A lot of real estate investors gravitate towards QuickBooks simply because it’s a name they recognize and associate closely with accounting.

While the platform has been around for a long time and does indeed focus heavily on serving generalized accounting needs, it isn’t necessarily the best choice for rental property owners. That’s because real estate investors have specific needs that are often incompatible with what a general-purpose, off-the-shelf accounting program provides.

In this article, we’ll discuss how QuickBooks works and why it may not be the ideal solution for tracking rental property income and expenses. We’ll also discuss various options for rental property accounting and take a detailed look at the best overall accounting and reporting software for real estate investors.

Why QuickBooks might not be an ideal fit for landlords

QuickBooks is an industry leader in accounting software but may not always be the best fit for landlords or property managers. Here’s why:

1. Complex setup: QuickBooks requires a detailed setup process for rental properties, which includes creating individual property profiles, classifying tenants as customers, and establishing a chart of accounts aligned with IRS Form 1040 Schedule E. Such complexity can be overwhelming, especially for those less familiar with complicated accounting principles.
2. Time-consuming operations: Even routine tasks like recording rent payments can be time-consuming. It requires linking each payment to the correct tenant (or “customer” in QuickBooks terminology), applying it to the right property, and crediting it to the appropriate bank account.
3. Lack of property management features: QuickBooks is a generic business accounting tool and doesn’t have many specific features tailored to landlords’ typical needs. For instance, there are no built-in capabilities to track maintenance requests, manage lease agreements, or handle other property-related tasks.
4. Potential for confusion: In QuickBooks, tenants are designated as “customers,” which can lead to confusion. Landlords need to remember this terminology adjustment when managing their properties in the system.
5. Limited scalability: As your portfolio of rental properties grows, managing them individually as separate classes in QuickBooks can become increasingly difficult.
6. Restricted customization: QuickBooks has limited customization options, making it difficult for landlords to tailor reports and dashboards to their specific needs. For example, tracking rental-specific metrics may be less straightforward in Quickbooks than with a platform that’s purpose-built for landlords.

QuickBooks is undoubtedly a powerful tool for general business accounting. However, it may not offer the simplicity, specific features, and customization landlords need to accomplish key asset and property management functions efficiently.

Options for rental property accounting

When setting up an accounting system for your rental property, many landlords consider  three main approaches.

Manually track everything using spreadsheets

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 one or two properties that don’t generate a lot of transaction activity each month. For example, this worksheet is a nice, easy-to-use spreadsheet for rental property accounting 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. 

Many beginning real estate investors start out by using these simple methods. 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.

Use general accounting software (like QuickBooks)

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

Most multi-purpose accounting software uses a double-entry system of bookkeeping, meaning each entry you make has a corresponding opposite entry. 

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

In addition to helping you maintain accurate financial records efficiently, rental property accounting systems can help make your business look much more professional.

For instance, say you’re meeting with different lenders to potentially refinance an 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 rather than a computer printout of your own homegrown spreadsheet. 

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

Use property management software

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

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

Some property management platforms allow landlords to easily market vacancies, screen tenants and sign leases, collect rent and store documents, and process maintenance requests entirely online. Tenant-friendly features like these can help keep your occupancy levels high and improve cash flow.

Next, we’ll cover some of the best free and low-cost property management software platforms for landlords. Most include an income and expense tracking feature, plus additional tools that landlords expect and appreciate.

The best QuickBooks alternatives for landlords

Real estate investors who enjoy spending their evenings and weekends customizing QuickBooks for rental properties may consider the software a perfect match. Fortunately for the rest of us, there are plenty of good alternatives to using QuickBooks for rental property accounting.

Landlord Gurus provides expert advice on typical issues and decisions faced by residential property managers and landlords. The company recently researched and graded some leading rental accounting software providers. They evaluated competing options on several different criteria, including how well each handled expense tracking, bank integration, reports, and tax preparation, among others. They then ranked the top three best reporting and accounting tools for landlords.

Best overall accounting and reporting software

Recognized as the top accounting solution for landlords by Landlord Gurus, Stessa is like having a custom accounting platform that’s designed exclusively for rental properties. Stessa’s burgeoning community of over 200,000 users, composed of novice investors and seasoned property professionals, tend to share this view.

Setting up a property on Stessa is free, quick, and user-friendly. Simply input the rental property address, link the business bank accounts, and then generate comprehensive financial reports, such as income statements, Schedule E, and net cash flow. Users report saving an average of up to $4,000 and over 100 hours annually, making Stessa an excellent choice for efficient property management.

You can utilize Stessa for a wide range of rental property types, including single-family homes, multifamily units, and short-term rentals. It offers automated income and expense tracking and personalized reporting at the property and portfolio levels, helping you maximize profits through intelligent money management.

Plus, landlords can open deposit accounts for each property with Stessa Cash Management, seamlessly integrate those accounts within the platform, and enjoy interest rates significantly higher than the national average. 

Key features within the Stessa platform include the following:

• Automated income and expense tracking: Instantly sort and classify transactions from linked bank, lender, credit card, and property management accounts, all without additional fees or required add-ons.
• Financial reporting: Generate income statements, net cash flow summaries, and balance sheets (available with the paid Pro plan), among other reports.
• Landlord banking: Open an FDIC-insured high-yield bank account* for each property and easily integrate them with Stessa’s financial tracking features.
• Rental applications and tenant screening: Use Stessa’s tenant screening services and free rental applications to find and select qualified tenants.
• eSigning (in partnership with DocuSign): Upload your document, tag it for digital signatures, and send it to tenants, vendors, partners, and others. 
• Free rent collection: Collect rent from tenants through one-time or recurring ACH payments.
• Real-time performance metrics: Get round-the-clock insights into the performance of your property portfolio.
• Property management integration: Link your property management data portal to Stessa to import transactions and get a detailed portfolio overview.
• Unlimited properties: Add an unlimited number of properties to your Stessa account.
• Collaborative access: Invite other investors, CPAs, spouses, and others to share your Stessa account. Manage their access levels to view and/or edit the account.
• Data security: Stessa employs industry-standard encryption and multi-factor authentication to help keep your data safe and secure.
• Tax resources: Access the 2022 Tax Guide and a suite of educational materials created in partnership with The Real Estate CPA to make tax season a breeze.
• Online community: Stessa offers a vibrant community forum where users can network, share ideas, learn from others’ experiences, and become a valuable resource to each other.

Pricing

Stessa crafted its tiered pricing structure carefully to accommodate the diverse requirements and budgets of owners of residential rental properties:

Best for tax preparation

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

Pricing begins at $45/month after a free trial.

Best for Expense Tracking

Landlord Studio is another solution that received solid marks from Landlord Gurus 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.

The GO plan is free for up to 3 units. After a free trial, PRO plan pricing begins at $12/month (billed annually) for up to 3 units and offers increased functionalities, such as automated bank feeds, recurring expenses, and integration with Xero.

*Stessa is not a bank. Stessa is a financial technology company. Terms and conditions, features and pricing are subject to change. This article, and the Stessa Blog in general, is intended for informational and educational purposes only, and is not investment, tax, financial planning, financial, legal, or real estate advice.