Accounting & Record Keeping

[NOTE: I get a lot of requests for my Quickbooks Chart of Accounts these days. I have now included the Chart of Accounts as part of the special goodies when you buy my Flipping and Estimating books. Click here for more information!]

I receive a lot of questions about my company’s method for accounting and recording keeping for our rehab projects. For those who have been in this business for a while, you probably have your own system that you rely on and that works well for you; for others who are just starting out, hopefully this will give a framework for thinking about these types of things…

First, I use Quickbooks for all my accounting and financial record keeping. I used Quicken for a LONG time, but finally realized that I’d be much better off porting my Quicken data over to QuickBooks; my accountant is highly appreciative of this as well.

As for how I break down my financial view of a house flip, it looks something like the following:

Purchase Costs

This group accounts for all costs incurred up until the day I own the property. This includes any earnest money deposits, inspections, appraisals, financing fees/charges, closing costs, bank credits, etc.

I like to keep this as a separate category because this group of expenses represents costs that I’ve incurred not just on the properties I flip, but also on some properties that I investigate but don’t end up purchasing. For example, if I put a property under contract, hire an inspector to do a property inspection, and then later back out of the deal, I still need to account for those inspection costs.

That said, I keep a close eye on this group of expenses (I have several reports that I run once a month in Quickbooks); because there are a lot of “sunk costs” (costs that are never recouped) in this area, I try to ensure that I do everything possible to keep expenses in this area as low as possible.

Rehab Costs

Rehab costs are all costs associated with both materials and labor during the rehab. Material costs consist of everything that gets purchased for the property and will stay with the property (materials used for staging that will be retrieved upon sale are not counted). Contractor costs include everything from the GC to the landscaper to the termite inspection to all the other sub-contractors I might hire.

In short, rehab costs are essentially anything I spend to renovate the property.

Holding Costs

Holding costs are those costs that accrue the longer I hold the property, generally monthly. This includes any mortgage or loan payments against the property, property taxes, insurance premiums, utility payments (water, electricity, gas, garbage, etc), lawn care (once the rehab is complete), etc.

Selling Costs

Selling costs are all the costs accrued in order to sell the property. This includes commissions, any closing costs I might pay on behalf of the buyer, selling closing costs, any mortgage or loan payoffs, etc.

This category also includes items required by the buyer as part of the purchase contract. For example, if the buyer requires a termite letter, that would be included as part of the selling costs. In the case where the buyer requires that a repair be performed that should have been performed during rehab, I may attribute the cost to Rehab Costs.

Lastly, any refunds or over-payments that are returned to me — such as escrowed funds or insurance over-payments — are also attributed to selling costs.

I’ve found that this system of managing and organizing expenses is very effective for the way I think about this business, and I extend it past just my financial management software. We keep four folders for each property (Purchase, Rehab, Holding, Selling), along with a “Receipts” folder; these coincide to the financial groupings that I use so it’s generally pretty easy to find and cross-reference items when I need any property information.

133 thoughts on “Accounting & Record Keeping”

  1. My bookkeeper wants me to create a chart of accounts for my fix-n-flip business. I dont want to reinvent the wheel, but do you have a Chart of Accounts that you use for your fix n flip business that you wouldnt mind sharing? I found a good one from the National Association of Home Builders, but I wanted to see if maybe you had something better. Let me know. Thanks. -Gerard

    1. Gerard –

      Are you referring to a chart of accounts as would be used in Quickbooks? If so, Im happy to share what I use…just shoot me an email from my contact link on the Home Page…

  2. Thanks for the high level summary. Have never used quicken, but with Quickbooks we have to deal with capitalizing costs in WIP, converting it to COGS when sold, etc. Not overly difficult once we plow through the hundreds of tidbit information (yet to find a comprehensive walk-through – and would write one if I knew enough) available on the intuit site. That said, do you have simialr issues with decided what to expense, what to capitalize, debit and credits to move the money around from WIP to COGs, etc? Does your accountant do all this?

  3. If you have this information to share, I would also like a sample or copy of your “Chart of Accounts” please. Thank you for all the helpful info.

    1. Hi Cheryl,

      My accountant is actually in the middle of overhauling my QuickBooks chart of accounts; once hes done with it, Im happy to send you the latest version.

  4. Brad, I do the same accounting system WIP, COGS, Expenses, etc.. it is so hard to keep track of and a lot of journal entries. Last year we had over 50 properties that we flipped and year before over 60 properties with different investors. If there is a simpler way to do all of this please advise. I have will be trying the Flipper Software today to try out 30 day free guarantee trial.

    1. Hey folks,

      Not sure what the “Free Flipper Software” is, but I can promise that its not something Im offering (I dont charge for anything on my site). Perhaps youre seeing advertisements on my site to other peoples products…if so, please keep in mind that I dont endorse any software (and havent tried anyone elses software), so buyer beware!

  5. J Scott
    What software do you recommend? I am clicking your link and nothing happens. Unless I am clicking wrong link. Can you post your website?

    Thanks.

    1. Hi Liz,

      Im not sure what link youre clicking, but for tracking rehab costs (and all investing income/expenses), I just use QuickBooks. I highly recommend it, both because its helps you to see your financial statements quickly and easily at the click of a button and because it will make your accountants job a lot easier. If youre flipping 50-60 properties per year, Im not sure how youre keeping track of everything without something like QuickBooks.

  6. Jason,

    Thanks for the overview of your accounting method! It is just the thing I am looking for. Which version of the Quickbooks are you currently using, basic, pro, premier? Do you recommend it for someone who is just starting out? Also, if possible, can you please send me a copy of your QuickBooks chart of accounts?

    Another question about the CPA, interviewed a few accountants, they all claim they have real estate experience, but when I ask about whether or not one can qualify for Real Estate Professional for tax purpose, none of them can give me a straight answer, and most of them dont even know that you can defer your deduction to future years. When asked about schedule of fees, the only thing they gave me is how much they charge to prepare a tax return for different schedules. Does this sound right to you? Or I should keep looking? These names all come highly recommended by my local REIA attendees.

    1. Hi Sophia,

      I currently use QB Pro 2012, which is what my CPA uses/recommends. Hes actually working on revising my Chart of Accounts, and Ill send you the revised one as soon as I have it.

      As for finding a CPA, ask him/her if he owns any real estate personally. Ive found that a CPA that owns real estate tends to have a much better handle on the tax regulations than someone who just has investors as clients. I think the question about, “What does it take to be an RE Professional?” is a reasonable one, and any good CPA that works with investors should know the answer. Also, you probably want a CPA who can not just do your taxes, but can also make recommendations throughout the year on how you should structure your business/investments to offer you the best tax advantages before its too late (when hes working on your taxes). Based on that, I would keep looking…

  7. Thank you for all of the info. I am working the book for a small company that flips houses and I would be interested in how you set up your chart of accounts. I think that I am going to have to do a total rehaul!

  8. Hey J,

    Put me on the list for the QB chart of accounts if you dont mind. Ive read this article over and over, trying to memorize it all 🙂

    Thanks again for everything.

    1. Hey Shane –

      Happy to send my Chart of Accounts. It may be difficult to interpret, as I track multiple income streams through one company:

      – Flip Property Income/Expenses
      – Rental Property Income/Expenses
      – Real Estate Agent Commissions/Expenses
      – Staging Income/Expenses
      – Consulting Income/Expenses

      But, Ill send it and you can decide if its worth trying to use…

  9. Hey J Scott,

    Thank you so much for this website, Ive been on it for the past couple of months and it has been a great reource for me. I purchased my first flip about a month ago, will be applying what Ive learned here 🙂

    Can you also send me your chart of acounts when its available? I will be setting up quickbooks soon 🙂

    Thnanks again!

  10. Would you please send me your chart of accounts? I am going to set up a new client with similar multiple income streams as you describe. Would rather not start from scratch and it seems like you have a good handle on this piece of your business.

  11. I am also interested in receiving a copy of your chart of accounts that you use. Also, I am interpreting from one of your previous coments that you track all your short-term investments (flips) and long-term investments (rentals) under one company. Is this true? Under our structure, we are considering having long-term investments under a separate corporate entity for ease of tax preparation. Do you have any thoughts on that?

    Thank you.

    1. Hi Lisa,

      Ill send you the COA in a separate email. There is definitely some ease of tax preparation advantages to tracking flips and rental separately. I actually also filter consulting, staging and some other income through my main LLC, so those are part of the COA as well. My CPA has no issue with it, but I could certainly understand the desire to segregate income streams to different companies.

  12. Hi Scott,
    To keep it short, I am also interested in your COA for flipping homes. I am helping a new client track his expenses through spreadsheets right now, but as of the first of the year, I want to get him up and running in Quickbooks. He has rentals but also rehabs homes and sells within the year he purchases. I am still fairly new to QB myself (taking classes, tutorials)..I would be happy to pay you for the COA. I think you should anyways..There are only 2 or 3 accountants out there offering samples and they are charging, as you know, $300.

    Daisy
    clearvueorganizing.com

  13. Hi! Thanks for all the information about flipping. I have a new client that has been using quickbooks to record all there information (both aquiring the property and selling). They have used many different methods to record entries. I will be doing somewhat of an overhaul and need a starting point. Can you please send me your chart of accounts? I do think that would be the place to start. Also…if you have a sample JE posting a HUD statement that would be great. Thanks in advance!

    Ann

  14. Wow! Lots of good information. Please send me your COA. I am just getting started and the information you are sharing is very helpful. Thanks.

  15. Hello –

    I am very interested in receiving your COA – I currently use quick books for both house flipping and rental properties, but Im very new to it and learning as I go! Thanks in advance.
    Kim

  16. Hi Scott,

    You truly have some of the best info. in the biz, keep it going for us newbies! I too
    would really appreciate a COA. I will be getting Quicken or QB for my biz.

    Thanks!

  17. Hello –

    I am very interested in receiving your COA – I currently use quick books for both house flipping and rental properties, but I’m very new to it and learning as I go! Thanks in advance.
    Kim

  18. J Scott-

    Love the website. Ive found it to be a tremendous resource as I begin my flipping enterprise-thankyou! If youre not yet overwhelmed by all the requests, I too would love a copy of your COA.

    Jeremy

  19. Hi J,

    Really love your site and the wealth of information you provide. I also would love to have a copy of the chart of accounts. I recently completed my first flip and would like to get it all setup in QBs. Any recommendations on entering HUD statements into Quickbooks as well?

  20. Hi Scott! i am so glad i found your site. We are just getting ready to close on our first flip and I was searching the web for accounting software. We already have quicken and was thinking of updating to quicken for rental properties (we do have 3 rentals), but didnt know if it would be good for flipping. Have you ever looked at that software. Also could you please sent me COA. Would really appreciate it as I do your site. Thanks,

  21. Great info! I will send you an email for a COA. It is nice to see someone doing exactly what I have been doing and now it is time for me to get my QBs up and running. I hope all is working out well for you in the business.

  22. Thanks for the great info. I had been going from one bookkeeping organization to another to find the exact method used for flipping houses. QB recommends using the property as Inventory and the costs as COG, but the client insists that Fixed Assets and sub-categories for the costs is the way to go. I had already divided by the categories you mentioned in your article, I am so glad I was on the right track. But I am confused on how to close off a property if the deal fails. A copy of your chart of accounts would be a great help. Thank you so much.

  23. Enjoying the site. Can you add me to your newsletter? If its not a hassle, I too would enjoy seeing your chart of accounts.
    Thanks!

  24. Could I get a copy of your COA for flipping? I just found your site. And really need some help. Do you use the ITEMS list in QuickBooks? or just post straight to the GL expense accounts.

  25. Please add me to the lust for your COA.
    Also, do you know or use any apps that you use in your business.
    We are primarily in flips but see ourselves venturing into rentals as well.

    Thanks,

    Andi

  26. Could I get a copy of your COA? Just found this site and is very helpful Im just starting out in this business and could use all the help. Thanks

  27. Hi there,

    I am so glad to have come across your blog. Can I also have a copy of your COA? I am just beginning to use QB for our business and I would appreciate a guideline I can follow. Thanks.

    LJ

  28. Ive flipped a few houses in the past but am now getting serious and need to set up the business the right way from the start. Im so happy to have found this amazing resource. Thank you for everything you do. I am going to add my name to the list of people requesting a copy of your COA. Thanks so much.

  29. J Scott,

    Can you please email me a chart of your account on quickbooks? Your website is very helpful!

    Best!
    Gary

  30. Hi, Could you please share the COA with me also, Im using QB2012 and flipping houses, I am treating the properties as income and expense but I need a little help to tweak QB for a more accurate way to track my properties…

    Thank you very much for your time and effort.

  31. Awesome website. Ive flipped a few houses already and am in the process of closing on 3 more. Can you please send me a copy of your CoA. Thanks!

  32. Hello!
    I see you are willing to send out your COA, please email me when you have a chance. THANKS! – Summer

  33. Hi, I purchase a copy of your book and i didnt find any explanation about how to setup the coa file in quickbooks – data mapping etc….
    Could you please point me in the right direction.

    The information and goodies in the files i received are just phenomenal and i wish i would have come across your books earlier, i spent at least a $200 on all kind of books and these are by far the best and most comprehensible of all. Highly recommended for anyone in the flipping business.
    Thanks a lot

  34. Thanks but I was looking for more of a simple scenario of how chart of accounts are setup in QB for each project (from purchase through sold).

    1. Hi Stephie,

      Im not sure I understand the question. I typically use a separate class for each project, so that way I can look at individual project data by running a report per class.

  35. Hello! I would love to see your chart of accounts as well! I am in the process of switching to quickbooks from excel…Do you treat each property you flip as a customer or item?

    1. Hi Sumer,

      I treat each property as a Class, and then have various COGS accounts for purchase costs, holding costs, rehab costs and selling costs.

  36. I have just recently began using QuickBooks to keep track of my billing on my rental. I am in the process of a flip and have used QuickBooks for the expenses. If possible could I also receive a copy of your list it would be most appreciated.

    Thanks

    P.S. I read both of your books. Found them to be very informational and still reflect back to them. Thanks again for all your insight for us new flippers out there.

  37. Hi Jason–

    Could I get a copy of the COA you have referenced on this website? I have several streams of income running through the the LLC (rental, sales of property, etc.)? Will your COA work for this?

  38. I understand that you classify your properties by class but do you add them to your balance sheet as inventory or something else?

  39. J Scott,
    Would you send a copy of your Chart of Accounts? I am wanting to use Quickbooks for the first time. You have several streams of income. I have a rental property with four units: three units under professional property management and one for family use. Thank you for your site!
    Kerry

  40. Would you please send me a copy of your COA for flipping homes. Just flipped my first and buying another property to flip. I just started using quickbooks so I want to start out on the right foot.

  41. Hello Scott,

    I just purchased it and I am using QuickBook Pro 2014 on Mac, I have it all done, but how to import the data into the Chart of Accounts ??

    1. Hey Arshad,

      Sorry, I dont use a Mac so I dont know if its the same…but for Windows, to import an Excel file for a COA, you go to the following menu choices:

      File > Utilities > Import > Excel then choose Advanced Import

      If that doesnt work for Mac, I would try a Google search and it shouldnt be too difficult to find some instructions!

  42. I just purchased your book last night, and I am not finding in your book where you walk threw the accounting process and explain how you set up all your accounts? Am i missing it some where? I was under the impression that you walked threw this process, so at the end we can see the financial big picture..
    Thanks

    1. Hi Anne,

      My methodology is explained on the page where you left this comment (see the article above). If you purchased the digital copies of the books, you would have received a zip file with a bunch of digital files. One of those files is my QB Chart of Accounts.

  43. Hi J,

    I would like to purchase your “The Book on Flipping Houses” from Amazon.com but would like to receive the CoA as well. Is this possible?

    Thanks,
    Adam

  44. Hi,

    Can you please also send me your COA for flipping? I would like to know how you determine your expense treatment (COGS vs OPEX).

    Thank you.
    Eric

  45. How do you account for these purchase and rehab costs as of 12/31 for tax purchases, do you account for them as a loss if you havent sold that property and then net it against gains you may have made on your other LLC property sales?

    1. Ronda –

      Any flip that is not completed is considered “Work In Progress” and the expenses for the project are carried over into the following year. There is no loss or gain taken until the property is ultimately sold.

  46. Where do you log the asset part of the property you are rehabbing? Fixed Asset is usually for longer than a year. Other Current Asset? Cost of Goods Sold?

    1. Hey Jared,

      For a rehab/flip project, everything is cost of goods sold (COGS). I break COGS up by Purchase Costs, Holding Costs and Selling Costs (with lots of sub-categories) and everything goes in one of those categories.

      For rentals, the basis is considered Fixed Asset.

  47. A couple suggestions on file formats. A PDF is is almost impossible to use for those of us who read e-books on phones and tablets. An e-book format should be included. A PDF is just not professional publishing. Also, having the Quickbooks COF file in Excel only makes importing it very difficult. Why not save a QB backup file with only the COF and classes? This way users can just open the file in Quickbooks.

    1. Hey Matt,

      The books have a lot of tables and images, which dont convert well to Kindle or other eBook reader formats (resolution issues). Theres also the paperback versions, which might be a better choice for those who dont like PDFs. As for the QB COA, import from Excel is the standard way to import accounts. With a QB backup file, it would be impossible to import accounts into an existing QB file — youd be required to start a new company file without any existing data.

      I apologize for the inconvenience. It appears you were provided a full refund, so hopefully there are no hard feelings…

  48. Hi J,
    Lets say you bought a house for $100K, put down $20K and borrowed $80K. If you record the transaction as a Flip Costs:Purchase Costs:Property Purchase expense, is the value $100K or $20K? If its $100K, where do you record the $80K you borrowed so you can track your initial equity?

    1. Hey David,

      On the General Journal entry, the $100K would be a Debit against the “Flip Costs:Purchase Costs:Property Purchase” account and then there would be an $80K Credit against the “Mortgages” account (which is a Long Term Liability). The $20K difference would be a Credit from a cash account (the funds you brought to closing) to even out the entry. Obviously, there would also be closing costs and other stuff in there as well, but thats the basics of how the loan is handled.

  49. Well that makes a lot of sense. Thanks for helping out. Im a big fan of your blog and books and look forward to your future reporting on rentals.

  50. Good morning,
    I am a full-time investor in N Idaho (we did 15 last year, already have done 5 the first 3 months this year). About 1 in 4 properties I flip are rentals. My accountant believes we should separate the rental income from flip profit because there are different rules regarding deductions. This causes a lot of extra work, which doesnt feel warranted given that the rental income is such a small number compared to the flip profit. Do you separate?

    Thanks

    1. Hi Dan,

      We absolutely do separate the income. We flip in one business entity (multiple actually) and hold our rentals in a separate entity. The flip income is going to be subject to ordinary income taxes plus self-employment taxes, while the rental income is only going to be subject to capital gains taxes. The difference there could be between paying 50% in taxes and paying 20% in taxes!

      Even if youre just making $20K per year in rental income, thats a $6K savings by separating the income. Obviously, the more youre making, the bigger the savings is. And, in my opinion, thats not insignificant. In addition, you want to ensure that when you sell the rental properties, they are taxed at long-term capital gains rates, not ordinary income.

  51. where do you account for cost outside of these categories but would be business expenses none the less? My initial thought would be any expense related to finding the property (I.e. gas expenses or MLS fees etc.).

    1. Cole –

      Those are business expenses (independent of any property), and are categorized separately at tax time. These things are often categorized as “overhead”…

  52. Hi
    I have question regarding Quickbook. Do you explain in your book step by step how to set up accounting sheets in quickbook. I am an experienced flipper but now need to get organized

    1. Hi Tony,

      The book doesnt explain how to use Quickbooks or do accounting, but if you purchase direct from the publisher, it does include my Quickbooks Chart of Accounts:

      http://www.biggerpockets.com/flippingbook

      There are lots of different (and correct) ways to do your accounting, and every situation will have different accounting needs and requirements — it would be impossible to discuss this in a way thats general enough for everyone in my books. But, the COA can probably get you started, and a chat with a good tax professional will help even more so!

  53. Hi Tony,

    I am trying to set up my quickbooks with not much luck can you give me any advise on how yours is set up properly?

  54. Could you please send me your COA for QuickBooks? Ive just started flipping homes and would love to make sure I am setting up my accounting system the best I can! THX!!!

  55. I am late in the game. But I just purchased a book from Gita Faust on how to use quickbooks for flipping properties. After I followed her easy step I was able to view property costing by each flip. She says no to journal entry and no to learning debit and credit. I was laughing when she said it on the call. Now I get it.

  56. Arent the profits made in less than 12 months considered short term capital gains, like a stock purchase / sell? Thus both Federal and States taxes may be as much as 33% of the profit during a fiscal year.

    1. Jim –

      Profits on a flip (regardless of how long you hold it) are taxed as ordinary income at your marginal rate — NOT capital gains. This essentially equates to the same rates as short term capital gains, but you cant offset them with capital losses and youre generally subject to self-employment taxes as well. Ultimately, house flipping is a horrible choice for someone looking to minimize tax burden.

  57. I have QB2016 for Mac. It wont read a normal .qbw file. Anyway I can get your chart of accounts in a Mac version. Intuit says it can be created from the Windows side (thats the only way). Thanks!

  58. I guess I should retract that last comment and start over. My son purchased your book through BiggerPockets, but we cant figure out how to access the COA (or other digital content). Can you direct us? Thanks.

    1. Hey Kevin,

      If your son bought from BP, he should have gotten all the digital files as part of the zip file (if he was able to open up the books, the rest of the files should have been right there in a separate folder). The COA is a Microsoft Excel file. The easiest way to import it to Quickbooks is:

      Go to File menu> Utilities> Import> Excel Files

      From there, follow the prompts…

    1. Pam –

      There are a couple ways to do this (quit claim deed, second closing, etc), but there are tax and legal nuances with everything, so I would recommend talking to a good tax professional and/or attorney to guide you through the process.

  59. Hi, my question is: I flip houses and during the course of the renovation, I use Inventory: Labor & Materials and class the property address (i.e. 36 Main Rd.). I just sold a property and now need to enter that incoming wire transfer that went into my bank for $127,701.36 as I now sold it. I am clueless and dont know what to do as I read a lot about COGS and Inventory and conversions once sold. I dont think all of the rehab costs have been allocated for 36 Main so therefore it is an unorthodox situation. is there a way to fix this quickly and get the deposit of the $127,701.36 to appear in my bank so i can reconcile. Also moving forward, what is the correct way of handling this as I will have a lot more in the future. Remember, I am not at all an Accountant and have no idea so please explain like I am a baby:-) Thank you so so much…

    1. Mark –

      I prefer to make all the costs categories (purchase costs, rehab costs, selling costs, and all the sub-categories under those) as COGS accounts. When I spend money on anything, it goes as a COGS item. I associate the property name with each, using the Class field. Then when I sell, I record the income (minus the selling costs) as a journal entry, making sure to assign the Class field to the property name.

      Then to see a P&L for a particular property, just do a P&L by class.

      Does that make sense?

  60. Hello, I use your books and website material all the time. Thank you for all the information! I have heard you say that you account for your Flip and Rental properties in separate businesses. Do you use two separate quickbooks accounts and two checking accounts? If so how do you transfer a flip house to a rental house in quickbooks? I am trying to forecast all contingencies for a flip gone bad 🙂 Thanks again

    1. Hey JR –

      Thats correct. Each LLC has its own Quickbooks file. Ive never had to transfer from flip to rental, but something to keep in mind — the IRS will consider the tax basis of the property to be whatever was the original intent for the property. In other words, if you have a flip gone bad, technically you are still on the hook for active/flip taxes, not passive/rental taxes. Likewise, if you intended for the property to be a rental but had a great opportunity to flip (that you took), the IRS would consider that as capital gains taxes. Youd need to prove your original intent if you ever got audited.

      Im not a tax professional, so get professional advice about all this stuff, but thats how it works. Unfortunately, I also dont know the details of how best to move from one LLC to the other. There could be title issues, accounting issues, legal issues, etc. that you should investigate.

  61. J,

    My friend gifted me an e-book copy through Amazon Kindle of your book, The Book on Flipping Houses. After reading it, I also bought your book on estimating rehab costs (Amazon order # 113-4974488-5001863). Would you consider sharing your Quickbooks Chart of Accounts with me?

  62. Hello,

    I am setting up beginning balances in QuickBooks for my flipping business and I am a bit stumped on something. At the end of 2017 I had two houses that had been fully renovated and under contract but, not yet closed. So that is to say that I had incurred all of the remodel expense. For tax purposes my business is a cash basis S corp. I closed on both properties in February and thought this would be a good time to setup QBs. I need to recognize the revenue in 2018 because thats when it was received technically but, what is the other side of my entry? Owners Equity? Dr. Owners Equity Cr. Revenue? Please help!

    Thanks, Linda

  63. Hello Scott,
    I owe a land in FL I bought few years ago. I am planning to hire a contractor to build a property on this land and sell it when construction is finished. Would you recommend registering a company to make this project more beneficial in terms of tax matters?
    Thanks on advance,
    Anjelika

    1. Hi Anjelika –

      I would consult a tax professional to discuss your specific situation, but generally speaking, if youre doing development, you might want to consider an LLC taxed as an S-Corp. It can save you some money on self-employment taxes, and is allow a good liability shield if used correctly.

  64. Hello
    I do real estate investment and in most cases I have to put money into the properties before renting them out or in the case of a turn over after an old tenet moves out. I’ve recently realized I would spend less if I were to install a more durable flooring like engineered hardwood flooring instead or carpet being replaced every time a tenet moves out. To cut to the chase, I got a better deal on buying the flooring in bulk per square foot then if I were to walk in Lowe’s and keep buying it. How do you record the inventory on hand as it’s being used for multiple different properties within different periods?

    1. Hey Kim,

      In Quickbooks, I keep a separate expense account for “Materials On Hand” (nearly all materials Im holding are expensed, as opposed to CapEx). When I use them in a rental project, I do a general journal entry to move the cost from the “Materials On Hand” account to the maintenance or turnover account for the specific property. Doing it this way will sometimes expense materials before they are used, but Im okay with that and as long as Im not storing a whole warehouse of materials, my accountant doesnt mind.

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