Tracking real estate loans
mdkoch84
Member Posts: 7
Hey folks, looking for help on how to structure and track bank loans used for rental property purchases. Since Wave cant import this data, its been a little challenging for me to sort out how to track it properly outside the income statement (since mortgage costs are not operating expenses). Anyone have any quick tips for how to set this up?
Basically its a loan to begin with that gets transferred directly to the seller. We have the balance and just pay a principle and interest payment monthly.
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Comments
@mdkoch84,
If you want to know the principal balance on a monthly basis then you would split the disbursement between Interest Expense and Mortgage Payable - XYZ. Follow the amortization schedule to obtain the monthly breakdown. Real Estate usually requires a journal entry to get everything from the closing statement on the books. Debits to Land, Building, Mortgage Costs, Escrows and credits to Mortgage Payable. Many times there are miscellaneous items such as taxes and insurance which would be debited or credited depending on the closing statement.
@Mikeg So is "Mortgage Payable - XYZ" a loan under "Loan and Line of Credit"? I believe I follow what your saying, so thank you!
@mdkoch84,
I would use Long Term Liabilities. Using the accounts under Loan and Line of Credit assumes it will be connected. Since it cannot, there is less flexibility to categorize transactions from the register.
@Mikeg thanks for your help! For real estate, I believe technically we want interest to not be part of the net profit equation (or operating expense). I dont see any way to separate it out. Any ideas? or just something I need to do outside Wave?
@mdkoch84,
Interest Expense is an operating expense. Wave does not generate an income statement in a format that you typically see when financial statements are audited by a public accounting firms. Nevertheless, interest is still an expense regardless of where it is presented.