Accounting for a loan you have issued

The REI Hub system is flexible enough to track loans you have issued, such as selling a property via seller financing or a loan contract.

However, since this is slightly less common than other real estate investments, the system does not currently have the same level of custom features and automation built out as other areas of the software. Specifically, it is not set up to automate amortization calculation for loans you hold the note on in the same way we can for mortgages.

UPDATING YOUR CHART OF ACCOUNTS

Since you hold the note, this is not handled through the Loans area in REI Hub (which corresponds to Liability accounts). Instead, you will need an Asset account to track the balance and a Revenue account for the interest you collect.

Add the Asset account through the Chart of Accounts in the right-hand menu. Click Add Account, give it a name, and select Asset account. Uncheck the 'this is a sub-account' box and select Other from the account sub-type menu.

To fund the account, create a Manual Journal (click Add Transaction at the top of the left menu; Manual Journal is at the bottom of the Other column). Debit the new Asset account you have created. Credit the account the money came out of - use Owner Funds if it is not one of your linked bank accounts. If it came out of one of your linked bank accounts, you can match the imported transaction to the Manual Journal you created.

There is already a default Revenue account for Interest that you can use, or you can create an additional sub-account if you want to track it differently from other interest revenue (like what you may receive in a savings account).

RECEIVING PAYMENTS

Since we don't have a dedicated transaction type for receiving this payment type, you have two options for booking the received payments. You can either Split the deposit into Interest and Principal components or use a Manual Journal to record payments.

SPLIT AND BOOK

If you receive payments into one of your linked bank accounts, splitting the deposit may be slightly faster. Click Book on the transaction in question, and select the Split option instead of Create.

Find your principal and interest split for this payment and enter the respective amounts as separate lines. At this time, we would not be able to track the amortization schedule automatically inside of REI Hub to calculate the principal/ interest split—that would have to be entered manually.

Splitting the original deposit transaction (parent) from the import feed creates additional transactions (children) in the amount you designate with ‘split’ appended to the description. Book the interest portion as a Revenue to the account you created for it. Book the principal portion as a Transfer Between Accounts, selecting the asset account you created for the land contract.

MANUAL JOURNAL AND MATCH

While the above option works well, it doesn't show the full payment in one transaction with multiple line items. For that, we would need to use a Manual Journal.

Manual Journals are skeleton keys—blank transaction entries for which you can choose the appropriate credits and debits based on your needs. To receive a loan payment, create a journal for the appropriate date and property. Debit the checking account that received the payment. Credit the revenue (interest) account and the financing asset account. Of course, make sure the total credit and debit amounts match!

The REI Hub system scans your Import Feed for any transactions in the same account for the same amount within +/- 7 days. After you have made the journal entry, clicking Book on the imported version of the payment should display the Match option. Saving the transaction with the match consolidates the two versions and prevents duplication.

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