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Can Landlords Use QuickBooks for Their Rental Properties?

person using spreadsheet
by Jeff Rohde, posted in Investment Strategy

A lot of real estate investors choose QuickBooks simply because it’s a name they are most familiar with. 

While the software is good for accounting, it isn’t necessarily the best choice for rental property owners. That’s because real estate investors have specific needs beyond what a general-purpose, off-the-shelf accounting program can provide.

In this article we’ll discuss the various options for rental property accounting software, how QuickBooks for landlords works, and take a detailed look at the best overall accounting and reporting software for real estate investors.

 

Options for Rental Property Accounting

When you set up an accounting system for your rental property you’ll have four main options to choose from:

Spreadsheet Program

Using a spreadsheet program such as Microsoft Excel, Google Sheets, or OpenOffice Calc is similar to using an electronic version of the old-fashioned pen and paper method of bookkeeping. 

There’s nothing wrong with setting up a spreadsheet for rental property accounting, especially if you own just a few properties. For example, the Zillow Rental Income and Expense Worksheet is a nice, easy-to-use spreadsheet for rental property accounting that is designed for landlords with 1 to 5 properties in their portfolios.

You can download the Microsoft Excel spreadsheet for free, save it in a different format if you like, and customize it to fit your specific needs. The worksheet can also be used if you set up online rent payments with Zillow Rental Manager, although the two programs don’t sync with one another. 

Many beginning real estate investors start out this way. But after a while, they quickly discover that using a spreadsheet for rental property accounting requires constant updating, and it’s far too easy to forget to record an expense that could be a valuable deduction at tax time.

Accounting System

An accounting system for rental property is a good step up from a basic spreadsheet. 

Accounting software automatically uses a double-entry accounting system of bookkeeping, which means that each entry you make has a corresponding opposite entry. 

For example, if you enter a rent payment received by a tenant, the tenant’s outstanding rent liability is reduced and the checking account balance for your rental property is increased. Or, when you pay your property taxes, your checking account is automatically reduced and the property tax payment is recorded as a tax-deductible expense on your P&L.

In addition to accuracy and ease of use, rental property accounting systems help make your business look much more professional. 

If you’re meeting with different lenders to refinance the existing mortgage, you’ll make a much better impression – and potentially increase the odds of getting the loan you’re looking for – with a professionally printed income statement and net cash flow report than a computer printout of a spreadsheet. 

Some of the best free and paid accounting software for landlords include Stessa, Wave, ZipBooks, GnuCash, and QuickBooks. However, Stessa is the only free software system specifically designed for real estate investors.

Property Management Software

Property management software for landlords combines all the benefits of an accounting system with other features you need to manage rental property. 

In addition to keeping accurate records of your income and expenses, and assets and liabilities, most property management software systems offer features that help your rental property to run more smoothly and efficiently. 

You can market vacancies, screen tenants and sign leases, collect rent and store documents, and process maintenance requests entirely online. Tenant-friendly features like these help to keep occupancy levels high and cash flow strong, because happier tenants tend to pay their rent sooner and take better care of your property.

Some of the best free and low-cost property management software for landlords include Cozy, Housters, Rentler, Stessa, and TenantCloud.

 

QuickBooks for Landlords

If you’ve been in business for any length of time, the odds are you’ve heard about QuickBooks. The accounting software package was originally launched back in 1983 by the founders of Quicken. 

Today, millions of small and medium-sized businesses worldwide use both the desktop and cloud-based versions of QuickBooks to accept payments, do accounting, manage and pay bills, and process payrolls.

Because QuickBooks is practically a household name, many real estate investors wonder if QuickBooks can be used by landlords for rental property accounting. The answer is that you can, and many rental property owners do. In fact, the company recently explained how to set up rentals 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. 

That’s because each rental property is essentially treated as an individual business or rental property company file. Then, you need to make sure you’re crediting and debiting income and expenses to the right property and the correct account if you want accurate financial statements. 

 

How QuickBooks Works

QuickBooksHelp recently posted on how to record transactions for a property management company. You have to think about your business that way, at least if you want to use QuickBooks, even if you have only one rental property. 

First, you need to create a company file for a rental property company where you will keep track of the transactions for each property, such as rental income and expenses. Once you create the company, you’ll have to:

  • Create your business banking accounts (including checking and credit card).
  • Set up tenants and vendors (in QuickBooks, tenants are known as customers).
  • Set up each rental property as an individual class.
  • Set up your chart of accounts using IRS Form 1040 Schedule E as a guide.
  • Record security deposits on your balance sheet as a short-term liability.
  • Track the rental income such as rent, late fees, pet fees, and other income (known in QuickBooks as a product).
  • Record expenses for each property ensuring that each invoice is charged to the correct property and the correct line item expense.

Doing something as straightforward as recording a rent payment received from a tenant is equally complex. After setting up your tenant as a customer, you’ll need to:

  • Create a recurring invoice for the rent payment due.
  • Receive the rent payment by choosing the tenant (customer) name.
  • Credit the rent payment received to the correct property and the right bank account.

 

person using spreadsheet

Best QuickBooks Alternatives for Landlords

For real estate investors who enjoy spending their evenings and weekends figuring out how QuickBooks works for rental property, the software will be a perfect match. Fortunately, there are plenty of good alternatives to using QuickBooks for rental property accounting.

Landlord Gurus is a website dedicated to providing expert advice on the residential property management issues faced by landlords and property managers. 

The company recently researched and graded rental accounting software providers using a variety of criteria including expense tracking, bank integration, reports, and tax preparation to rank the top three best reporting and accounting tools for landlords:

Best Overall Accounting and Reporting Software

Stessa is ranked as the best option for landlords looking for an alternative to QuickBooks. In fact, many investors believe the Stessa is like a QuickBooks specifically for rental properties.

Setting up a property online with Stessa is free, fast, and easy. Simply enter the rental property address, connect your business bank accounts, and run financial reports such as income statements, net cash flow, and capital expenses statements in a single click.

Real estate investors with single-family, residential multifamily, and short-term rentals can use Stessa to automate income and expense tracking, maximize profits through smart money management, and personalize reporting on both a property and portfolio level.

Features include:

  • Unlimited property tracking.
  • Performance dashboards at the property and portfolio level.
  • Automated income and expense tracking.
  • Unlimited monthly reports.
  • Export tax-ready financials.
  • Online document storage with bank-grade security.
  • Access 24/7 from anywhere with an internet connection.
  • Smartphone apps available for iOS and Android.

Pricing is 100% free with optional premium services for a fee such as rent analysis, mortgage financing, and market research.

Best for Tax Preparation

Rentec Direct is a complete rental property software solution that is best for landlords looking for tax preparation tools. The online software includes a complete accounting system, along with modules for tenant screening, online rent payments, vacancy publishing, and online file management. 

Pricing begins at $35 per month after a free trial.

Best for Expense Tracking

Landlord Studio is another full-service solution that received top marks for accounting and financial tracking. The all-in-one platform helps landlords save time while managing rentals, with rental accounting, online rent collection, and tenant screening integrated into one software package. 

Pricing for one unit begins at $5.99 per month based on annual billing after a free trial.

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