Tracking a Flip in QuickBooks Online: Purchase, Rehab and Sale

What a flip needs to track

A flip is not one number. It is the price you paid for the house, the money you spent fixing it, and the price you sold it for. Each part needs its own line so the profit per flip is real.

When you track all three parts by project, you can see which flips pay and which ones cost more than they bring in. When you do not, you get one big pile of house money and rehab costs and no way to tell whether the first flip or the fifth flip was the good buy.

Most fix and flip remodelers run more than one house at once. Some houses flip fast. Some sit on the market. Some need a full gut. Some need paint and floors. Each house has its own purchase price, its own rehab budget and its own sale. When the books tie each line to the project, the business makes sense. You can read more about how we keep these lines tied on our bookkeeping page.

Here is what a clean flip looks like.

When each line ties to the project, the profit per flip is real. When they sit in one pile, you are guessing.

How the purchase shows up in your books

The purchase is the first part of a flip. You buy the house. You pay the price, the closing costs and the fees. The house is not an expense. It is an asset you hold until you sell it.

The clean way is to book the purchase price to an asset account for that house. The full amount you paid goes in as a real estate asset. The same amount leaves your bank as cash. Your balance sheet shows the house you hold and the cash you spent. Your profit and loss does not move, because a house you bought is not income and not an expense.

The messy way is to book the purchase as an expense. Now your profit drops the month you bought the house. Your books show a loss before the flip even started. When the house sells, the sale looks like pure income and the profit looks huge and wrong. Your CPA has to sort it out at year end and the real numbers hide until then.

Here is how to keep the purchase clean.

• **Book the purchase price to a real estate asset account: ** not to an expense line.
• - **Keep one asset account per flip: ** or tag each purchase to its project class.
• - **Match the purchase price to the wire that left the bank: ** the two should agree.
• - **Add the closing costs to the asset cost: ** fees you paid to buy the house are part of what it cost you.
• - **Tag the asset to the project class: ** so each flip carries its own house.

When the purchase sits in an asset account, your books show what you hold. When it sits in an expense, your books show a loss that is not real.

How the rehab shows up in your books

The rehab is the work you do to get the house ready to sell. Materials, labor, permits, dumpsters, paint, floors, plumbing, electrical. Every cost needs to tie to the flip.

The clean way is to book every rehab cost to a rehab cost line tagged to the project class. When you buy lumber, it lands on the flip. When you pay a plumber, it lands on the flip. When the dumpster rolls up, it lands on the flip. When you run the profit and loss by class, each flip shows its own rehab total. You can see which house went over budget and which one came in under.

The messy way is to book every rehab cost to one general repairs line with no project tag. Now you can not sort by house. You can not tell if the first flip went over on materials or if the second flip cost more in labor. The whole rehab looks like one blur. You can read more about how we tie rehab costs to a project in our hard money loans and draws guide. The same idea works for a flip you pay for in cash.

Here is how to keep the rehab clean.

• **Book every rehab cost to a rehab cost line: ** not to one general repairs line.
• - **Tag every cost to the project class: ** so the rehab sorts by house.
• - **Log each cost the day it happens: ** not at month end from memory.
• - **Match each contractor bill to the bank: ** so no cost floats untied.
• - **Watch the budget per flip: ** a house that goes over needs a closer look.

When every rehab cost ties to the flip, the rehab total is real. When they sit in one pile, every flip looks the same.

How the sale shows up in your books

The sale is the last part of a flip. The buyer pays you. You pay off the loan if you had one. What is left is the profit. Each step needs a line.

The clean way is to book the sale price to a sale income line tagged to the project class. Then you clear the asset off the books. The house you held as an asset comes off the balance sheet when it sells. The sale price goes to income. The rehab costs and the carrying costs already sit on the project line. The difference is the real profit for that flip.

The messy way is to book the sale and leave the asset on the books. Now your balance sheet shows a house you do not own. Your profit is wrong because the purchase price never got pulled into the math. Your CPA sorts it out at year end and it takes longer than it should.

Here is how to keep the sale clean.

• **Book the sale price to a sale income line: ** and tag it to the project class.
• - **Clear the asset off the books: ** the house is gone, so the asset comes off the balance sheet.
• - **Pull in every cost: ** the purchase, the rehab and the carrying costs all on the project line.
• - **Match the sale proceeds to the wire that hit the bank: ** the two should agree.
• - **Run the profit and loss by class after the sale: ** so the real profit shows.

When the sale clears the asset and pulls in every cost, the profit for the flip is real. When the asset hangs and the costs sit loose, the profit is a guess.

How to keep each flip on its own line

A flip operator with three houses and one checking account needs a way to sort the money by project. Classes in QuickBooks Online do this.

The clean way is to turn on class tracking and set up one class for each flip. Every purchase, every rehab cost, every carrying cost and every sale carries the class for the house it belongs to. When you run the profit and loss by class, each flip shows in its own column. You can see which house paid and which one ate the budget.

The messy way is to book every line to the same accounts with no class. Now you can not sort by house. You can not tell if the first flip earned its keep or if the third flip is the one that needs a closer look at the budget. You can read more about how we keep projects apart in our cost codes and projects guide. The same idea works for a flip.

Here is how to keep flips on their own lines.

• **Turn on class tracking in QuickBooks Online: ** and set one class per flip.
• - **Tag the purchase to its project class: ** so each house carries its own cost.
• - **Tag every rehab cost to its class: ** so the rehab sorts by house.
• - **Tag every carrying cost to its class: ** so the time you hold the house sorts by flip.
• - **Tag the sale to its class: ** so the profit shows per flip.
• - **Run the profit and loss by class each month: ** so each flip shows in its own column.

When each line carries a class, the business reads like a row of houses. When it does not, the business reads like one big blur.

How the month end close works

At month end, every flip needs its lines added up. The purchase, the rehab, the carrying costs and any sale all pull together into one project total. When the flips roll up by class, you see each house side by side.

We start with the bank. We match each purchase to the wire that left. We match each rehab cost to the check that went out. We book the carrying costs each month, not saved for the sale. We check each asset balance against the house you still hold. When a house sells, we book the sale, clear the asset and pull in every cost. Then we add up the month by project class. We send you the profit and loss by class, a balance sheet, and a cash summary. Each flip sits inside the report.

Here is a simple month end check.

• **Match each purchase to the bank: ** every wire cleared.
• - **Match each rehab cost to the bank: ** no orphan costs.
• - **Book carrying costs each month: ** not saved for the sale.
• - **Check each asset balance: ** the house you still hold is still on the books.
• - **Clear the asset when a house sells: ** so the balance sheet stays true.
• - **Run the profit and loss by class: ** so each flip shows in its own column.

When the close runs every month, the business stays clear. When it skips a month, the flips stack up and the next month is harder to close.

A situation we clean up

The flips that all looked the same

A flip operator runs three houses at once. The purchase for each house lands in one general expense line. Every rehab cost lands in one general repairs line with no project tag. The carrying costs sit in overhead. At sale, the sale price goes to one income line and the asset stays on the books. The owner can not tell which flip made money and which one cost more than it brought in. The owner can not tell which house to copy and which one to avoid next time.

Here is how we handle it. We turn on class tracking in QuickBooks Online and set up one class for each flip. We go back through the open months and move each purchase to an asset account tagged to its house. We pull every rehab cost out of the general repairs line and tie it to the project class. We book the carrying costs each month, tagged to the flip. When a house sells, we book the sale, clear the asset and pull in every cost. When we are done, the owner can run the profit and loss by class and see each flip in its own column. We set up a rule so the next purchase carries the right class from the start.

Mistakes we fix

• The purchase booked as an expense instead of an asset
• Every rehab cost in one general repairs line with no project tag
• Carrying costs buried in overhead instead of on the flip
• No class tracking turned on, so no way to sort by flip
• A sale booked with the asset left hanging on the books
• The sale price in one income line with no project tag
• Carrying costs saved for the sale instead of booked each month
• No profit and loss by class run after a sale
• A house that sat for months and the interest cost no one saw
• The purchase price never pulled into the profit math at sale

Common questions

How do I record the purchase of a flip? Book the purchase price to a real estate asset account, not to an expense. The full amount you paid goes in as an asset and the same amount leaves your bank as cash. Your balance sheet shows the house you hold. Your profit and loss does not move, because a house you bought is not income or an expense.

How do I track the rehab for each flip? Book every rehab cost to a rehab cost line and tag it to the project class. When you buy materials or pay a contractor, the cost lands on the flip. Run the profit and loss by class so each flip shows its own rehab total.

How do I record the sale of a flip? Book the sale price to a sale income line tagged to the project class. Then clear the asset off the books. Pull in the purchase, the rehab and the carrying costs. The difference is the real profit for that flip.

How do I keep each flip separate? Turn on class tracking in QuickBooks Online and set up one class for each flip. Tag every purchase, rehab cost, carrying cost and sale to its project class. Run the profit and loss by class so each flip shows in its own column.