How Do I Keep Records for Reit and Direct Property Investments?


by Stephen L. Nelson, CPA - Date: 2008-04-23 - Word Count: 423 Share This!

In essence, a REIT is a company that owns apartment houses, office buildings, shopping centers, or sometimes real estate mortgages. A REIT investment works in the same way that a stock investment works. You buy and sell REIT shares in the same way that you buy and sell shares of a stock. From the perspective of the investor, REIT record keeping works in the same way as stock record keeping.

How do I keep records for direct property investments?

You can use Money to keep the financial records for property you own and actively manage, such as rental properties, office buildings, and so on.
To track direct real estate investments using Money, you need to complete two tasks.
First, you need to set up categories that match the income and expense amounts reported on the tax form you use to describe your real estate investing, income, and deduction data. This is the Schedule E tax form at the federal level for U.S. taxpayers; your state taxing agencies may use a similar form.

The Schedule E form requires you to report your rental income and the individual types of expenses that you incur, such as advertising, auto and travel, cleaning and mainte- nance, commissions, insurance, legal and other professional fees, management fees, mortgage interest, other interest, repairs, supplies, taxes, and utilities. The rent income item and each of these expense items needs to also have its own category.
Tax forms do change from year to year. This presents a problem in that you only know for sure which income and expense categories you report at the end of the year. Nev- ertheless, if you start with a good set of income and expense categories, real estate investment record keeping is much easier.

If you look closely at the Schedule E tax form, you will also note that you need to report income and expense amounts individually for each property you own. For example, if you own three small rental properties, the Schedule E form requires that each property's income and expense be reported individually. The first property, for example, would be reported in the Property A column. The second would be listed in the Property B column, and the third in the Property C column. You would also total columns A, B, and C and report using the Totals column.

The second task you need to complete is to set up what Money calls a "classification" to report income and expense information by property By using a classification for each separate property, you can easily collect income and expense data by property.


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CPA Stephen L. Nelson is the author of do it yourself kits for Incorporating in Pennsylvania, Pennsylvania S corporation, and Pennsylvania limited liability company.

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