Property managers and owners often have the question, “How do I set up QuickBooks for a property rental company?” I read time and again that for rental property owners/managers, etc., they should set up QuickBooks with the Rental Property as Customer and the Units as Jobs of the Customer. This is not correct.
How do you track the actual tenant’s payment for the rent or the amount he/she may owe. Setting up QuickBooks this way means the property itself is providing the income and not the tenant. When you run an Accounts Receivable report, you only see the unit as owing money, not the tenant.
It is best to use classes to track the properties. Any property with units has a subclass for each unit. For example, Southland Apartments is the property/building. It has four units which are number 101, 102, 103, and 104. I would create the following classes:
- Southland Apartments
- SA Unit 101
- SA Unit 102
- SA Unit 103
- SA Unit 104
You can add another level, say for location, so the top level is the location and the apartments buildings are sub-classes with their respective units as sub-classes of the buildings.
This way, you can create an Invoice or a Sales Receipt for the tenant, who is the real customer and select the appropriate class, which is the unit they are renting. You can also create a Bill for work done or repairs again select the class which is the rental unit. For every single transaction – invoice, sales receipt, check written, bill received, deposit made, etc. – you can enter the appropriate Class.
When you run your Profit & Loss report, you can see your overall profitability. You can sort by Class or Filter by Class and can see each property’s profitability.
When you run an Accounts Receivable report, you can see the individuals who owe you money. You can print the invoice and mail it directly to your tenant.
In summary, for income and expense tracking: Your rental units are in QuickBooks as Classes. The tenants are your Customers. The commodity for which they are paying (rent, deposit, etc.) are Items.
Customers are the ones who pay you for services and goods. They should never be anything else in QuickBooks.
Written by Julie M. Watkins, QuickBooks Certified Pro Advisor Online