Video of Landlord Accounting Training (long form)

Read happy customers’ testimonials ♥, skim through the training information, or watch the short video below. You’ll learn how QuickBooks can be easily, and correctly, set up for Landlords.

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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.

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Tenants as Customers or Jobs in QuickBooks?

quickbooks tenant customer or job

How do you enter tenants in QB’s?

In our training, we recommend you set your tenants up as Jobs in QuickBooks. Properties are Customers. If you have several tenants that pay separately, you can create multiple Jobs under one property (Customer), and then memorize independent invoices for each of them and ‘receive payments’ for each.

 

Following our recommendation, you gain these benefits:

  • This gives you a significant organizational simplification within your QuickBooks company.
  • Doing it this way makes for automatic, at-a-glance, rent-rolls. You can see vacant properties, overdue tenants, and everything in a “rent roll” at a glance. No report needed.
  • It reminds you of a tenant’s location (which is hard when you have dozens of tenants, and you find yourself thinking of things in term of units/buildings rather than tenant names). You also can search by name or property within the list, as shown below.

In the example below (from our training company file with 12 months of sample real estate transactions) you can see three tenants that share a unit. None of the tenants owe any money, if they did the current amount due would appear in the Balance Total column.

quickbooks tenant as customer or job

If you have a large multiunit apartment building, you have the option of having the Customer as the property, Jobs as each unit, and Sub-Jobs as each tenant. Or, you can suffix (or prefix) each tenant (Job) with the unit they belong in, such as “Lee,Jake[A]”

Read the related article: How to convert a Tenant as a Customer into a Job in QuickBooks.

Find this helpful?  Want to learn more about QuickBooks and landlording? Read LandlordAccounting’s blog Or, order our training today and become an expert tonight.
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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.

QuickBooks for Rental Houses?

Can you use Intuit QuickBooks to manage your residential rental properties? Yes you can, and thousands of our clients do it every day. It works great if you set up your company file in the correct way.
Here’s a basic overview for setting up QuickBooks to manage single family homes or apartment buildings.
QuickBooks has a Customer center where you enter the people or businesses that pay you rent. Single family houses get an entry for the Customer, and underneath it you need to make a Job for the tenant living in that house. Here’s an example:

quickbooks-rental-houses-customer-job-company-file-setup

Why did we just do that? Because we want an easy way to create a Rent Roll (monthly listing of who owes you rent, and how much income each tenant will give you.) We use Customers as the property for organization, and ease in scaling the system as you get more tenants. This works really well.
To use QuickBooks for Rental Houses, you also need to enter the houses as assets in your balance sheet. Create them as Fixed Asset sub-accounts under a Real Estate account. Keep another account for tracking accumulated depreciation with your accountant calculates for you.
Also, create a Rental Income account. From there, you’ll need to create a Service Item to post to the Rental Income account. Invoice your Customer:Job (tenants) with this item every month for the amount of their rent. 
We could get into greater depth for multiunit apartment buildings and other topics for using QuickBooks for Rental Houses. If you want to hear more, feel free to leave a comment, or use the contact form. Impatient? You can buy our full training with hundreds of pictures explaining everything.