Why aren't loan principal and escrow on the Net Income reports?

One common question from new users is how mortgage payments are reflected on reports in the REI Hub system. The loan payment template helps automate the breakdown of a mortgage payment into its component principal, interest, and escrow (if applicable) pieces.

Interest

Of these three pieces, only the interest component is immediately visible on the Net Income/ P&L or Schedule E reports. Depending on your selection when creating the loan account, you can find it under either the mortgage interest or other interest expense accounts. The IRS considers Interest a deductible expense, which is immediately reflected on profit and loss-focused reports.

Principal

The principal paydown for a loan is not displayed on the Net Income/ Profit & Loss statements. Loan repayment is not considered an expense when it comes to your taxes or when calculating profitability. You can see the principal paydown on the Cash Flow or Balance Sheet reports.

Escrow

If your loan is escrowed, the monthly escrow contribution won't show on the P&L since it is an estimate and not a direct expense (and therefore, the IRS doesn't allow it to be used as a deductible expense).

The actual property tax and insurance expenses that correspond to your escrow contributions will show on the P&L, but these escrow expenses have to be entered manually since they are not coming out of a linked bank account.

Our Tax Review process helps ensure that you don't forget to enter these (and other easily missed) transactions.

Alternate Reporting

Use the Operating Cash Flow reports to see your standard income and expenses with principal paydown, interest expenses, and escrow contributions.

The Operating Cash Flow reports show NOI plus principal paydown and escrow contributions in a digestible format (but omit fixed asset purchases and manual journals, as this report is intended to show normalized operating cash flow).

Reach out to the REI Hub support team with any questions!