This guide is designed for Rental Arbitrage operators who use the Guesty property management system alongside QuickBooks accounting software to manage their operations.
Rental Arbitrage is a business model where an operator rents a property from an owner on a master lease and subleases said property to guests on Airbnb, Vrbo or their own Guesty direct booking website. This business model thrives in markets where vacation rental short-term income potential is higher than local long-term rental prices. Keeping a close eye on your numbers with an automated accounting system will make a great difference in navigating the success of your operations. In this guide, you’ll learn how to implement and automate accounting for a Rental Arbitrage business model using Guesty and QuickBooks.
NOTE: In this guide, we only cover income accounting, not costs. For a guide about Airbnb costs and chart of accounts to consider, check out this guide instead: Vacation Rental Cost Accounting and Chart of Accounts to Consider
Here’s what you’ll get from this guide:
There are other business models that may be more suitable in your particular scenario, which are covered better in the following guides:
Here we’ll describe our QuickBooks chart of accounts template for vacation rental income in great detail:
| No. | Account | Type |
|---|---|---|
| 24000 | Rental Liability | Liability |
| 24320 | Rental Liability: Guesty General Taxes Payable | Liability |
| 42000 | Rental Revenue | Revenue |
| 42410 | Rental Revenue: Guesty General Income – Accommodation Fare | Revenue |
| 42420 | Rental Revenue: Guesty General Income – Cleaning Fee | Revenue |
| 42430 | Rental Revenue: Guesty General Income – Additional Charges | Revenue |
| 42620 | Rental Revenue: Guesty General Refunds | Revenue |
| 51000 | Rental Costs | Cost of Service |
| 51130 | Rental Costs: Guesty General Application Fee | Cost of Service |
| 51150 | Rental Costs: Guesty General Stripe Service Fee | Cost of Service |
| 11210 | Guesty General Stripe Reserved Funds | Current Asset |
NOTE: In this guide, we only cover income accounting, not costs. For a guide about general Vacation Rental costs and chart of accounts to consider, check out this guide instead: Vacation Rental Cost Accounting and Chart of Accounts to Consider
Click to expand and learn more about any particular account type.
Rental Liability
24000 – Rental Liability – This is a parent account with child accounts that account for rental liabilities.
24320 – Rental Liability: Guesty General Taxes Payable – This represents all taxes collected from Guesty and payable to a tax authority.
Rental Revenue
42000 – Rental Revenue – This is a parent account with child accounts that account for rental revenue.
42410 – Rental Revenue: Guesty General Income – Accommodation Fare – This account tracks the accommodation fare portion of each Guesty reservation. The accommodation fare is equal to the number of nights multiplied by the average nightly rate of each reservation.
42420 – Rental Revenue: Guesty General Income – Cleaning Fee – This account tracks the cleaning fee portion of each Guesty reservation.
42430 – Rental Revenue: Guesty General Income – Additional Charges – This account tracks any additional charges collected from Guesty.
42620 – Rental Revenue: Guesty General Refunds – This account tracks refunds executed by Guesty.
Rental Costs
51000 – Rental Costs – This is a parent account with child accounts that account for rental costs.
51130 – Rental Costs: Guesty General Application Fee – This account tracks service fee costs from Guesty for each reservation, which is subtracted from the income.
51150 – Rental Costs: Guesty General Stripe Service Fee – This account tracks service fee costs from Stripe for each reservation, which is subtracted from the income.
11210 – Guesty General Stripe Reserved Funds – This is a current asset account that tracks amounts subtracted from Stripe as a reserve against disputes.
This guide primarily focuses on revenue recognition for Guesty. Please note that the provided template does not include many general accounts. We also make reference to some accounts not included in this particular template, which we’ll list here:
Here’s how to import the above chart of accounts template. The chart of accounts discussed in this article can be imported into QuickBooks automatically using Tallybreeze setup tools. Here’s how to access this utility…
Guesty can generate significant revenue for many rental arbitrage operators. With Tallybreeze, automating the reconciliation of Guesty reservations in QuickBooks is both efficient and user-friendly. In the following section, we will outline the process for automating revenue recognition for a rental arbitrage operation, including chart of accounts setup and preset configuration.
The Tallybreeze interface allows you to flexibly setup Guesty listings to automate accounting. Upon integration with QuickBooks, the system enables users to configure detailed accounting rules for each property using our templates for QuickBooks. Below is a template setup for Guesty Rental Arbitrage.
Explanation of Preset Lines
In this business model, everything collected from Guesty is yours. This includes the accommodation fare, cleaning fee, Guesty service fee (subtracted), any added fees, taxes and any reserved funds, etc…
| Guesty Price Item | % | Account |
|---|---|---|
| Accommodation Fare | 100% | 42410 – Rental Revenue: Guesty General Income – Accommodation Fare |
| Cleaning Fee | 100% | 42420 – Rental Revenue: Guesty General Income – Cleaning Fee |
| Guesty Application Fee | 100% | 51130 – Rental Costs: Guesty General Application Fee |
| Guesty Stripe Fee | 100% | 51150 – Rental Costs: Guesty General Stripe Service Fee |
| Additional Charges | 100% | 42430 – Rental Revenue: Guesty General Income – Additional Charges |
| Taxes | 100% | 24320 – Rental Liability: Guesty General Taxes Payable |
| Stripe Reserved Funds | 100% | 11210 – Guesty General Stripe Reserved Funds |
Let’s say you have Tallybreeze set up for this listing using the preset settings above. Let’s say Guesty sends a payout for a current reservation with the following itinerary price items:
Tallybreeze accounts for all the income received by Guesty, separating out each price item. The total amount to be received from Guesty for this reservation is $2440, which is allocated to the Guesty Payment Clearing Account to be later reconciled against the resulting bank deposit.
| Account | Debit | Credit |
|---|---|---|
| 42410 – Rental Revenue: Guesty General Income – Accommodation Fare | $2000 | |
| 42420 – Rental Revenue: Guesty General Income – Cleaning Fee | $300 | |
| 51130 – Rental Costs: Guesty General Application Fee | $60 | |
| 24320 – Rental Liability: Guesty General Taxes Payable | $200 | |
| 11200 – Guesty Stripe Payment Clearing Account (Asset) | $2440 |
On the date the reservation payout is received from Guesty into your Operations Bank Account (3-5 days later), a bank rule in QuickBooks can automatically reconcile the amount back to the Guesty Stripe Payment Clearing Account:
| Account | Debit | Credit |
|---|---|---|
| 1XXXX – Operations Bank Account | $2440 | |
| 11200 – Guesty Stripe Payment Clearing Account (Asset) | $2440 |
Finally, consider setting up a general customer (e.g. “Guesty Guests”) in your Tallybreeze listing rules. Or if you prefer, you can also set the guest as the customer if you want to save your guest information in QuickBooks. It’s also a good idea to set the class category of each line item as “Investment: <Listing Address>” meaning you should create two class categories in QuickBooks for this listing, one class category is “Investment” (set as the parent class) and the other class is the sub-class that represents the specific listing address. See example below:
With Tallybreeze, you’re also able to automate the creation of additional bills and invoices for each reservation. Consider the following:
All of the above settings can be quickly set up using Tallybreeze’s presets for your listings. Here’s how to set up these presets…
From here, presets will be loaded as your listing accounting rules and you can edit as needed.
In this section, we explore the nuances of vacation rental investment property transactions. The most common workflows for investors are outlined below:
Owners receive a fixed rent each month, which means it’s easy to create a recurring payment. Each rent payment can be reconciled to “5XXXX – Master Lease Rent Payments”.
You, the Rental Arbitrage operator, are paying the owner, Claudia Smith, $2000 rent per month for the property located at 212 Chantilly Way through a recurring bank transaction which happens monthly. Once the transfer is posted and complete, reconcile the outgoing transaction from the Operations Bank Account using the following entry:
| Debit | Credit | Class Category | |
|---|---|---|---|
| 1XXXX – Operations Bank Account (Asset) | $2,000 | Investment: 212 Chantilly Way | |
| 5XXXX – Master Lease Rent Payments (Cost) | $2,000 | Investment: 212 Chantilly Way |
Detailed instructions for QuickBooks Online
1. Create a Recurring Bill
| Vendor | Category | Description | Amount | Class |
|---|---|---|---|---|
| Mortgage Company | 5XXXX – Master Lease Rent Payments | “Master Lease Rent Payment” | $2,000 | Investment: 212 Chantilly Way |
2. Pay the Bill
Pay the Bill directly in QuickBooks or reconcile the Bill against the payment made in your bank feed.
If you need to purchase maintenance items and pay for it quickly, you may need to do so with the funds in your operations bank account. If your rental agreement allows, when rent is due again after paying off this expense, remove those additional monies from next month’s payment going towards landowner(s).
A property owned by Claudia Smith needs a bathroom faucet to be replaced by a professional plumber. The service costs a total of $200 and needs to be rectified quickly as there are guests checking in later in the day. You also charge a 20% markup for allocating funds and administering the service for the owner.
First, you’ll need to pay the plumbing company from your Operations Bank Account either via bank transfer, ACH, check, Venmo or other means. Once the transaction is posted and complete, record the outgoing transaction from your Operations Bank Account using the following entry:
| Debit | Credit | Class Category | |
|---|---|---|---|
| 1XXXX – Operations Bank Account (Asset) | $200 | Arbitrage: 212 Chantilly Way | |
| 7XXXX – Billable Expenses (Expense) | $200 | Arbitrage: 212 Chantilly Way |
When you pay your next rent payment (rent is $2000), subtract the amount billed plus a 20% markup. This equals a payment of $1760 ($2000 – $240 = $1760). Once the transaction is posted and complete, record the outgoing transaction from the Operations Bank Account using the following entry:
| Debit | Credit | Class Category | |
|---|---|---|---|
| 1XXXX – Operations Bank Account (Asset) | $1760 | Arbitrage: 212 Chantilly Way | |
| 5XXXX – Master Lease Rent Payments (Cost) | $2000 | Arbitrage: 212 Chantilly Way | |
| 4XXXX – Billable Expenses Income (Revenue) | $240 | Arbitrage: 212 Chantilly Way |
Detailed instructions for QuickBooks Online
1. After paying the service provider, categorize and reconcile the transaction in your operations bank feed
| Payee | Category | Description | Amount | Class |
|---|---|---|---|---|
| Plumber Pro | 7XXXX – Billable Expenses (Expense) | “Billable Expense: Bathroom Faucet Replaced” | $200 | Arbitrage: 212 Chantilly Way |
2. Subtract amount when making the next rent payment and reconcile as follows
Rent is $2000. Upon payment, subtract the amount billed plus a 20% markup. This equals a payment of $1760 ($2000 – $240 = $1760). Once the transaction is posted and complete, record the outgoing transaction from the Operations Bank Account using the following entry:
| Payee | Category | Description | Amount | Class |
|---|---|---|---|---|
| Claudia Smith (Owner) | 5XXXX – Master Lease Rent Payments (Cost) | “Rent Payment for 212 Chantilly Way” | $2000 | Arbitrage: 212 Chantilly Way |
| Claudia Smith (Owner) | 4XXXX – Billable Expenses Income (Revenue) | “Billable Expense: Bathroom Faucet Replaced” | -$240 | Arbitrage: 212 Chantilly Way |
In most jurisdictions, operators are required to collect transient occupancy taxes and remit them to the appropriate local tax authorities. Typically, rental arbitrage operators receive these taxes through Guesty and are responsible for submitting the payments directly to the relevant agency.
If you are using Tallybreeze, the “Taxes” line item within your presets is designed to automatically handle the tax collection process. As a result, your responsibility is simply to remit the collected amounts to the proper tax authority.
This guide will walk you through the process in detail.
The listing, 462 Atlas Way, is set up on Guesty to receive custom taxes for all reservations. In Tallybreeze, these amounts are allocated to “24320 – Rental Liability: Guesty General Taxes Payable”. After running a balance sheet report on this listing in QuickBooks, you see that $200 is owed for transient occupancy taxes.
First, you’ll need to send your payment to the tax authority either via bank transfer, ACH, check or other means. Once the transaction is posted and complete, record the outgoing transaction from the Operations Bank Account using the following entry:
| Debit | Credit | Class Category | |
|---|---|---|---|
| 1XXXX – Operations Bank Account (Asset) | $200 | Investment: 462 Atlas Way | |
| 24320 – Rental Liability: Guesty General Taxes Payable | $200 | Investment: 462 Atlas Way |
Detailed instructions for QuickBooks Online
1. Check how much exists in the Custom Taxes Payable account for the property
The amount that needs to be paid to the tax authority can be found in the balance sheet. Filtering the balance sheet by the class for each listing, look up the total amount under “24320 – Rental Liability: Guesty General Taxes Payable”.
2. Create Bill
| Vendor | Category | Description | Class |
|---|---|---|---|
| Tax Authority | 24320 – Rental Liability: Guesty General Taxes Payable | “Taxes Paid: 11% City TOT” | Investment: 462 Atlas Way |
3. Transfer the amount from your operations bank account to the tax authority
Send the money via bank transfer, ACH, check or other means.
4. Reconcile operations bank account statement line amount with bill
Reconcile the bill with the bank feed in QuickBooks
Now that your reservation data is automatically processed from Guesty and perfectly synced into QuickBooks, you’ll be able to produce beautiful monthly reports of your rental arbitrage operations. After you’ve reconciled any expenses, you can then observe the performance of each listing in detail.
This report is meant for internal purposes to view side-by-side, displaying the profitability of each listing for your rental arbitrage operations. This report is found under QuickBooks “Reports” as “Profit and Loss by Class”:
Rental arbitrage can be an incredibly lucrative business model that requires modest up-front costs yet allows you to retain control over your accommodation brand. However, keeping a close eye on your numbers is key, especially when it comes to acquiring more properties and negotiating with current and upcoming landlords. It is important to consistently monitor your listing performance and process the correct numbers in order to understand how well your operations are performing – which, in turn, will allow you to make the most profitable decisions.
A streamlined accounting method provides a great deal of transparency into the success of your business – something we hope you have received from this guide as you build your firm. To automate Guesty Arbitrage accounting, check out the link below!
Finally, there are other business models that are not covered in this guide but are covered better in the following guides. Be sure to check these out:
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