From: NYC, NY

Dear TaxMama,

I am a real estate investor in NYC and Maryland and have purchased several properties.

My dilemma is that I not quite sure how to record these purchases in Quickbooks.

Below are the details for one of the NY properties.  I will use your response as a model for the others:

[loooooooooong list of expenses deleted]

Additionally we contributed $15,000 during a 2-month period to cover various rehab expenses.

Finally, We refinanced the property at $500K pulling out some equity of $85K of will $52K was distributed evenly between the partners for repayment of cash we invested.

My questions are:

1. How do I record the purchase?
   
2. how do I record the capital from partners?
   
3. how do I record HUD-1 fees/closing cost?
   
4. How should I record rehab expenditures?
   
5. How do I record Refinance and payoff of prior loan? (should the closing cost be entered in the same manner as in Question 3?)
   
6. How do I record Equity?
   
7. How do i record distribution of Equity to partners?
   
8. How do I record the paydown of Principal and Interest related to monthly payment.  (my monthly payment also includes escrow amounts--how do i record those?)
   

Fred

 

 

 

Dear Fred,

If you can afford to buy the properties, you can't afford not to have your own tax professional. [TaxMama was being [polite here]

Ask TaxMama is just a free service to guide to additional information, where possible. I can't do your journal entries.  It would take me at least a half hour to write out one entry and explain it to you.  And to answer ALL those other questions and explain accounting procedures to you - well, count on at least two more hours, minimum.

That's the function of your bookkeeper or, preferably, your tax professional. Hire them. Pay them for their time.

[Unsaid at the time, but...really...what kind of idiot embarks on a million dollar property buying spree without working with a tax professional who is solidly grounded in real estate tax and accounting????]

Where can you turn to get specific information about how to book a real estate purchase? Good question.

I honestly don't know. These are things I learned during my 10 years in college in the course of my degree and my 15+ experience handling taxes and accounting for real estate investment and mangement companies.

Well, gee, here's a book you can get for only $295.

You might explore some of these hits on Google. Search was for "bookkeeping for real estate journal entry"

But really, if you are investing in real estate, you do need someone by your side to handle the bookkeeping and tax set up and issues. It will save you a fortune in the long run.

(Besides, there are a couple of ways to book your particular transaction, depending on your long-term goals for the building.)

Best wishes,
Eva Rosenberg, MBA, EA