How to Read Your House Flip Profit and Loss Report
A property profit and loss report, or P&L, shows income and expenses for the selected period. That report alone does not confirm that every relevant cost from the flip is included. After the sale, check the property, reporting period, earlier costs and any questions still unresolved.
That matters when a purchase, renovation and sale cross calendar years, or when a new bookkeeper takes over partway through the project. The date of the sale cannot tell you how the earlier activity appears in the books.
Start with the reported sales income, then the costs and expenses included for the property. The net income or net loss line shows the result of those recorded amounts for the selected period. If the report also shows gross profit, that is a subtotal before other expenses shown below it.
Start with the property and the reporting period
Before focusing on the result, check which property and business you are looking at and the dates shown.
A report for several properties answers a broader question than a report for one flip. A report for the month of the sale also covers a different period from one showing the year so far.
Also check whether the report is on a cash or accrual basis. That setting can change when income and expenses appear, so ask your bookkeeper what basis was used and what the report is intended to show.
QuickBooks offers different report views and periods. Intuit's guide to customizing reports explains those options. The important question for your review is whether the report reflects the deal you want to understand.
Our approach to flip bookkeeping includes reviewing the property's P&L alongside relevant balances on the balance sheet after a purchase or sale is recorded. The balance sheet shows the business's assets, liabilities and equity at a point in time, providing context beyond the profit figure.
Ask how earlier costs are represented
A flip may have started before the current reporting year or before your current bookkeeping records begin. Those earlier costs need attention when you review the result.
Costs from an earlier year may still be reflected in the result for the period when the property sells, depending on how they were recorded and carried forward. A shorter report period does not, by itself, mean those costs are missing.
Ask your bookkeeper how costs from before that starting point are represented and what supports them. That may involve records from the prior accounting system or the records kept while the property was being acquired and renovated.
You do not need to know the accounting entries to have this conversation. You need to understand whether the report includes the relevant earlier costs or whether some history still needs review.
If your question is how QuickBooks organizes property and project information, our guide to QuickBooks features for real estate investors covers that background. A completed deal still needs to be understood in the context of its records.
Keep the closing statement in context
The final sale statement is an important part of the record. It shows the sale's closing activity, but costs recorded before closing also matter.
The cash you receive at closing is not the same as the flip's profit. Repaying loan principal reduces the debt and the cash received; it is not another expense of the property. Interest and financing charges are separate costs.
Keep the purchase and sale closing statements together with the records supporting renovation and the costs of holding the property. This makes it easier to explain the deal's history when a question comes up.
The useful question goes beyond whether the closing statement was recorded: how does that closing activity fit with the costs already recorded for this property?
Know which questions remain open
An unclear property reference, missing support or unexplained amount can require more information. Ask which items are still being reviewed and whether they could change your understanding of the result.
A report can arrive with questions attached. Read those comments along with the numbers rather than assuming that delivery means every question has been resolved. If an answer is needed from you, provide the relevant record or explanation.
Your bookkeeper organizes and reviews the bookkeeping. Your tax CPA determines how tax rules apply and what additional information is needed for your return. Our explanation of the bookkeeper and tax CPA roles covers that distinction.
Before relying on the result of your next completed flip, ask:
- Does this report cover the property and period I intend to review?
- How are the earlier costs represented?
- What is still unresolved?
Those answers give the profit figure useful context. If you need help maintaining the records behind your reports, our bookkeeping and cleanup services explain the support available.
A CPA turned bookkeeper, QuickBooks ProAdvisor, and real estate investor, she helps real estate investors save time and maximize profits with expert bookkeeping.
