Navigating the financial landscape of real estate investments can be like steering a ship through a storm. Without careful attention to every distraction and detail, it’s easy to get thrown off course. 

Short-term rentals are particularly challenging when it comes to bookkeeping and financial reporting. High turnover and the sheer volume of guest stays can make for an overwhelming workload. Without a solid system in place, even seasoned investors can end up sailing off in the wrong direction. 

That’s why many investors use an online rental property accounting platform to help them chart a straight line to their destination. These digital navigators help rental property investors stay on course by automatically tracking income and expenses, managing tenant information and lease documents, making tax time more efficient, and generating financial reports with just a few clicks.

QuickBooks stands out as a popular choice among these software solutions. Over the years, it has evolved to offer a complex suite of robust accounting and financial management features for businesses of all stripes.

In this article, we’ll unpack the QuickBooks offering and provide our take on why it may be the best choice for some, but not all, short-term rental owners. We’ll also share our suggestions for other viable property management software alternatives.

Rental property accounting options

There are a few different approaches we think you should consider when it comes to rental property accounting.

Spreadsheets

The online space is full of worksheets, spreadsheets, and templates for just about every task related to tracking income and expenses, including rental property management. You can also create your own worksheets in Excel, Google Sheets, or OpenOffice Calc.

This approach arms you with a wide array of free downloadable templates, but no real roadmap to show you how to proceed. You can find free, basic worksheets in just a few minutes to get your record-keeping up and running fast, but in a very basic and limited way. More complex spreadsheets with automated formulas and intuitive charts and tables are also available, but they can be pricey and some have a very steep learning curve.

We think worksheets are ideal if you’re a self-starter that’s willing to roll up your sleeves and you’ll enjoy fiddling with formulas and doing regular manual data updates.

Accounting software

In our experience, accounting software for rentals is the go-to option for automating the accounting processes in your short-term rental business. 

Unlike a spreadsheet, many software platforms automate some of the routine manual tasks associated with bookkeeping and accounting for short-term rentals. Proper handling of double entry accounting, journal entries, tax management, and receipt scanning can be made easier with online accounting software.  Automation can also help eliminate a lot of the common errors found in worksheets that aren’t always kept up to date.

You can often integrate accounting software with other software programs and service providers, like your business credit cards and bank accounts, to further automate reporting and reconciliation processes. Software can also help you keep track of outstanding tenant balances, late payments, and reimbursements for things like utilities.

In addition, you can often generate nicely formatted financial reports, including an income statement, net cash flow report, and balance sheet. These reports help drive sound investment decisions, inform your pricing strategy, and are essential when seeking financing from financial institutions or other investors.

Property management systems (PMS)

A PMS is a software-based management system for individuals and businesses in the property industry, from hotels to commercial and residential rental properties. The difference here is that these platforms are typically very comprehensive, take a long time to master, and often come with substantial subscription costs.

Nearly all PMS offerings promise to eliminate paperwork and manual processes across your entire portfolio. These systems also typically facilitate guest bookings, communication, and other operational tasks related to short-term rental management. 

You can oversee most guest and tenant issues with a PMS solution, including rent and fee collections, screening, maintenance requests, cleanings, and other necessary communications. Many PMS options provide a guest dashboard, allowing you to track and manage every short-term guest’s dates, details, and conversations.

Plus, these systems usually offer more than just property management. You also get built-in accounting software or the ability to integrate with other programs like Quickbooks®.

QuickBooks for rental property

QuickBooks is a world-renowned accounting software platform. It’s used by businesses of all sizes and across numerous industries, including real estate.

However, using this software isn’t as straightforward as it may seem, especially if you have multiple rental properties. You’ll need to treat each property as a “class” and customize your chart of accounts and categories, which can take a tremendous amount of time and effort.

How QuickBooks works

Setting up QuickBooks for rental property owners can be quite complex, especially for those without a background in accounting. It involves understanding and correctly implementing concepts like journal entries and double-entry accounting – tasks that are second nature to CPAs but can be confusing for landlords.

After choosing a plan, QuickBooks asks for your email (user ID), name, and mobile number. To create your company’s profile in QuickBooks, you will need to include a variety of details:

• Owner’s Details: This includes personal information about the owner.
• Chart of Accounts: Use the IRS’s Form 1040 as a guide for this.
• Income Accounts: These should be labeled as products and might include rental income and late payment fees.
• Expense Accounts: This includes bills and other expenses related to your rental business.
• Customer (Tenant) Accounts: Include details such as the house number for each tenant.
• Vendor Accounts: List out accounts for vendors such as the utility company, IRS, and other service providers.
• Asset Accounts: Include any assets your rental business has, like appliances and the property itself.
• Bank Accounts: Include all credit cards and bank accounts associated with your business.

QuickBooks also requires a significant amount of customization to effectively track rental property income and expenses. This includes setting up custom categories relevant to rental properties, which can be time-consuming.

When you’ve set up these accounts, you can start recording transactions. One of the most important transactions to record is tenants’ security deposits, part of your current liabilities. Next, create recurring invoices for your tenants to create an outstanding rent liability each month, even if you don’t actually invoice your tenants. When the rent is received and posted to the tenant’s account, the liability is removed. 

Keep in mind that if you own more than one property, the set-up process can be extensive. Each property needs to be set up separately, and the process needs to be repeated for every new property added to your portfolio. This could make QuickBooks less than ideal for property owners with more than a handful of rental properties.

Best QuickBooks alternative for rental property

Despite QuickBooks’ popularity with CPAs and a general business audience, it’s probably not the ideal solution for most rental property owners. That’s primarily because QuickBooks is a financial management tool that isn’t purpose-built for the unique situations that we believe real estate investors encounter on a daily basis.

Because of its broad focus, specialized features often required by the real estate industry may be missing. These include a logical way to track individual properties and units, portfolio-level reporting, categories that work right out of the box, tools and integrations to manage tenant turnover, and specialized handling of specific real estate tax scenarios, deductions, etc..

Additionally, while QuickBooks offers many helpful features, its complexity can be overwhelming for those without a solid accounting background. Quickbooks often requires many hours to master and newer users may spend more time navigating the software than managing their properties.

QuickBooks can be a powerful accounting tool for those who already know how to navigate its many complexities. Fortunately for rental property investors, there are purpose-built alternatives like Stessa that aim to offer a more seamless way to keep your rental business accounting in order.

Stessa

Stessa is dedicated accounting software for rental property owners. It’s an affordable QuickBooks alternative that’s easy to learn and still provides robust bookkeeping features. Stessa also receives top ratings from sites like Software Advice, Fit Small Business, Google Play, and the App Store.

Specifically designed for both short-term and long-term rental property owners, Stessa helps streamline your financial processes. The platform is purpose-built for landlords, and enables the management of multiple properties or portfolios with ease. Key features include:

• Accounting: Real-time, dynamic financial reporting and insights allow you to generate income statements, balance sheets, and cash flow reports in a few clicks. Stessa’s automation tools accurately categorize and organize income and expense transactions, providing peace of mind and simple report creation.
• Landlord banking*: With Stessa’s FDIC-insured bank accounts, you can run your your real estate finances through accounts that integrate seamlessly with all of Stessa’s core financial tracking features. Stessa Cash Management offers competitive APY interest rates with no hidden or ongoing maintenance fees. It’s easy to open an account for each property or business entity. Your funds are FDIC insured up to $250,000 through Blue Ridge Bank; Member FDIC.
• Rental applications: Simplify the process with free rental applications and tenant screening (the latter is usually paid for by the tenant). You can quickly generate applications and track their status without resorting to manual screening or third-party services.
• Tenant screening: Access comprehensive tenant screening, including full credit reports and background checks. Additional screening options include income verification and judgment and liens research, all of which helps you make informed decisions and reduce financial risks.
• Rent collection: Stessa’s rent collection features automate the entire process to increase on-time rent payments while reducing the number of monthly tasks rental property owners are required to perform. Rent reminders, check deposits, past due notices, and tenant ledger accounting is all handled seamlessly. Real-time updates are available through various dashboards, freeing you from the hassles of manual tracking and third-party finance apps.
• Taxes: Stessa’s Tax Center, developed in partnership with The Real Estate CPA, provides a comprehensive suite of tax resources for rental property investors. Informative blog articles and product videos guide investors through tax preparation best practices, deduction strategies, and efficient use of Stessa’s features. Tax season is a breeze with Stessa in your corner.

Stessa keeps you on track by covering all the bases when it comes to financial management for rental properties. Bookkeeping, rent collection, landlord banking, tax readiness, tenant screening, and other key aspects are far easier with Stessa. 

Start with the free Essentials plan or get more features with the Pro plan for just $16/month when billed annually ($20 for monthly billing).

* Stessa is not a bank. Banking services are provided by Blue Ridge Bank, N.A, Member FDIC. Deposits are FDIC-insured through Blue Ridge Bank, N.A.,Member FDIC. The Stessa Cash Management Visa Debit Card is issued by Blue Ridge Bank, N.A., Member FDIC, pursuant to a license from Visa USA Inc. Your funds are FDIC insured up to $250,000 through Blue Ridge Bank; Member FDIC.