I'm in the real estate business and I did a double close on a wholesale deal. How do I add the closing cost expenses to the cost basis of the fixed asset?

I use a single journal entry to match line by line the HUD-1 on all our deals despite the fact that you cannot track names on a JE. That way I never miss anything and when entering settlement costs I post the cost directly to the fixed asset. Sometimes I will post it as Settlement Costs (expense) as a debit and then down further post as a credit to zero the expense portion and add the debit to the asset.

You need to add the closing costs into the total fixed asset prior to backing out the land value since only the improvements can be depreciated.

So at this point it depends on if you already booked the cost as expense somehow and wish to edit that booking or to enter a new transaction that acts as a reverse to reduce the expense and increase the asset.

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@Anonymous wrote:

Thanks @john-pero.  I held the property for 6 days.  There is no depreciation.  I was going to do a double close on the same day, but my end buyer needed an extension.  So I charged him for that too.  I'm having trouble calculating my net profit on the deal in QBO.  I can do it in Excel because I can add up all my costs related to the purchase, and the purchase price, and then take my sale price and reduce it by my sales costs.  QBO doesn't lay it out that simply.  Any ideas?

 

 

 

Also, since it's a 6 day hold, I don't think I need to break out land and building.

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What you laid out in Excel can be transferred directly to a Journal Entry, debits and credits all being equal at the end. In this situation debits will be your asset acquisitions and costs related and credits will be the sales and credits in the sale. Cash to you will be debit to Undeposited Funds

A simplified example of Buying an asset and flipping it within the week but recording it once,

Debit Purchased Asset 100,000

Credit Earnest money                     5,000

Credit loan from friends                55,000

Settlement charges

       post to asset             10,000

Cash at closing                                  50,000

at this point your asset value is 110,000

Sale portion (selling price 150k)

Credit sales                                       150,000

Settlement charges

      posted to asset              7500

payback shortterm loan  55,000

check to you (UF)             87,500

(and here is an example of double posting)

Debit sales                      150,000

Credit remove asset                          117,500

Credit to gain on sale                         32,500

You can skip showing the selling price and just go straight to calculating the end result since what you sell for is not as important as what you receive, the selling price will still go on the Schedule D

Also can you explain this part:

 Sometimes I will post it as Settlement Costs (expense) as a debit and then down further post as a credit to zero the expense portion and add the debit to the asset

Yes, you have a total of settlement charges that may comprise charges to assets but also current expense and posting the settlement charges as an expense even though not allows for later distribution of the amounts, in same or additional JE. You might also have a purchase or sale that involves multiple assets and may not have an accurate breakdown when first entering the journal entry