Q&A: one or two QuickBooks companies for US and Canadian businesses?

Chris, a training customer of ours writes in:

I am going through your course now. It’s very helpful (♥) and am looking forward to mastering it.

I had a question about using QuickBooks for two different real estate companies. We have one based in Canada, and one in the US registered as separate entities. Would you recommend keeping both companies in the same Quickbooks document, or having two separate docs to work off of?

I am wondering if it makes more sense to amalgamate all our activities, or to keep them compartmentalized?

Thanks, Chris

Chris, thanks for writing in. Two company files is almost always the better approach.

Generally it is easier inside QuickBooks to have one company per company file. You can combine them into one (with separate balance sheet accounts for each) but it is more work. Now all recent versions of QuickBooks for Windows support opening multiple company files at the same time. (Note, I use a mac but more frequently use QuickBooks in VMWare with Windows since that version from Intuit is the most mature product). Note, if you are using the online edition, you will need to have multiple subscriptions to have more than one ‘company file.’

If you want to take advantage of the Canadian Specific version of QuickBooks, then you’ll certainly want two company files. One for Canada, in the Canadian version, the other in the US version. You can probably get away with just using one (Canada or US) version of QuickBooks too. Check that your accountants can open whichever country file you send them.

Have a question? Contact the team at Landlord Accounting; we look forward to hearing about your QuickBooks and Landlording questions – or order our training and get answers right away.

See pricing information for QuickBooks training for Real Estate

 

 

Q&A: Partial Security Deposit Payments in QuickBooks

P.J. wrote in asking how to receive security deposit payments over time, such as in a payment plan.

How do I properly track partial security deposit payments (Some of our tenants cannot pay full deposit up front—but might take an additional month to pay in partial payments).

We need a easy way to know at any given time how much they owe. I read how to setup the security deposit in your book—but I am unclear on how to determine how much they owe vs. how much they paid.

I can look at Chart of Accounts and see how much they have paid in Security Deposit—Current Liability account—but I cannot determine how much is remaining—any help would greatly be appreciated.

Great question. Fortunately, after reading other parts of the book you practically know the solution already. You’ll want to create an invoice and invoice the tenant (job) for the security deposit. The key is you need to create an item, just like the Rent Item, but it is a new item to post to this tenant’s security deposit sub-account.

Create the new tenant’s security deposit account:

create security deposit account - partial deposits

security deposit accounts - partial deposits

Create the item to use on the invoice for the security deposit.

quickbooks item for security deposit of a tenant

partial security deposit item lists

Invoice the tenant for the item, as in the rest of the examples in the book. Then go through the book’s normal receiving of payments process as the tenant pays things back. Receive payments as many times as they pay. Choose if you want (and are allowed) to impose finance charges to a late payment.

How much does this tenant still owe in their security deposit?

Look at the Customer center and see the tenant (job’s) current outstanding balance. Or, click Reports > Customers & Receivables > Customer Balance Detail.

If all of this seems complicated, we have a simpler way that works in most cases. Usually security deposits are paid upfront, so we teach a quicker method in our training. Also, we show instructions for combining the first month’s rent with the security deposit. There are many more screenshots (with detailed arrows) in our book than in the abbreviated instructions above.

Learn about our Landlording Training for QuickBooks or order our full guide today. Money back guaranteed, no questions asked, read about some of the thousands of happy customers.

See pricing information for QuickBooks training for Real Estate

We Trust You: No Restrictions on All Downloaded Training Files

Since 2004 we have helped train thousands of landlords how to use QuickBooks. It is an honor when we read their testimonials. (Check them out, read how customers love us).

We couldn’t imagine trying to have customers if we couldn’t trust them. That’s also why there are no DRM or copy/printing restrictions on the pdf ebook. We have suggested past customers go to Kinkos or Office Depot and print/bind the full manual. This is usually extremely affordable, and you get a physical hard copy to take notes on and add bookmarks to the pages. If the copy center gives you any problems about a copyright and they won’t print it – please ask us and we’ll explain how we give you permission to print what you need.

After you gain access to the members only area, you can download your files over and over, again and again. You’ll still have access years later. And, as we improve the content we’ll let you upgrade your training to the latest that we offer.

As for answering questions over email and in the forums, we currently do not have a cut off date. We have customers from 2006 who occasionally send us emails, which we gladly answer. We can’t answer everything, as sometimes you really need to discuss complicated issues with you tax advisor, but we are glad to help wherever we can.

The full product is for sale here, however I have a special “pay only what it is worth to you” guarantee. If within 30 days you’re not totally satisfied, you can get your money back, 100% of it. Or you can request a partial refund, based on what it was worth you.

Yes, you can get a bargain with this offer, but we want to ensure you have no reasons to hesitate from investing in our training. It is really good, and we stand behind it 100%.

See pricing information for QuickBooks training for Real Estate


How to Import the Sample Company and Template File (QuickBooks Online Instructions)

Previously, we explained for Windows and Mac users how to import the training files you purchased. Now, we break it down for users of the Online versions of QuickBooks.

Step 1. Email us requesting the online edition data files. They are not currently in the members only area because most customers still use the desktop versions of QuickBooks.

Due to QuickBooks Online limitations, you must use Windows and Internet Explorer for importing. Read more about how to work around this if you only have a Mac.

Step 2. Log into QuickBooks Online. It is important to note that having multiple online company files requires multiple subscriptions. With only one subscription, you can create and delete many company files, trying new things each time. But, you may only have one active company at a time, and delete any existing company file so you can import the sample company.

If you must delete an existing company file, here’s how:

Log into your old company and click the dropdown in the top right. Go to My Apps.
go to my apps to cancel quickbooks online to create a new company file

Go to the Manage My Apps tab and click Cancel subscription.
confirm to cancel quickbooks online to create a new company file.jpg
Confirm you want to do this.
Cancel Subscription - YourCompany, LLC Sample Company File - QuickBooks Online Essentials-1

Then go to http://quickbooksonline.intuit.com/ to sign up for a new account, at whichever cost level you want. (Try the free trial to learn if it will work for you.) For more help deleting and creating a new company, read this. (If you are paying, you won’t have to pay any more because this new account will replace your previous account).

Step 3. Logged into a brand new QuickBooks online company file, choose to Import QuickBooks Desktop Data.

import quickbooks desktop data

Upload the the special online edition file that we gave you. When prompted, if you want to view sample transactions, choose to import everything, if you want a template just import the lists.

You may need to wait a short while once you imported the file before it is available to use. Check for an email from QuickBooks when your file is ready. When it is imported (it only took a few minutes for us), explore all of the data and transactions you now have.

quickbooks online after landlordaccounting import

When it is time for you to create a real company file, you can erase all this data, or go through the import process again. Questions about landlording and QuickBooks? Contact us, we’re glad to chat.

Want to start learning today with our custom landlording training? You can buy our full training with hundreds of pictures explaining everything.

Cash on Cash Return Calculation for Landlords

Cash on Cash Return = Annual Pre-Tax Cash Flow divided by the Total Cash Invested

Example: You purchase a $200K rental property for 30% down plus $4K in closing costs. You invest $10K cash in improvements. After expenses, your first year’s pre-tax cash flow is $12K. The Cash on Cash Return would be $12,000 / $74,000 = 16%.

How do you use it?

Cash on Cash return is one of the simplest and most versatile ways to evaluate real estate properties. You can quickly determine if an investment is performing favorably, as well as trying to detect if a property for sale is underpriced. (See also our cap rate blog post).

Calculating Pre-Tax Cash Flow

  1. Sum the annual income including rent, fees, laundry, parking, everything.
  2. Leave an allowance for vacancies.
  3. Subtract expected cash outlays, such as expenses (repairs, interest expense) and the mortgage payment.

If cash is extracted from a property, through a refinancing for instance, don’t include that cash in the annual cash flow, because that return of capital is not income and it would misleadingly inflate your rate of return.

Carefully Consider the Following

Cash on cash return is based on before-tax cash flow, so it does not consider the investor’s tax circumstances (although it could become more favorable after the tax saving depreciation expense is considered).

Cash on cash return also ignores property value appreciation.

It ignores what investments your cash flow could be reinvested in, thus neglecting the effects of compound interest.

How to calculate Cash on Cash Return in QuickBooks

quickbooks for landlords instructional training - cash on cash returnIf you are doing a forward looking calculation, you will not have income information about that transaction in QuickBooks, so you can do it all on paper or in Excel. (Perhaps basing your vacancies and expenses on actual comparable numbers, though.) If you have entered the purchase price already, you can calculate this with a few clicks and a simple calculator. To learn more (quickly), invest in our QuickBooks training for landlords and property managers today.

See pricing information for QuickBooks training for Real EstateEverything is 100% guaranteed and you can read other investors testimonials ♥ for more information.

If you enjoyed this, also read about the Cap Rate explained for Landlords and Real Estate Investors or the rest of our landlording blog.

Cap Rate (Capitalization Rate) Explained for Real Estate Investors

capitalization rate landlords property managementShort version: Cap Rate = Net Operating Income divided by Total Value of the Property.

Example: You consider buying a property for sale for $300,000 that generates $35,000 (after fixed costs and variable costs). You verified the income and expense numbers from the seller, and believe they are accurate (very important). Your capitalization rate would be $35K/$300k = 11.7%

In other words, for every $100 you invest in that property, you expect to earn $11.70 per year.

How do you use it?

Cap rate can be used as a way to quickly compare returns on investment between different properties. It is as if you have a cash only purchase, thus if you use financing the cap rate will not be the actual leveraged return you will get.

Calculating Net Operating Income

  1. Determine gross revenue by adding all the rental, laundry room, and other income.
  2. Subtract income lost from vacancies. This is effective gross income.
  3. Subtract operating expenses (maintenance, management, advertising, etc).
  4. That is your Net Operating Income.

Key to remember for the NOI is all revenues must come from ongoing operations and not a one time asset sale or insurance payout. Also, do not consider depreciation and debt service for expenses. These conventions are used because we are focusing on the asset’s value, and one time events, depreciation, and financing reflect irregular events, tax issues, and capital structure, not value.

Projecting Property Value Given a Cap Rate

Because Cap Rate = NOI / Value, if you have a target Cap Rate you can estimate your max price by dividing NOI by cap rate. Example: 8% target cap rate / $200K = $2.5M. Compare that to what the actual properties are selling for (and verify your assumptions for NOI).

Carefully Consider the Following

Cap Rate does not consider financing. In thoroughly evaluating an investment, you need to consider what your actual return on investment will be, after financing. Also, verify all assumptions of the costs and occupancy rates if you are given a cap rate for a property from another investor or seller.

Consider other factors such as the stability of expected income, property value appreciation, and your alternative investments you could buy instead.

Cap Rates change. In the example above, if the property value appreciates to $350K in a few years, with net operating income held constant, your new cap rate will be $35K/$350K or 10%. This is less favorable and reflects how you could sell the property and purchase another investment. (Or in reality, perhaps refinance.)

Cap Rate’s Similarity to P/E Ratio in Stock Equity Investing

If you invest on fundamentals in the stock market, the Cap Rate can be considered the real estate version of the P/E ratio. The P/E ratio is the market value per share (price) of a security divided by the earnings per share.

This is the inverse relationship of what the Cap Ratio is for real estate investments. A P/E of  20.5 could come from $40 share value and $1.95 earnings per share. This is the “price multiple” or “earnings multiple.” The cap ratio can be considered similar because it is the opposite comparison: the net operating income divided by the value. Much like it is useful to compare P/E ratios of one company to another in the same industry, it is useful to compare similar properties’ Cap Rates.

We hope you enjoyed this article. Read more about real estate accounting and QuickBooks at LandlordAccounting.com.

Invest in our training too, for more help with QuickBooks and landlording. See pricing information for QuickBooks training for Real Estate

 

How to Import the Sample and Template Company File (QuickBooks for Mac)

Previously, we explained for Windows users how to import the training files you purchased. Now, we break it down for landlords using the Mac version of QuickBooks. Use the online edition? Read those instructions.

Step 1. Download the data files from the members only area.
mac download landlord accounting files

Step 2. Open QuickBooks for Mac. Choose to restore a backup file.
mac step 1 - restore quickbooks file for landlords

Step 3. Choose where to restore the file. You can browse to a different location so that it saves the file in a nicely organized place for you.
mac step 2 - restore quickbooks file for landlords

Step 4. Confirm that you are going to restore a backup file.
mac step 3 - restore quickbooks file for landlords
It will confirm that you restored the file, and offer to show it in Finder.
mac step 4 - restore quickbooks file for landlords

Great, you’re done. Now the Company file opens up, and you can begin exploring in QuickBooks. We hope you find this helpful for managing your rentals in QuickBooks.
mac opened company file landlord accounting

If you want to understand more, feel free to contact us. Impatient? You can buy our full training with hundreds of pictures explaining everything.

How To Import the Sample and Template Company File (QuickBooks for Windows)

Great, you just invested in learning to use QuickBooks for landlords. The following instructions show exactly how to import the company file for QuickBooks 2012 on Windows. The instructions are essentially the same for all other year’s versions on Windows. Mac user? Read the Mac instructions for landlords. Online user? Read those instructions.

Step 1. First, make sure QuickBooks is installed. Start the program. Close any existing company files you have. File > Close Company File…

Step 2. Download the files in our members only section with the login you received upon purchase.
members only area
Take note where you save these files.

Step 3. Restore these backups. Click the button or use the File menu to open the file.
step 0a - open or restore quickbooks for landlords or:
step 0b - open or restore quickbooks for landlords

Step 4. Choose to restore a backup copy.
step 1 - open or restore quickbooks for landlords

Step 5. It is a local backup:
step 2 - open or restore quickbooks for landlords

Step 6. Browse to where you downloaded the file in step 2, above. Restore one of the files:
step 3 - open or restore quickbooks for landlords

Step 7. You’ll see this screen, click Next.
step 4 - open or restore quickbooks for landlords

Step 8. Now, choose where to restore thihs company file. If restoring the “template file” this could be the demo file we suggest everyone creates, or your actual file. If restoring the “sample company” file, generally it is best to leave the name as the default, so not to confuse it with your company files.
step 5 - open or restore quickbooks for landlords

That’s it. You should then be able to have everything imported into QuickBooks. Now you can repeat this for the template file.

Note, it is possible you see a message about upgrading the company file, if you are restoring a backup from a previous year’s version of QuickBooks. This is the screen you will see, but don’t worry about it. Go through the prompts presented, and Update Now.
step 6 - open or restore quickbooks for landlords

If you want to understand more, feel free to contact us. Impatient? You can buy our full training with hundreds of pictures explaining everything.

How we Recommend you use our Training: a Proven Landlord Learning Approach

After working with thousands of landlords to teach them how to use QuickBooks for rental property management, we have a few suggestions for how to quickly get up to speed. These assume you have a copy of our training book along with QuickBooks. If you don’t want to purchase our training, signup for our free newsletter (at the bottom of this page). Mastering your bookkeeping quickly is more enjoyable that doing it slowly, so hopefully you invest in our 100% guaranteed education.

If you are a complete beginner to QuickBooks and accounting

Since you’re new, here’s what we suggest: pick up our training program, skim (don’t read) through the book. Then open up the data file. Start in the reporting chapter and run some reports. Spend time “doing” even if you don’t totally understand it all.
Take a step back, and watch the QB’s videos that come from Intuit. Having first seen the landlording specific company file will help all the videos “stick” better. From there, explore more in the company file, using the ebook as a guide.
Create a “demo” company by copying the Template File you downloaded from us (or use the EasyStep interview if you have more time). Don’t expect it to become the real company file; it is just something you can play around with. Try entering last month’s transactions. Play with it a few hours over several days (so it will sink in) and then go for the real thing.
Create a real company file for your company. Using our template company: copy that file you downloaded and rename it to your company’s name before you start. Start entering transactions. Make frequent backups, and don’t be afraid to ask for help in the forums. Also, here’s a perfect time to show your hard work to your accountant and get any suggestions or corrections up front, rather than waiting until tax time.

If you have accounting, but not QuickBooks experience

Included in QuickBooks are a series of introduction videos. These are a fairly quick way to understand the terminology that QB’s uses. Watch these and then open our sample company file. Skim the book for the example transactions of recording rent due, receiving rent payments, late fees/finance charges, making repairs, and buying/selling rental properties. Cross reference the transactions with the company file.

Then create a fake “demo” company for you to play with. You’ll always keep this even when you have your own company file. It is a useful tool to test out transactions where you don’t have to worry about messing with real data.

Lastly, start by trying to enter one of your properties recent investment property purchases, rehabs, and leasings. Transition that into your real company file.

If you have both accounting and QuickBooks experience

Start with the sample company file, creating reports to see how transactions were entered. Ask questions on the free landlording forum, or email us. Please feel free to share your tips.

Key for landlords is getting the correct chart of accounts, and knowing how to enter tenants, properties, repairs, capital improvements, rent due, and rent payments. You can master that in an hour with our training, and then start directly with your company file. Refer to the ebook for examples as you need them.

In all situations, consider these guidelines

Show your work with your accountant as you think you are getting set up. Feel free to show the training book with them. Get their feedback and approval, and we’d love it if you leave us sa comment too sharing your experience.

Importing our Sample Company Files

If you want to understand more, feel free to contact us. Impatient? You can buy our full training with hundreds of pictures explaining everything.

Entering Landlords’ Historical Transactions in QuickBooks

If you are starting a new QuickBooks company file for an existing company, you probably want to enter all those old transactions from the company into QuickBooks so that you can track current performance versus the past. For many landlords’ businesses, this is the right approach, and we will present two methods to quickly enter these historical transactions.

But for other businesses (especially the very small) it may make sense to cut over to use QuickBooks and leave historical reporting in your old system (Quicken, Excel, etc). If you create summary reports and some spreadsheets you can get a lot of the benefit of comparison, but less effort in migrating the data.

Forms method to ender historical transactions in QuickBooks

First, you can re-enter every transaction using the forms and windows you would normally. (Create invoices, receive payments, etc.) This is a great way to learn how to enter new transactions into QB’s. We recommend it for everyone to try, even if only to scrap that company file, as you learn much about how to do property management in QuickBooks by entering actual transactions.

If you do this, the order you enter the transactions is important, do it in the following order.

Enter Accounts Receivable in this order:

  1. Invoices
  2. Statement Charges
  3. Cash Sales
  4. Returns
  5. Customer Payments
  6. Deposits of customer payments sales tax payments

Enter Accounts Payable in this order:

  1. Bills
  2. Credits from vendors
  3. Bill Payments

Enter historical payroll txns.

Enter bank and other txns in the following order:

  1. Checks (do not duplicate bill payments)
  2. Deposits (do not duplicate customer deposits) bank fees and transfers
  3. Credit card transactions

Reconcile each bank account for each month as you go. Getting each month perfect will save a lot of time versus having to reconcile many months at once.

Summary journal entry method (“monthly rollup transactions”) to enter historical transactions in QuickBooks

This method is more useful for quickly entering your transactions, but only gives transaction data on a monthly rollup level.

Enter all historical transactions by creating a summary journal entry for each month between the start date and current date. Each entry will have the net impact of the month: rent receipts, maintenance (per property/class), capital investments per property’s asset account, owner draws, etc. You can enter in on the first of the month, for all transactions that happened each month.

Remember, even though this is not entirely accurate, it gives you a granularity that enables year over year monthly comparisons. For some people this is helpful enough, and potentially faster to calculate these net transactions from their old system than enter everything individually.

Reports to verify correct entry of old transactions into QuickBooks.

There are several reports you can run after migrating the data to ensure your new company file has the correct information.

  1. Run a Balance Sheet report as of the start date to verify beginning account balances.
  2. Generate a Profit and Loss report for periods since start date to verify historical transactions.
  3. Create an Open Invoices report and verify accounts receivable as of the start date.
  4. Use the Unpaid Bills report to verify accounts payable details as of the start date.
  5. Verify inventory by running inventory valuation summary report (probably not applicable for rental property companies).
  6. Run the Payroll Liabilities report to verify payroll liabilities detail as of the start date.
  7. Use the Payroll Summary report to check year-to-date payroll transactions.

We hope this helps, remember at Landlord Accounting you can learn more about tracking rental properties in QuickBooks and invest in our training.

See pricing information for QuickBooks training for Real Estate