Scaling up a house flipping business requires investing in a good accounting system and finding a CPA familiar with this type of business. Tracking your expenses and income will not only provide tax-saving advantages but also keep you right with the government. Even minor miscalculations can create financial losses or trouble with tax authorities. A knowledgeable tax professional will help you manage capital gains and minimize liabilities.

The main transactions you need to track can be broken into 5 categories: acquisitions, rehab, holding costs, selling costs, and income.

Acquisitions

When you acquire the property, keep all documents related to the purchase. These include, but are not limited to: tax assessments, appraisal and insurance, any and all fees, commissions, and permits.

Rehab

Record and keep all receipts and invoices for the remodeling process, including mileage and depreciation. Keep a copy of the contracts with the GC or subcontractors and any materials you provide. Large outlays such as an HVAC system, new roofing, kitchen, or bath remodel will reduce your capital gains. Your CPA will advise you on the proper forms needed for contractors.

Holding Costs

These are the costs associated with ongoing monthly expenses such as financing and interest, insurance, utilities, and lawn care.

Selling Costs

This includes broker and legal fees, CPA fees, title insurance, staging fees, and closing costs.

Income/Profit

Keep the paperwork for income verification and tax purposes.

Finding a Better Balance in Life

A good accounting professional, familiar with real estate investors, can help you manage your budget and maintain cash flow. A good accounting professional can help you lower your tax obligations. A good accounting professional will put your mind at ease.

Taken from https://www.biggerpockets.com/blog/accounting-for-flipping-houses