How to record construction costs while using personal loan but eventually refinance the property to payoff the loan

Forum|Forum|4 years ago
August 24, 2021
4 replies
22 views

I am building a new unit on an existing rental property. I am using an equity line of credit that is on my personal home to pay for the expenses. Once the construction is done I am planning to refinance the property to pay off the equity line of credit. How do I set this all up to ensure all the expenses are recorded correctly such as permit fees, architect fees, contractor fees, appliances, flooring, etc.

QuickBooks Desktop

Rustler

Level 15

all costs to build are part of the items cost, that includes permits and other fees. I would

create a bank account called WIP-building (work in progress)

Make payments from this account in QB (in actuality you have the make the payments yourself)

at least once a month note the balance in this account, it will be negative, make a deposit in that amount and use owner equity investment as the source account for the deposit

When the building is ready for use, create a fixed asset account for the building, and a sub fixed asset account for the accum depreciation-building

get the refinancing set up, then do a journal entry, debit fixed asset building, credit loan liability

pay off the personal loan

CMGM60Author

Thank you so much.

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