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tennesseejb
Level 1

Booking downpayment or cash purchase for rental property to owners equity?

I believe I'm thinking about this correctly, but want to check...

 

We've been tracking a few rental properties via spreadsheets for a while, and are about to start tracking everything in quickbooks.  I'm going to start that as of the 1st of the year and catch up to now so that I have a full year come tax time. 

 

We have a property that we financed and put 20% down on.  And we have another that we purchased for cash and then spent $40k rehabbing before renting. 

 

In the past, when I had a couple small businesses I "funded" those businesses by making a deposit into the business checking account and booking that to owners equity.  In the case of these rentals, there wasn't a "business checking account" that we used, so any funding came from our personal accounts.  When I make those entries, am I correct to assume that the purchase price and the down payment would go to Owners Equity? 

 

On a related note, we've continued to purchase things for the properties (supplies and services) that have been co-mingled with our personal accounts.  To keep things simple, can I just book those to owners equity as well?  It seems like that's the most appropriate description... I've invested my personal funds into the business.  Any reason to do it another way?

 

Thanks,
JB

4 Comments 4
vpcontroller
Level 11

Booking downpayment or cash purchase for rental property to owners equity?


@tennesseejb wrote:

I believe I'm thinking about this correctly, but want to check...

 

We've been tracking a few rental properties via spreadsheets for a while, and are about to start tracking everything in quickbooks.  I'm going to start that as of the 1st of the year and catch up to now so that I have a full year come tax time. 

 

We have a property that we financed and put 20% down on.  And we have another that we purchased for cash and then spent $40k rehabbing before renting. 

 

In the past, when I had a couple small businesses I "funded" those businesses by making a deposit into the business checking account and booking that to owners equity.  In the case of these rentals, there wasn't a "business checking account" that we used, so any funding came from our personal accounts.  When I make those entries, am I correct to assume that the purchase price and the down payment would go to Owners Equity? 

 

On a related note, we've continued to purchase things for the properties (supplies and services) that have been co-mingled with our personal accounts.  To keep things simple, can I just book those to owners equity as well?  It seems like that's the most appropriate description... I've invested my personal funds into the business.  Any reason to do it another way?

 

Thanks,
JB


@tennesseejb 

 

"In the case of these rentals, there wasn't a "business checking account" that we used, so any funding came from our personal accounts. When I make those entries, am I correct to assume that the purchase price and the down payment would go to Owners Equity?"

 

Write a Journal Entry (Company menu on top > Select Make General Journal Entries)

 

  • Debit to Fixed Asset account for the purchase price and down payment transactions of properties
  • Credit to Owner's Equity account

 

And also be sure to consult with your Accountant for real advice.

tennesseejb
Level 1

Booking downpayment or cash purchase for rental property to owners equity?

Thanks @vpcontroller .

 

Any reason why I couldn't just continue to book expenses this way?  I guess what I'm asking is are there any disadvantages I may not be thinking of?  Unlike a traditional product or service business where you might invest some startup funding, it will be a while before rent revenue will fund further property acquisitions or renovations.  So most of our funding will be continued investment of "personal" funding.  Seems like two steps to transfer that to a business checking account rather than just do journal entries and book it back to owners equity. 

 

Thanks again!
JB

BizPro
Level 3

Booking downpayment or cash purchase for rental property to owners equity?

Hello,

 

This is what we do every day and we are not just an accounting firm, we are real estate professionals with many years of experience in Property Management.

 

To answer that in the best way possible, the first thing to examine is the entity in which you hold the properties and the business. If the properties are held by an LLC , do you use your Social Security number or an EIN or a combination of both for each entity? In your business are you  a sole proprietor? There may be a variety of different ways and nuances you may need to address, in order to track the income and expenses.

 

Please let us know if how we can best assist. We always offer a no-cost 30 minute consultation.

 

Best regards and profitability,

 

Michelle H

BizPro Financial

BizPro
Level 3

Booking downpayment or cash purchase for rental property to owners equity?

You could enter the total purchase price as the liability, then reduce the liability with the down payment. Loan amount would be posted as the liability.  and, AS you make payments you'd record the principle, and interest costs you are paying in each payment, reducing your liability each time you make a payment.

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