and now we will learn all about flipping properties this is video 1 in a series of 3
videos regarding flipping properties and in this video we will learn about buying a property if
you have any questions about this topic you can leave them in the comment section below and I'll
do my best to help you and of course if you feel the video helped you I hope you will click like
and don't forget to subscribe to get updates on new videos that come out all the time what does
flipping property mean it means you buy a property then you renovate the property and then you sell
it for a profit for the first time in this course you will now have assets in your chart of accounts
and you may well ask what is an asset well it's something you pay for that has value well after
you pay for it so let's clarify at the moment you pay for something if you already used the
value at the moment you pay for it that's how you know you have an expense and expenses are
reoccurring things like delivery repair cleaning and things you always have to pay for to maintain
and run your business however if at the moment you were paying for something you are paying
for an asset the value is still there after you pay so things like a car or equipment or even a
building if you pay for these things at the moment you pay it still has value that you can use into
the future it's still an asset even if you can't touch it and that's a very important point if
the asset is intangible or you're paying for some idea but this idea has value into the future then
it is still considered an ass and it is put into QuickBooks that way now when you buy property it
is a fixed asset type of account in QuickBooks you usually buy it with a mortgage you give the
down payment to the bank and the bank gives the mortgage money to the previous owner so how do
we set up to buy property well first we have to put the mortgage company on the vendor list in
this case it's mighty Mikes mortgages from the main menu click vendors vendor center then in
the top left just likely learn click vendor new vendor and just type in mighty Mikes mortgages
and then just click OK and now we have a payee on the list that we can pay the deposit to and
make the mortgage payments too and now we put the fixed asset account in the chart
of accounts that represents the property that we're buying or at least represents the cost of
the property that we're buying 110 Livingston Street and we put it in as a fixed asset from
the main menu click list chart of accounts then in the bottom left click account new
now this is a fixed asset major purchase we click continue and we're going to put in building 110
110 Livingston Street that's the name of this fixed asset save and close and now we have the
fixed asset on the list ready to use and now we have to add the mortgage account in the chart of
accounts as a long-term liability and you can just name it mortgage to Mike so account new
and it's a long-term liability click continue and type in mortgage to Mike and that should be
enough for us to remember what it is so now that we're all set up we have to ask what happens on
the day that we buy the property well cash and Bank decreases by the amount of the down payment
we become responsible for a long term liability which is the mortgage and we own the asset that
we just paid for all you have to do to handle all of this is to make one big journal entry or you
could break it up into two transactions which is the normal way to do it for example let's
imagine on October 1 we paid the mortgage company Mike's mortgage check number 2001 for 30 thousand
dollars for a down payment on the house and 110 Livingston Street so how do we do that well we
already know how to write a check we can click check from the icon bar and it's check number 2001
and the people whom were paying or the mortgage company is mighty Mike's mortgage and the date
we're paying I believe the date was October 1 so it just happens to be here in the calendar and the
amount we're paying is thirty thousand dollars now this was already chosen because I did a warm-up
video but you should know that the account that you're paying or is the new asset that you made
it's the building at 110 Livingstone street so if you click here and then you click building and 110
Livingstone street it means you're paying thirty thousand dollars for that building we click Save
and close and then we check the trial balance and you can see cache is greatly diminished
but you can see building at 110 Livingston Street shows up for the first time in the trial balance
as thirty thousand dollars now let's imagine that the mortgage company Mike gave the previous owner
of 110 Livingston Street the seventy thousand dollar mortgage that we are now responsible for
as the new owners of the property well how would you do that as I mentioned before you would make a
journal entry so if you look at the building right now you see it showed up normally when we wrote a
normal cheque as the debit side this implies that the building or the asset would normally be on the
debit side and that's what we're going to put when we record the journal entry and that will help you
remember the amount of the building that you paid for through the mortgage gets put on the debit
side and therefore the balance of the mortgage and the liability account goes on the credit side from
the main menu we click company make journal entry make general journal entry and the journal entry
window opens up just click OK for this now the date that we are assuming responsibility
for both the mortgage and the property is really October 2nd now as mentioned this 110 Livingston
Street building showed up on the debit side when we paid for it by giving the owner the mortgage we
are paying more by seventy thousand so it goes on the debit side that's how you will remember
it if you pay more for it the debit part goes up and of course everybody knows in a journal
entry whatever money amount goes on the debit side goes on the credit side and you may well ask what
account should we credit for the 70,000 and the answer is the long-term liability mortgaged to
Mike so at the moment we assume responsibility of the building we make a debit for seventy thousand
to show that we have more paid more for this asset but we acknowledge we owe this liability we make a
credit seventy thousand and if you want to learn more about debits and credits and why we put this
the way that we do you can watch the supplemental videos about debits and credits in the meantime
click Save and close and don't worry about this just click OK and now notice the total you paid
for the building was one hundred thousand dollars and you only have a seventy thousand dollar
mortgage and your cash has greatly decreased and these are the results that you would expect
after paying your cash plus assuming a mortgage to buy a building worth a hundred thousand you