Can Tenants Pay Rent Through Quickbooks?

Being a landlord can be a tricky job. Being such obviously means you care about the well being of your tenants and your property. But it also means that you have to be able to handle financial aspects of property management yourself, right? Can Tenants Pay Rent Through Quickbooks? Let’s find out.

Can Tenants Pay Rent Through Quickbooks?

The question that everyone has is: can tenants pay rent through Quickbooks? And the answer is yes! You don’t have to be a landlord or property manager to use Quickbooks as a tool for collecting rent. Here’s how it works:

First, you’ll need to create an “account” for your tenant. Then, you’ll need to add a payment method to that account. The payment method should be linked with a bank account or credit card—you can attach the same account for all of your tenants, or choose a different one for each. Once the account is created and linked with the payment method, you can set up automatic payments from that account into your bank account or business checking account every month on whichever day works best for both parties (for example: first Friday of every month).

This way, you don’t have to worry about chasing down checks or cash every month. You can just sit back and relax while waiting for an automatic deposit in your bank account!

QuickBooks is a program that helps landlords and property managers keep track of their business finances and expenses. In addition to invoicing, tracking payments and expenses, and managing payroll, QuickBooks can be used by landlords to track rental income and expenses. It can also help you manage your rental properties by letting you create reports on the status of each property, including expenses and income.

QuickBooks includes several features that make it easy for tenant-landlords to record rent payments made by their tenants. First, there’s an option in the program called “invoice” which lets you create invoices for your tenants to pay their rent online or by mail. If you use this option, it will automatically add those payments into your bank account as soon as they’re made. You can also use the “tracking tab” in QuickBooks to keep track of all payments receive

If you’re a tenant, you can use QuickBooks to make your rent payments. You’ll just need to set up an account with your landlord and then create a transaction in QuickBooks. Once that’s done, you can pay your rent from the app. In order to do this, you’ll have to have basic knowledge of how to use QuickBooks, but if you don’t already have an account with your landlord, it’s easy enough to set one up. From there, it’s smooth sailing!

While it’s possible to use Quickbooks to pay rent, there are a few things you should know before setting up this type of payment method.

The first thing is that if your landlord accepts electronic payments, you’ll need to set up an account with them first. You don’t have to worry about setting up a bank account—they can use whatever payment service they already have in place. However, you will need to verify that the landlord has an account set up and then send them your information so they can go ahead and process your payment.

Next, you’ll need to make sure that Quickbooks supports the type of payment system your landlord uses (check with them before doing anything else). There are several different types of online payment services out there, so it’s important that yours works with what they offer.

Finally, once everything is set up and ready to go, simply enter in the amount due on your upcoming bill and click “pay.” It will take a few days for your landlord’s system to process it all properly; however, once it has been verified by both parties involved (you and your landlord), everything should run smoothly from there on out!

Chart of Accounts for Rental Property

Because they are necessary for creating a financial budget, charts of accounts and bookkeeping are crucial for real estate businesses. Additionally, complicated processes are used in the real estate industry for everything from purchasing and selling to property maintenance. Therefore, it’s crucial to maintain track of financial transactions. We’ll go over a real estate chart of accounts and bookkeeping techniques in this article.

Real estate agents can protect their financial security and keep organized for important tax compliance and collection chores by using a well-prepared chart of accounts. You may organize and streamline your company’s complex financial data with the real estate chart of accounts. Organizing data into comprehensible, logical account categories is beneficial. It also helps create financial models for real estate.

A real estate company’s chart of accounts shows all the accounts for your company organized in one place. It provides you with a bird’s-eye perspective of all of your company’s financial transactions. Due to the unique nature of the business and separate accounts, the real estate chart of accounts will be different from that of other firms.

You can use a chart of accounts to group all of your business’s transactions throughout a specific period of time. By dividing your revenue, liabilities, assets, equity, and business expenses, it also enables you to gain insight into the effectiveness of various parts of your organization. The chart of accounts also assists in financial budgeting and planning by listing all the accounts involved in your company’s daily operations.

The account names, brief descriptions, and unique account identification codes are all provided in the chart of accounts. The accounts for the income statement are listed after the accounts for the balance sheet.

Assets, liabilities, and shareholders’ equity make up the balance sheet accounts, which are further divided into numerous subcategories. Revenues and expenses are broken down further into sub-categories in the accounts that make up the income statement.

Setting Up the Chart of Accounts

The accounts that are specified while creating a chart of accounts largely depend on the type of business being run. For instance, a taxi company will have some accounts that are unique to the industry in addition to the generic accounts that apply to all companies. For instance, the taxi company will include a fuel expense account, which is not typical for businesses, but will omit an inventory account because it is a service company and does not keep stock.

Normally, a numerical system should be used to easily identify the accounts when listing them in the chart of accounts. Additionally, numbering makes it simple to record a transaction. Large firms typically use four-digit numbers because they have room for more digits as their operations expand, whereas small enterprises typically use three-digit numbers.

Each of the five major categories is given a set of numbers, with blank spaces at the end to accommodate future additions of more accounts. Additionally, the numbering needs to be uniform to make it simpler for management to roll up data from one period to the next.

Categories on the Chart of Accounts

Each of the accounts in the chart of accounts corresponds to the two main financial statements, i.e., the balance sheet and income statement.

Balance sheet accounts

Such accounts are required when creating a balance sheet for the business. Balance sheet accounts comprise the following:

1. Asset accounts

The asset account provides a list of all the categories of assets that the business owns. The account may include intangible assets (such as trademarks, patents, and software), current assets (such as cash on hand, accounts receivable, and

Each asset account can be numbered in a sequence such as 1000, 1020, 1040, 1060, etc. The numbering follows the traditional format of the balance sheet by starting with the current assets, followed by the fixed assets.

2. Liability accounts

Liability accounts provide a list of categories for all the debts that the business owes its creditors. Typically, liability accounts will include the word “payable” in their name and may include accounts payable, invoices payable, salaries payable, interest payable, etc.

Liability accounts also follow the traditional balance sheet format by starting with the current liabilities, followed by long-term liabilities. The number system for each liability account can start from 2000 and use a sequence that is easy to follow and compare in different accounting periods.

3. Owner’s equity accounts

Equity represents the value that is left in the business after deducting all the liabilities from the assets. Owner’s equity measures how valuable the company is to the shareholders of the company.

Some of the components of the owner’s equity accounts include common stock, preferred stock, and retained earnings. The numbering system of the owner’s equity account for a large company can continue from the liability accounts and start from 3000 to 3999.

QuickBooks for Rental Property

Among the many ways you can use QuickBooks for real estate is to keep track of the revenue and costs incurred by your portfolios of rental properties.

However, small to medium enterprises are the main target audience for QuickBooks. QuickBooks is difficult to use for rental properties for the same reasons that make spreadsheets inappropriate for rental portfolios. Essentially, you need to keep your finances for each property separate while tracking the income and expenses for your rentals, ideally on a unit-by-unit basis. In fact, it’s nearly necessary to approach each property as a separate company.

This requires utilizing a different spreadsheet for each property when using spreadsheets, which can easily become out of hand. The QuickBooks user interface is also not intended for people who manage multiple different accounts.

In other words, you could be better off using property management software unless you’re an expert or have a lot of expertise with QuickBooks. It allows you to manage individual properties and is intended to make tracking income and expenses as easy as possible because it was specifically created for landlords.

Additionally, good property management software should have features that are specialized to the industry, like online rent collecting, customisable reports, and rental applications.

Given that QuickBooks is nearly a household name, many real estate investors are curious as to whether landlords can use it for accounting purposes related to rental properties. The short answer is yes, and a lot of landlords do it. Actually, the business only just described how to configure rents in QuickBooks Desktop.

At first glance, the process for using QuickBooks to manage rental property accounting seems simple enough, but it can actually be pretty complex. 

This is due to the fact that each rental property is essentially considered as a separate business or rental property company filing. If you want accurate financial statements, you must ensure that you are crediting and debiting income and expenses to the appropriate property and account.

How Do Landlords Use QuickBooks?

You can set up corporate and client files as various properties in Quickbooks desktop editions. In addition to any fees associated with property maintenance, this will enable you to manage activities like collecting rent from renters and paying property owners and management firms.

It’s significant to remember that there isn’t a version of QuickBooks specifically designed for the real estate or property management sectors. In order to make the program perform the way a property owner would like, you’ll need to be flexible with it and possibly make a few modifications and alterations.

For example, in QuickBooks you’ll be able to create and manage two company files:

• Rental property company: For collecting rent, paying bills, and managing the property for the owner
• Property management company: A file for receiving income for managing properties

This will help keep the companies’ transactions separate from each other, allowing you to set up tenants and vendors, accounts and items, record security deposits, track the rent income, record expenses for each property, and pay the property owners. From the property management side, you’ll be able to set up property owners as customers, set up accounts and items, and record property management income.

If the property management business is comprised of several large properties or multiple complexes, it is advised you look into a more advanced system. A professional property manager could be better off finding a trust accounting system. Whatever accounting software is chosen to handle property management accounting, these facts remain certain:

• Once rent is received from the tenants, it needs to be disbursed to the property owners. This money should be kept in its own account and separate from any account that is used to pay expenses.
• Any money also received from the owners for the work you’ve done (your management fee) should be put into your own account.

Limitations of Using QuickBooks for Property Management

Although QuickBooks may be one of the most popular accounting programs for small businesses, this comes at the disadvantage of lacking rental management features particular to the industry.

Although it is feasible to set up QuickBooks in a way that can handle rental property accounting, as was mentioned in the previous section, it is not as simple as it could be with industry-specific software. In order to set up the software properly, a company will need to have a deeper understanding of it than the ordinary user, which will also result in a steeper learning curve for your staff.

Tenants do not have access to a client site where they may log in to check their monthly rent statement when you establish invoice payments for rent collection.

The property managers won’t have access to features like tenant screening, eSigning lease contracts, accessing tenant work orders, or sending mass emails to tenants (such as announcements). Although leaving a long-used accounting program may be difficult, many people find that having all of those features in one location makes more sense.

While QuickBooks may excel at handling its strongest features (such as tracking transactions and keeping track of cash flow), it may fall short for a property manager who lacks the patience to put up with these restrictions, for someone who wants more than just financial features, or for someone who wants a software designed just for them.

How to Set Up Multiple Rental Properties in Quickbooks

Setting up multiple rental properties in QBO

The process for setting up multiple rental properties in QuickBooks Online is similar to the above, although there are several extra steps involved. 

Let’s assume an investor owns a single-family rental (SFR) home and multifamily duplex with 2 units. One way to use QBO for multiple rental properties is to use 1 company and multiple classes, while the other approach is to create 2 different companies. 

Before choosing a method and taking the time to set up QuickBooks Online, an investor may wish to speak with a real estate attorney or certified public accountant (CPA) to better understand the pros and cons of each approach. 

Multiple properties under one company

1. Create and name the Company, such as Bob Smith Rentals.
2. Set up a Chart of Accounts referencing Schedule E (Form 1040) 
3. List each rental property as an individual Fixed Asset so that property values can be periodically updated and depreciation can be deducted from each property.
4. Add the banking, credit card, and mortgage accounts used for receiving rent payments, paying operating expenses, and financing each property.
5. Configure the SFR as a Class and assign it a name, such as 1411 Orange Drive.
6. Configure the multifamily property as another Class and assign it a name, such as 1919 S. Jones Ave.
7. Configure Sub-Classes under the multifamily Class for each unit of the property and assign the units names, such as 1919 S. Jones Ave. #1 and 1919 S. Jones Ave. #2.
8. Create tenants as Customers by using the name(s) on the rental agreement.
9. Set up rental income as Product and create Sub-Products for each type of rental income collected, such as monthly rent, late fees, and pet fees.

One advantage of putting multiple properties under the same company is that consolidated financial reports can be generated for an entire rental property portfolio, as well as for each property Class. 

However, there are 2 potential problems with having multiple properties under the same company. 

First, when rents are received and expenses are paid, a landlord or property manager must ensure that income and expenses are being posted to the correct Property Class and credited to the right Customer. 

Also, by having more than one property on the same real estate balance sheet, it may be difficult to understand which assets and liabilities relate to which company. This can create issues when tax time comes around and for accurately calculating capital gains (or loss) and depreciation recapture when one of the properties is sold.

Individual companies with multiple properties

Having one company for each rental property is another way to set up multiple rental properties in QuickBooks Online. The risk of posting transactions to the wrong property or tenant is reduced, and financial reports are cleaner. However, there are also more steps involved when setting up 2 different companies, and a user will need to jump back and forth between companies when posting or reconciling transactions.

Here are the steps to follow to create 2 companies (one for the single-family rental used in this example, and the other for the 2-unit multifamily duplex):

Setting up a single-family rental company

1. Create a Company. 
2. Set up a Chart of Accounts.
3. List the rental property as a Fixed Asset on the Chart of Accounts.
4. Add business bank, savings, credit card, and mortgage accounts.
5. Configure the property as a Class.
6. Create the tenant as a Customer.
7. Set up rental income as a Product, with Sub-Products for each type of rental income.

Setting up a multifamily rental company

1. Create a Company.
2. Set up a Chart of Accounts.
3. List the multifamily property as a Fixed Asset on the Chart of Accounts.
4. Add the banking, credit card, and mortgage accounts for the multifamily property.
5. Configure the multifamily property as a Class.
6. Configure each unit in the multifamily property as a Sub-Class under the Main Class.
7. Create tenants as Customers by using the name(s) on the rental agreement.
8. Set up rental income as Product and create Sub-Products for each type of rental income collected.

There are a number of ways to keep track of rental properties, including spreadsheets, software specifically designed for real estate, and general purpose accounting software like QuickBooks Online. 

QuickBooks was launched nearly 40 years ago, and has become a household name. Because the software is well known, many investors wonder how to set up rental properties in QuickBooks Online.

In this article, we’ll explain the steps to follow to set up a single-family rental and multifamily property in QuickBooks and discuss a free alternative to QuickBooks Online.

Key takeaways

• Rental properties can be set up in QuickBooks Online by following 8 steps.
• Because QuickBooks is general software, a real estate investor will need to spend time setting it up.
• An owner is named a Company, a rental property is named a Class, a tenant is named a Customer, and rental income is considered to be a Product.
• Understanding how a real estate chart of accounts works is also required to use QuickBooks Online for rental property.
• Multiple rental properties on QuickBooks Online can be created under a single company, or different companies can be set up for each rental property.

How to set up a rental property in QuickBooks Online

Setting up a rental property should be a relatively easy task. 

However, the process to set up a rental property in QuickBooks Online (also known as QBO) is pretty complicated and actually requires following 8 steps. 

Because QBO is general accounting software designed for every type of business, there are several hoops a landlord will have to jump through to use QuickBooks Online for a rental property business.

Here are the 8 steps to follow to set up QBO for a single-family rental: 

1. Create a Company and give it a name, such as Music City LLC or Orange Drive Rental.
2. Set up a Chart of Accounts using Schedule E (Form 1040) 
3. List the rental property as a Fixed Asset on the Chart of Accounts so that depreciation can be manually deducted at the end of each year and property fair market value can be updated.
4. Add each business bank account used for the property, including checking, savings, credit card, and mortgage accounts.
5. Configure the property as a Class, in most cases using the exact address, such as 1411 Orange Drive.
6. Create the tenant as a Customer, generally using the name(s) on the lease to ensure rental income and security deposits are credited correctly.
7. Set up rental income as a Product, then create Sub-Products for the different types of rental revenue collected, such as monthly rent, late fees, and pet fees.
8. Set up recurring invoices for Rent Payments if you wish to send a bill to a tenant each month instead of using a free online rent payment service

Conclusion

Quickbooks is a great tool for the rent industry. It allows you to rent properties through the easy process of using Quickbooks. Additionally, it can help you keep track of rental transactions and make necessary adjustments. In the final analysis, Quickbooks is an essential tool in the rental industry and can be used to great effect.