Classes, Locations, or Tags? How to Track Multi-Entity Profitability in QBO

If you're managing multiple properties, investment entities, or business units in QuickBooks Online, you've probably stared at your chart of accounts wondering: How do I actually see which properties are making money?

You're not alone. Real estate investors and firm owners constantly juggle this challenge: trying to track profitability across multiple entities without creating an accounting nightmare. The good news? QBO gives you three built-in tools to slice and dice your data: Classes, Locations, and Tags. The tricky part is knowing which one (or which combination) makes sense for your specific situation.

Let's break down each option so you can make an informed decision.

Understanding the Core Difference

Before we dive into the "how," let's tackle the "what."

Classes are your power tool for tracking business segments, departments, or profit centers. Think of them as buckets that categorize transactions by function or type: like "Property Management," "Renovations," or "Legal Services."

Locations do exactly what they sound like: they track geographic or physical locations. This is ideal when you have rental properties at different addresses or operate office locations in multiple cities.

Tags (formerly called "Groups" in some QBO versions) are your flexible, custom labels. You can create tags for anything that doesn't fit neatly into Classes or Locations: like "Investor A Portfolio," "2024 Acquisitions," or "Active Rehab."

Here's where it gets interesting: You can use all three simultaneously on the same transaction. That rental income payment? It could be tagged with a Location (123 Main Street), a Class (Rental Income), and a Tag (Smith Family Properties).

When to Use Classes

Classes shine when you want to track profitability by business function or operating segment rather than by physical location.

Best for:

• Tracking different lines of business (property management fees vs. rental income vs. renovation services)

• Separating business activities (operations vs. development vs. asset management)

• Departmental tracking for firms with multiple service offerings

• Distinguishing between income types across all properties

Real-world example: You're a real estate investor who also offers property management services to other owners. You'd use Classes to separate "Own Property Operations" from "Property Management Services" to see which part of your business drives profitability.

How to set it up:

1. Go to Settings (gear icon) → Account and Settings

2. Click the Advanced tab

3. Enable "Track classes"

4. Choose whether to assign classes to each row (more granular) or one class per transaction

5. Create your class list under Settings → All Lists → Classes

The key advantage? Class-based Profit & Loss reports let you compare performance across your business segments side-by-side. You'll see instantly whether your renovation business outperforms your rental portfolio.

When to Use Locations

If your primary question is "Which property or physical location is most profitable?", Locations are your answer.

Best for:

• Tracking individual rental properties

• Managing multiple office locations

• Geographic market analysis

• Per-unit or per-address profitability

Real-world example: You own five single-family rentals and two duplexes across different neighborhoods. Locations let you track each property's income and expenses separately, making it crystal clear which addresses generate the best returns.

How to set it up:

1. Go to Settings → Account and Settings

2. Navigate to the Advanced tab

3. Enable "Track locations"

4. Create your location list under Settings → All Lists → Locations

5. Assign locations to transactions as you enter them

Pro tip: Use the property address or a shortened version as your location name. "1234 Oak" is clearer than "Rental Property #1" when you're scanning reports six months from now.

The location-based P&L report becomes your best friend during tax season or investor reporting. You can filter by location and instantly generate property-specific financials.

When to Use Tags

Tags are your Swiss Army knife: flexible, customizable, and perfect for tracking dimensions that don't fit into Classes or Locations.

Best for:

• Grouping properties by investor or ownership structure

• Tracking renovation projects across multiple properties

• Identifying specific campaigns or initiatives

• Creating temporary groupings for analysis

Real-world example: You manage properties for three different investor groups, each with properties across multiple locations. Tags let you create investor-specific reports without creating separate QBO subscriptions for each entity.

How to set it up:

1. Tags are part of QBO Plus and above (included automatically)

2. Create tags on-the-fly when entering transactions, or

3. Manage your tag list under Settings → All Lists → Tags

4. Apply multiple tags to a single transaction if needed

The flexibility factor: Unlike Classes and Locations (where you typically assign one per transaction), you can apply multiple tags. That same transaction could be tagged "Partnership A," "2025 Portfolio," and "Capital Improvement": giving you multiple ways to analyze the same data.

The Real-World Combination Strategy

Here's where theory meets reality: Most sophisticated real estate investors don't choose just one. They use Classes + Locations or Locations + Tags together.

Strategy 1: Locations + Classes

• Locations: Track each property address

• Classes: Categorize income/expense types (rental income, repairs, capital improvements, property management fees)

This setup answers both "Which property is profitable?" and "Where is my money going across all properties?"

Strategy 2: Locations + Tags

• Locations: Track each property address

• Tags: Group properties by investor, partnership, or portfolio

Perfect for firm owners managing multiple investment groups. You get property-level detail plus the ability to roll up reports by ownership structure.

Strategy 3: All Three

• Locations: Individual properties

• Classes: Income/expense categories

• Tags: Special projects, partnerships, or time-based groupings

This is the most complex but also the most powerful. You can answer almost any profitability question your investors or partners might ask.

The Critical QBO Limitation You Need to Know

Here's the part nobody likes to talk about: QuickBooks Online operates on a one-company-file-per-subscription model. If you have legally separate LLCs or entities, you technically need separate QBO subscriptions for each.

QBO has zero native consolidation capabilities. You can't combine reports from multiple company files within QBO itself.

What this means for you: If you're tracking multiple properties within a single legal entity, Classes, Locations, and Tags work beautifully. But if you have five separate LLCs, you're looking at either:

• Five separate QBO subscriptions (and manual consolidation in Excel or Google Sheets)

• Managing everything in one company file (which may not align with your legal structure)

• Considering enterprise-level software with true multi-entity capabilities

This is a tough reality, but knowing it upfront prevents frustration down the road.

Making Your Decision

Ask yourself these questions:

What's my primary reporting need?

• Property-level profitability → Locations

• Business segment performance → Classes

• Flexible groupings → Tags

Do I need to track multiple dimensions simultaneously?

• Yes → Use combinations (Locations + Classes, or Locations + Tags)

• No → Start with the single dimension that matters most

How many legal entities am I managing?

• One entity, multiple properties → Classes/Locations/Tags work great

• Multiple separate LLCs → Consider the multi-subscription reality

What questions do my investors or partners ask?

• Design your tracking system to answer their most frequent questions

Setting Yourself Up for Success

Start simple. You can always add complexity later, but untangling an overly complex system is painful.

Begin with one dimension: If you're just starting, pick Locations (for property tracking) or Classes (for business segments). Get comfortable generating reports and understanding how the data flows.

Be consistent: Whatever system you choose, apply it to every transaction. Partial tracking creates partial reports: and partial reports are worse than useless because they give you false confidence.

Review quarterly: Set a recurring calendar reminder to review your tracking structure. Is it answering your questions? Are you using all the dimensions you set up? Adjust as needed.

Document your logic: Write down what each Class, Location, or Tag represents. Six months from now, you won't remember whether "Rehab Projects" is a Class or a Tag: and your bookkeeper definitely won't know without documentation.

The Bottom Line

There's no universally "right" answer to the Classes vs. Locations vs. Tags question. The right choice depends on your business structure, reporting needs, and growth plans.

Most real estate investors find that Locations + one additional dimension gives them the profitability visibility they need without creating reporting chaos. Whether that second dimension is Classes (for expense categories) or Tags (for investor groupings) depends on what keeps you up at night.

The goal isn't perfection: it's progress. Having some system for tracking multi-entity profitability is infinitely better than flying blind. Start with what makes sense today, and refine as your portfolio grows.

If you're staring at your QBO file wondering where to begin or realizing your current setup isn't working, that's exactly what we help with at QBO Cleanups. Sometimes the best investment is getting the foundation right before building higher.