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How to make a rental property chart of accounts in QuickBooks

charts and tables
by Jeff Rohde, posted in Investment Strategy

Although accounting may be the last thing an investor wants to do, the truth is that it’s an important part of owning and operating rental property. A good rental property chart of accounts can help investors accurately keep track of revenues and expenses, show an investor’s true net worth, and make tax preparation much easier.

The process for setting up a rental property chart of accounts is the same for all types of rental real estate, including single-family rentals, small multifamily properties, short-term and vacation rentals, and even owner-managed rental property.

In this article, we’ll review how to set up a chart of accounts for your rental property using QuickBooks, in addition to covering an alternative tool that you might find more useful for this exercise.


What is a rental property chart of accounts?

A rental property chart of accounts is a systematic way of keeping track of the transactions that come with owning and operating real estate. Information from a chart of accounts is then used to generate financial statements and reports such as:

  • Income statements (also known as a P&L or profit and loss statements)
  • Cash flow statements
  • Real estate balance sheets

Typical transactions, such as rental income and operating expenses, appear on an income statement, while current property value, mortgage balance, and owner’s equity are reported on the balance sheet. Information from these reports is also used to file a tax return for a rental property at the end of the year.


Here’s an example of how entries on a rental property chart of accounts might look in the real world of real estate investing. 

Let’s assume an investor purchases a single-family rental home for $125,000, which includes a land value of $15,000. The investor makes a 25% down payment and finances the balance due with a new first loan of $93,750. 

The home rents for $1,200 per month and a tenant moves in during the middle of the month. The total amount collected from the tenant is $3,000, which consists of the first month of rent, a half month of prorated rent, and a refundable security deposit equal to one month of rent.

There are 4 initial transactions to record on the chart of accounts:

  1. Home purchase price of $125,000 is recorded as an asset.
  2. Mortgage balance of $93,750 is recorded as a long-term liability.
  3. Tenant security deposit of $1,200 is recorded as a short-term liability (because the deposit is meant to be refunded).
  4. First month rent plus prorated rent totaling $1,800 is recorded as rental income in the month the payment is collected.

Throughout the year, rent is recorded as income; costs such as property management fees, maintenance, mortgage interest and taxes are recorded as expenses; and the principal part of the mortgage payment reduces the mortgage liability. 

At the end of the year, accumulated depreciation in the amount of $4,000 ($125,000 home value – $15,000 land value = $110,000 / 27.5 years) is recorded on the balance sheet, and the home value is reduced by the same amount. 

While the above scenario is pretty straightforward, transactions can get complicated after a few months. That’s why many investors use accounting software such as Stessa or QuickBooks to create a rental property chart of accounts and keep track of transactions.


woman looking at spreadsheets

How to set up a rental property chart of accounts in QuickBooks

After creating a company in QuickBooks for a rental property, the next step is to set up a chart of accounts. However, the process may not be easy. 

As one QuickBooks user recently posted: “OMG this is insanely confusing. . . Someone online said they would charge 200 an hour to help me set it up. And that’s just the Simple software. I had a friend who is a financial manager for a major company come over to help me set it up. She went home defeated.”

To be fair, while it may take quite a bit of time and effort, it is possible to set up a rental property chart of accounts on QuickBooks. An investor should begin by becoming familiar with Schedule E (Form 1040) and Form 8825. Both of these Internal Revenue Service (IRS) forms used for reporting income from rental real estate serve as an initial guide for setting up a rental property chart of accounts.

Here are the steps to follow to set up a rental property chart of accounts in QuickBooks, according to a QuickBooks moderator:

  1. Select Chart of Accounts from the gear icon or company menu.
  2. Choose New.
  3. Select account type in the Account Type drop-down.
  4. In the Detail Type drop-down, select the type of account.
  5. Enter an account’s name in the Name field.
  6. Type in a brief description of the account in the Description field.
  7. Click Save and Close.

This process needs to be followed for each chart of accounts line item or category. For rental property, typical line items might include:


  • Property value
  • Accumulated depreciation
  • Property land value
  • Checking account balance
  • Savings account balance (for CapEx)
  • Refundable deposits (such as opening a utility account)
  • Total assets


  • Tenant security deposit (refundable)
  • Mortgage balance
  • Owner cash contribution to open checking and savings accounts
  • Credit card balance for property-related expenses
  • Home equity line of credit (HELOC)
  • Property taxes due but not yet payable
  • Total liabilities


  • Estimated equity or liquidation value by subtracting total liabilities from total assets


  • Rent received
  • Prepaid rent
  • Miscellaneous rent (such as pet fees or parking)
  • Application fees
  • Late fees
  • Total income


  • Advertising
  • Auto and travel
  • Cleaning and maintenance
  • Commissions
  • Insurance
  • Legal and other professional fees
  • Property management fees
  • Mortgage interest
  • Other interest
  • Repairs
  • Supplies
  • Property taxes
  • Utilities
  • Depreciation expense
  • Other expenses
  • Total expenses

While a rental property chart of accounts can be set up in QuickBooks, the process can also be “insanely confusing.” That’s why many real estate investors sign up for a free Stessa account to make tracking real estate investments simple. 


How Stessa simplifies setting up a rental property chart of accounts

One of the biggest advantages of using Stessa to set up a chart of accounts instead of QuickBooks is that the heavy lifting is already done. Instead of having to make an educated guess or pay someone a couple of hundred dollars per hour for help, Stessa already comes with a rental property chart of accounts. 

The odds are that the necessary line items are already there, because Stessa was designed by real estate investors for real estate investors. However, it’s easy enough to add a chart of accounts line item in Stessa if needed. Either way, there’s no guesswork involved in setting up a chart of accounts, because Stessa has already done it for you.

General purpose accounting software like QuickBooks can be customized for a rental property, albeit with a lot of time and effort. But as we all know, in the real estate business, time is money. 

After signing up for a free Stessa account, simply enter a rental property address, link to business banking and mortgage accounts, and have income, expenses, assets, and liabilities automatically tracked and posted to the proper line items on the rental property chart of accounts. 

Stessa can also track rental property performance at the portfolio level, making it much easier to monitor the combined performance of all rental properties in a portfolio. 

Another big benefit of using Stessa’s rental property chart of accounts is that property value is automatically updated on the balance sheet. This gives investors a more accurate idea of the true net worth of their real estate investments. 

For example, assume an investor purchased a rental property for $125,000 in a market where home values increased by 15% in one year. A static chart of accounts from QuickBooks would still have the value at $125K at the end of the year, which means that owner’s equity is underreported. 

On the other hand, Stessa would update the property value in real time, assign the home an estimated value of $143,740, and increase owner’s equity or net worth by $18,750 for the year.

Most investors have limited time to learn, set up, and use complicated accounting systems. Stessa’s simple, yet robust features may provide a useful solution for rental property investors.


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