Quickbooks for Rental Property

quickbooks for rental property

Whether you own a single rental property or dozens, QuickBooks can be an excellent utility. QuickBooks can be used to streamline and automate all aspects of bookkeeping, including billing tenants, collecting rent, reconciling bank accounts, and tracking income and expenses. 

While there are other solutions that are specifically designed for rental properties, QuickBooks remains a simple and versatile accounting solution. Here’s what you need to know.

Which QuickBooks version is for rental properties?

There are both online and desktop versions of QuickBooks. You can select a plan that works best for your business. The online, cloud-based version of QuickBooks will be a monthly subscription:

  • Self-employed. If you rent out a single room or a single rental property, you may be able to get away with using QuickBooks Self-Employed. It doesn’t have the advanced features that are necessary for many businesses, but it’s enough to track some simple transactions. 
  • Simple Start. Designed for small businesses and start-ups, Simple Start is good for landlords who have a single property or just a few. Simple Start can be used to start your QuickBooks journey and can be upgraded as needed.
  • Essentials. Essentials includes more advanced features such as invoicing, which can be beneficial to landlords who are managing more than just a few properties. As a landlord grows, they may find Essentials a better solution.
  • Plus. Plus is usually for those who track inventory, such as property management companies. Property management companies may need to manage and maintain dozens of units and will need to be able to track their own inventories.
  • Advanced. QuickBooks Advanced comes with analytics and insights, which is perfect for a growing business. This is targeted more to mid-sized and larger businesses that might have more properties.
quickbooks pricing

Source: https://quickbooks.intuit.com/pricing/

There’s also Desktop Pro, Desktop Premier, and Desktop Enterprise. A landlord can start with Simple Start or Essentials and upgraded it as needed.

What Are the Pros and Cons of Using QuickBooks for a Rental Property?

There’s never a perfect solution — unless you create it yourself. There are always going to be pros and cons when choosing a platform. When it comes to QuickBooks, pros often outweigh the cons. But this depends on your unique situation and what you need.

The benefits of QuickBooks include:

  • It’s well-supported. QuickBooks has been a leader within the accounting industry for many decades and is an industry-standard within the professional accounting and bookkeeping industries. Because of this, there’s an extraordinary amount of documentation and information about using QuickBooks — as well as many classes for its use.
  • It has many third-party integrations. If there’s something you can’t do in QuickBooks, there’s always another software solution that you can use, and many of them can be connected directly to QuickBooks to expand functionality.
  • It’s affordable. QuickBooks can be acquired for a low, monthly fee, which ranges depending on the type of service you need. It can be less than $10 a month for landlords who have just a few properties.
  • It’s simple. A lot of work has gone into making QuickBooks intuitive and easy to use, making it one of the faster and simpler ways for a landlord to hit the ground running. This is especially important for those who have never managed their own accounting before.

The downsides of QuickBooks include:

  • It’s not tailored to being a landlord. There are programs that are specifically designed for landlords, which means they’ll make the entire process of booking your activity a lot easier. A landlord-specific program is going to be faster to setup and will have more comprehensive, advanced features as far as managing a rental property goes.
  • It doesn’t have any client-specific features. A landlord-based solution can create tenant portals that can be used to manage rental units, as well as special reports and features for tenants to use — improving upon customer service. 
  • It won’t help you with your marketing or your listings. Landlord-focused platforms will help you send out newsletters, market your existing listings, and manage listings online; this could improve your occupancy.
  • It doesn’t help you with evictions, credit checks, or background checks. Many tenancy platforms will also streamline the process of managing tenants themselves. But if you only have one or two units, you may not need these additional features.

Some of these may be applicable to your business while others may not be. The easiest way to tell whether QuickBooks is the right solution for you is to test it out. You can demo QuickBooks for your property to see how it works for you.

How to Set Up QuickBooks for Rental Property?

You can easily create a new account for QuickBooks through QuickBooks online. You can create a blank account for your business — or you can select “rental companies” or “property management” as a suggested template.

  • Add both business bank accounts and business credit cards so transactions can be processed.
  • Set up properties you manage as customer.
  • Set up units within properties as jobs and tenants as sub-jobs.
  • If you own several properties, add classes for each property so your statement of profit and loss report shows separate properties.

From there, QuickBooks can be used to invoice tenants, track rent that is owed (by creating recurring invoices) and rent that is paid (by applying rent correctly).

If there are advanced features that you need, you can use a plug-in or third-party application. QuickBooks is so popular that there are many modifications that can be made to QuickBooks with plug-ins.

How to set your QuickBooks Rental Property Chart of Accounts?

You can download a chart of accounts template if you aren’t certain how a rental property would be booked in your situation.

Otherwise, the chart of accounts for a rental property largely remains the same. However, most landlords will also need to track escrow accounts (for deposits) as well as the income and expenses related to each property.

We suggest to align account names so they can be easily mapped to Schedule E  of Form 1040 – Supplemental Income and Loss or IRS Form 8825 if you operate as a Partnership or an S Cooperation.

Rental Income and Expenses Account on Schedule E (Form 1040) – Supplemental Income and Loss

Schedule E

Source: https://www.irs.gov/pub/irs-pdf/f1040se.pdf

For the most part, landlords will create separate line items for each property, usually based on the property’s address. This will make it easier to trace money going in and out of a property.


QuickBooks for Landlords: Is it a Good Idea?

For most, QuickBooks for landlords will be more than sufficient. QuickBooks has been popular for many decades because it has numerous useful features and a very low barrier to entry. Landlords who have one or a few properties can find QuickBooks the most direct method of handling their financials. And because there are so many tutorials online and articles, it’s very easy to find answers to any question they might have.

But that doesn’t mean QuickBoks is the only solution available; far from it. There are many platforms designed for a rental property and most of them aren’t significantly more expensive. But they may be more advanced than you need and ultimately lead to challenges.

Most accounting solutions targeted toward landlords are a little more robust and advanced than a smaller landlord needs. They are targeted toward mid-sized or larger landlords, who are going to need to manage a lot of different properties. But it can be worth your time to try out the demos of different rental solutions and discover which rental solution fulfills your business needs. You can compare how different features work under each platform and determine which set of pros and cons works best for you.

Getting Started with QuickBooks for Landlords

  • Figure out which version of QuickBooks you need. If you’re going with a subscription, cloud-based version, you can always upgrade later.
  • Define your chart of accounts. For most landlords, each rental property may have a separate line, to keep track of income and expenses.
  • Input your client accounts and vendor accounts. This will help you track your cash flow and spending later.
  • Connect your bank accounts. Your bank accounts and credit cards can automatically upload transactions, saving you time.
  • Consider using demo versions; you can demo QuickBooks and other landlord platforms to determine what is best for you.

Are There Alternatives to Quickbooks for Rental Property Accounting?

There are many well-known alternatives to QuickBooks, though none of them are as large. The most popular include:

  • Rent Redi. RentRedi is a mobile-first platform that includes rent collection, tenant screening, property listings, property advertising, help desk ticketing, and e-sign. Pricing for RentRedi starts at $9 a month.
  • RentalHero. Features of RentalHero, which starts at $9.95 a month, include being able to automatically import transactions, automatically generating tax returns, and text messaging and emailing tenants.
  • Freshbooks. Freshbooks is extremely similar to QuickBooks, without a desktop option. Freshbooks is an all-in-one accounting solution like QuickBooks, but it can be customized to suit those who are looking to manage rental properties.
  • ReiHub. Built for property owners, ReiHub lets you add properties and accounts, manage your books, and interface with tenants. Owners are able to save time, better track their expenses, and organize their receipts.
  • ZenLord Pro. Another mobile-first solution, ZenLord Pro can track damage deposits, late fees, lease violations, additional rent, maintenance offices, and eviction processing. ZenLord Pro makes it easier to prepare your taxes and create financial documents.

If you’re looking for a rental property platform, you can demo different solutions to determine the best ones for you. Some of them are going to be tailored specifically to rentals (like RentalHero), while others (like FreshBooks) are more oriented toward any business.

Quickbooks Rental Property Accounting Example

Here is an example for how the accounting works in QuickBooks.

If you buy a building and the purchase price includes the cost of the land, you will need to create a split for building and land in QuickBooks. For example, you may conclude it would be appropriate to use 75/25 ratio and allocate 75% of the price to Building and 25% of the price to land.

Fixes Assets Split

Then you create a split for the land:

land split

If you have it financed by mortgage, create a mortgage which should contain the principal amount of loan.

MortgageCreate a journal entry for recording the acquisition of property with a mortgage.

Journal Entry

This his how your Balance Sheet will look like:

Balance Sheet

Now it is time to create an account for rental income:

rental income

If you use a property manager, you will split the payment received from the manager.

property manager

You can create tenant in the system and categorize income as rental income accordingly.


Categorize Rental Income


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