Single real estate property - proper set up with Mortgage/Loan

riskaverse

So, I have scoured and have chatted with help, but have not gotten a full answer on how to set all up properly. I just purchased a single tenant commercial property. Here is breakdown:

$750 - Purchase Price
$10 - Purchase Deposit (came from personal checking)
$161.40 - Personal Deposit to LLC Bank Account
$600 - Loan
$150 - Down Payment on Purchase

I have set up the following under Chart of Accounts:

Assets:
LLC Bank Account
Property - under Property, Plant, Equipment

Liabilities:
Property Loan

Equity:
Personal Bank Account

My main questions are how to properly transact:

• Personal Deposit Paid
• Personal funding of LLC bank account
• Funding of Property Down Payment
• Mortgage Transaction

Thanks for any insight here. - Brandt

Mikeg

@riskaverse,
How was the property down payment funded? Based on the above, I would expect your cash account to have 171.40. That is because your cost was funded by the down payment and loan.

riskaverse

@mikeg,
Thanks for the reply. I probably should have indicated that the down payment was funded from deposit from cash account, and from personal checking (initial deposit). $10 from personal for original contract deposit, and $140 from LLC cash account.

Not that applicable now, an additional $773.86 was paid in closing costs, but that can be figured out after I can determine how to properly set the asset and mortgage up, etc.

Thanks again.

Mikeg

@riskaverse,
So to post everything you have there the following journal entries or categorization should occur
Personal deposits
Debit cash (bank account) 10+140+161.40=311.40
Credit owner investment 311.40
This is assuming that the 140 was a prior personal deposit.
The building
Debit Building 750
Credit Mortgage Pay 600
Credit Cash in bank 150
You mention closing cost. How were they paid? What did they pay for? Here in the US they are done together with the purchase. So for example if I had to pay the seller for real estate taxes they already have paid then I would have a higher cash out pocket at closing.

riskaverse

@Mikeg ,

It was actually:

Debit cash (bank account) 10+161.40=171.40

The $140 was included in the $161.40 initial cash deposit to LLC. Any idea how I perform the "Credit Owner Investment".

I believe I properly figured out the Journal Transaction for the purchase from your help. Thanks again.

riskaverse

@Mikeg ,

I did not address your closing costs question. Yes, I am in the US. All were paid at closing along with the down payment, but I left that separate as a portion of those would be expenses, I believe.

Mikeg

@riskaverse,
Gotcha on the deposit. Depends on whether Wave is importing your transactions or not. If Wave picked up the deposit of 171.40 then you classify that as owner investment on the Accounting/Transaction page. If not, you would do a journal entry to record the bank activity. You would debit the cash account and credit owners investment.

riskaverse

@Mikeg

Thanks again. I did not turn on the importing, just for security reasons, so I have manually inputted. I believe I have all correct here. Next hurdle is to account for closing costs. What is an expense vs. cost basis and how to account for land vs. bldg for depreciation purposes. I have valuation here, I just am not sure how to properly transact.

Mikeg

@riskaverse,
When I account for clients, I use the HUD stmt to book the entry. Most items paid at closing are part of the cost basis. Items like real estate taxes, water and sewer are expenses if you are paying the seller for what they paid in advance. To book land you debit Land and credit Building for value established by valuation. Depreciation is computed using the IRS rates depending on residential versus non residential on the building only. Land is not depreciable. Best of luck