfolio.

And remember, accounting does’t have to be a bore! Have fun building your rental property business and watch the wealth grow.

 

 

2 Responses to Property Management Accounting with Quickbooks 2012 for Mac

  1. Stephen Swan says:

    Will Quickbooks handle multiple owners of properties in a property management company?

    Steve Swan

  2. Joe Bertone says:

    First time with Qbks12. Other package and HP machine went bust. Fustrated with the learning curve. If the nomenclature were familiar, it would be easier. Just the way you laid things out above this page. Q bis already on the machine (Mac Book Pro) Can you assist.
    P.S. My property is a 70 spaced mobile home park.

    Thanks

    Joe
    (518) 622-2220 Fax: 518-622-2233

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