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Real estate invoice sample for Accounting

hey everybody my name is Zach pascarello I own Harrisburg bookkeeping I currently have 44 clients who I do bookkeeping for and I teach other people how to start their own bookkeeping business if you are a real estate investor and you need help with your bookkeeping go to my website harrisburgbookkeeping.com and schedule a one-on-one consultation with me I would love to work with you if you are an aspiring bookkeeping business owner I have a course specifically designed for you I will teach you everything you need to know about starting your own bookkeeping business from start to finish bookkeeping fundamentals QuickBooks Online tutorials marketing strategy sales techniques and finally how to manage your clients there's a link in the description of this video you have to check it out in this video I'm going to talk about tips and tricks for Real Estate Investors and how they can do their bookkeeping or how you can do the bookkeeping for them I'm going to talk about a couple things specifically most importantly how to record Huds whenever you purchase or sell a property and then I'm going to talk about class tracking why it's important how to do it and what does it look like so this first and foremost you need to be using QuickBooks Online so I just created this QuickBooks online account and side note please excuse me I lost my voice over the weekend my best friend just got married so my voice is a little raspy so please forgive me I'm gonna do my best like I was saying first and foremost you need to be using QuickBooks online and this is just an account that I made today and I am going to show you how to start doing class tracking and then I'm going to tell you what it is and why it's important so first of all you need to go into your gear icon in the top right hand corner select subscriptions and billing and you need to make sure that you either have QuickBooks Plus or QuickBooks Advanced if you have Simple Start or Essentials you will not be able to do class tracking okay then you need to go to the gear icon click account and settings then click Advanced on the left hand side and then you will see this categories right in the middle here with the first option of track classes go ahead and turn that on and if you want you can check this box warn me when a transaction isn't assigned to class that's fine and then we're going to click save click done in the bottom right hand corner now we have enabled class tracking now let me tell you why that's important real quick so first of all if you are a real estate investor and you only have one property probably not that important but after you get two properties or more you want to be able to run your profit and loss and your balance sheet based on your properties and the best way to do that is to assign each transaction individually a class so for example you're going to start receiving rental income from multiple properties so anytime you receive rental income from each property you want to designate that rental income and assign it to a class AKA assign it to its property that way you can see how much money did I make per property the exact same concept with expenses and the exact same concept with assets and liabilities so obviously with expenses you want to see how much money did I spend on that property that way at the end of the month or the end of the year you can find out how profitable was that property and you can do that by enabling class tracking and giving each transaction a specific class or a specific property also with your balance sheet you want to see if you receive a security deposit you should give that security deposit a class Associated to a property that way whenever you run a balance sheet for that property whenever it comes time to sell it or if you're just checking in on the assets and liabilities for that property you are able to see okay there is a one thousand dollar security deposit still out there for that property let me track that down maybe somebody owes me a thousand dollars maybe you owe somebody a thousand dollars and also if you have loans multiple loans from the same company or the same person or the same private money lender and they're sending you money then you can differentiate between those loans based on the classes so they might all be categorized like let's say for example Lima one capital is a pretty big private money lender let's say they're giving you loans and you just want to assign all of the loans to Lima one Capital as on the chart of accounts that's your liability but for each property that you get a loan from liba one Capital you want to give it a specific class that way even if you run the balance sheet you're able to see how much debt am I in on this property okay so that's kind of fundamentally why we want to do class tracking now let me show you how to do it it's really super simple first of all we will just create a new transaction click the plus new button in the top left hand corner and in this example we will just create an expense and then every expense on the right hand side here is going to have the option for you to give it a class so in this example we need to create a class we will create one main street so that's a class and then we'll do two side street as another class so now we have two separate classes so whenever we create here's an expense for property taxes in October for nine hundred and eighty seven dollars for One Main Street here is property taxes for two Side Street then we can go to our reports profit and loss by class and we can see here One Main Street two side street property taxes property taxes this is the best way to show profitability by property okay now this is a HUD statement this is what every real estate investor is going to get whenever they buy or sell a property so this is an example and on the left hand side here we have borrower so this is the person buying the property on the right hand side we have the seller so right now we are only concerned with the borrower and I'm going to show you how to transfer this information into a journal entry so real quick I'll Orient you to what's going on here thirty thousand dollars is the purchase price five hundred dollars settlement charges 35 dollars and 536 dollars our taxes 405 dollars looks like a lot rent and then if we scroll down here there was no loan on this property which is a fairly unique situation but with a cheap property happens all the time so this person cash from borrower Thirty one thousand dollars so this person paid Thirty one thousand dollars cash to purchase this property now let me show you what this looks like so first of all plus new in the top left hand corner journal entry let's just say the property was purchased on October 3rd so first of all we need to add this as an asset fixed asset building we're going to call this one Main Street you have two options if this particular client only has a couple properties you can create a new chart of accounts for every property like we're doing in this example or you can just lump together all of the properties under one parent account name it buildings and then each property just gets added to the building startup account so if your client has 30 plus properties it's probably not going to be realistic to give each property a new chart of account that's just going to make the balance sheet way too crowded so in this example we're going to create a new fixed asset account One Main Street we will give it the class designation of One Main Street now this gets a debit let's check back here thirty thousand dollars so debit thirty thousand dollars description contract sales price next we have settlement charges of five hundred dollars settlement charges get capitalized which means we add them to the basis of the property settlement charges One Main Street for the class okay going down we have city taxes for 35 14. taxes do not need to get capitalized whenever you purchase the property so we can expense those as property taxes thirty five fourteen once again One Main Street assessments five three six fifty six I will categorize those under property taxes let me make sure I got that right five three six fifty six five three six all right and these are assessments I try to be as detailed as possible in the description and then it looks like we had to pay for rent so 405.73 this might have been a mobile home so we have to pay for rent 405.73 so that those are the total amount due from the borrower so typically this person might take out a loan maybe a twenty thousand dollar loan to purchase this property but in this example there was no loan it was just 31 477.43 cash from borrower and then the last thing I like to do I like to attach the HUD to the journal entry in QuickBooks now what we can do is we can go back to our reports look at the balance sheet customize filter class One Main Street Run report All Dates run report now we have fixed asset thirty thousand five hundred dollars now let's look at what happens whenever you sell this property there are a couple ways to do it a lot of it depends on if you're flipping houses or if you're holding them for more than 12 months let's just assume in this scenario this real estate investor is flipping this property so they are not holding it for more than 12 months so we are going to sell the property and let's look at that journal entry remember we currently have thirty thousand five hundred dollars in a fixed asset One Main Street all right so in order to get that off the books we need to Credit One Main Street for thirty thousand five hundred dollars give it a class now in this example we are going to run this property through cost of goods sold because we're flipping the property so we're going to treat it like inventory and then cost of goods sold so really this should not be a fixed asset this should be more like inventory because we're flipping the properties so we're going to credit the asset debit cogs the house cost for thirty thousand five hundred dollars give it a class so now whenever we look at the balance sheet the assets wiped off the books whenever we look at the profit and loss we're going to show a thirty thousand five hundred dollar expense in the form of cogs for the purchase price of the house now if we would have fixed the house we would have either wanted to capitalize the cost to fix the house or we can just expense the cost to repair the property in real time and if we expensed it it'll automatically show up on the profit and lost if we capitalized those costs then they would have added to the basis of the property which means we would have been carrying a value greater than thirty thousand five hundred dollars on the balance sheet but we're going to skip all of that we're going to keep it simple so now we're going to go to the sale of the property so the left side was the borrower the right side is the seller so the first HUD was the original purchase of the property now this is the sale of the property this particular real estate investor was able to sell this property for eighty seven thousand five hundred dollars so we're going to create a new chart of account called flip Revenue if you already have an existing income account that's fine use whatever makes sense for your business we're just going to call it flip revenue and then we are going to credit eighty seven thousand five hundred dollars for flip Revenue and then we have adjustments for items paid by the seller in advance so these taxes are something that the seller already paid for so now the seller is going to get reimbursed for these taxes so this is going to be a credit for these taxes which means it's going to reduce the taxes on the profit and loss so we have 37.40 109.97 and 303.57 and then we have rent that was prepaid for 562.57 whenever they're selling the property it's important that everything in this top section for gross amount due to seller everything should be a credit whether it's income or expenses being refunded everything in this top section right here should be a credit and then everything in this bottom section should be a debit so we have settlement charges to the seller so I created a new account cost of goods sold settlement charges and that's 25 81.50 that's a debit for settlement charges and then finally cash to seller 85 93201 and then we can go through here at the end and we can just copy and paste the class and then like I said go ahead and attach the HUD to the journal entry okay save and close now to wrap it all up let's look at the balance sheet to see what it looks like there should be nothing on the balance sheet for this property so we can filter by class we can go to One Main Street run the report go to All Dates and we have nothing here except for income and money going in and out of the checking account so that's good because we no longer have the asset so there should be no more liabilities no more assets related to this property now the last thing you want to do is go to the profit and loss just to check profitability on this property same thing we're going to filter by class One Main Street go to all dates so here we have flip Revenue which was the sale price of the property 87 500 and then the cost of the house thirty thousand five hundred settlement charges property taxes a rent reimbursement for a grand total net income of fifty three thousand this is why it's so important to do class tracking that's how you record a HUD obviously every client every situation is different but hopefully that gives you a little better understanding how to do bookkeeping for Real Estate Investors