Accounting for closing cost fees for a rental property purchase
JKais
Member Posts: 3
I have been researching how to properly account for a rental property mortgage, and believe I'm close to understanding it all.
So far, I understand what to do for the following:
1. recording the property as an asset
2. accounting for the the purchase price, down payment & loan starting balance
3. accounting for the escrow held by the mortgage bank for insurance and taxes
4. how to separate/allocate my monthly mortgage payments into principal, interest and escrow.
I found the following two WAVE Community threads to be particularly helpful in getting all of this set up:
https://community.waveapps.com/discussion/comment/32952#Comment_32952
https://community.waveapps.com/discussion/comment/38053#Comment_38053
My question is how do I account for additional closing cost fees, taxes & a seller credit at purchase? The listed purchase price and downpayment alone do not reflect the total cost of purchasing the property. There were about $12,000 of additional closing costs that I want to account for to have an accurate financial picture for my rental business.
Here are a few examples of the additional closing costs/fees and credits for this property purchase:
FEES
1. County taxes: $939
2. Loan processing fees: $5,383
CREDITS
1. Aggregate Adjustment to bank: $339.10
2. Seller credit at purchase: $5,000
Thanks for any help you can send my way!
Comments
I found these videos to be very helpful. They are not using Wave, but you can handle the journal entries the same way.
https://www.youtube.com/watch?v=OQsHvoIeG5U&t=0s&ab_channel=IncomeDigs
Some of those closing costs (not taxes) can be included in your asset cost basis as well. I am not sure the best way to handle tracking that in Wave yet though.
Thank you, SKN! These videos are fantastic. :-)
Yes, thanks for this video, now everything is clear