REI Hub is a system for both experienced and first-time property investors. As such, we have transaction types that match the description of what happened in the real world, so it's more easily recorded in your bookkeeping system.
Read more to learn each transaction type and how it's best applied.
Cash In Options
Revenue
Revenue in REI Hub is most commonly used for receiving rent, retaining security deposits, booking bank account interest revenue, or accepting applicant/tenant fees.
These would be most popularly reflected in the revenue lines of Net Income, Schedule E, and Operating Cash Flow reports.
Net Income
Net income refers to the total revenues minus expenses and then what was left over as the remaining income. In REI Hub, the net income transaction type lets you book gross revenues, include any expenses that were incurred, and then the remainder matches what was deposited in your bank account.
The net income transaction template will route the portion of expenses to the property expense account lines and the portion of revenues to the designated revenue lines. You can see this reflected best in the Net Income reports.
Owner Contribution
When booking an Owner Contribution, the system will credit Owner Funds as the payment account to show that you are the source of the funds flowing into your business.
Owner Contributions are not taxable events. Your taxable income is the same whether or not all funds have stayed in your business accounts or moved to personal accounts.
Owner Contributions are best seen on the Balance Sheet or exported using the Account Register.
Security Deposit
Security deposits are money received from a tenant that the property owner holds in trust. This is a liability and is not a revenue unless the security deposit is retained (kept by the landlord) when the tenant moves out.
These are best seen on the Security Deposits Held report and the Balance Sheet.
Transfer Between Accounts
This is when money is moved from one account into another. Most commonly in REI Hub, this refers to moving money from one bank account to another bank account (i.e. checking to savings accounts).
Refund Received
You can use the 'Refund Received' transaction template when booking a return/refund deposit for a previous expense. When entering the transaction details, you will select the same expense account to which you booked the initial payment.
This can be best viewed on the Net Income reports.
Cash Out Options
Expense
An expense is the most common cash out transaction in REI Hub.
Expenses refer to costs you would deduct in one tax year. These tend to be smaller transactions that help maintain the property and keep it in good condition, like new mulch to update the landscaping.
Some expenses are necessary to operate a rental business. These can include property taxes, property insurance, and REI Hub's most-used expense category of maintenance.
REI Hub matches our default chart of accounts to match the Schedule E expense categories, including advertising, auto and travel, cleaning and maintenance, commissions, depreciation, insurance, legal and professional fees, management fees, mortgage interest, other, other interest (non-mortgage), repairs, supplies, taxes, and utilities.
Transfer Between Accounts
A transfer between accounts is the transaction type that records the movement of money from one account to another. In REI Hub, this is most commonly done when moving money between bank accounts (i.e., from a checking account to a savings account).
Loan Payment
Loan payments reflect the principal, interest, and escrow (if applicable) components.
The escrow amount is the same every month, while the interest and principal split will change slightly each month as the loan amortizes.
Of these three pieces, only the interest component is immediately visible on the Net Income (Profit & Loss) or Schedule E reports. The principal paydown for a loan is not displayed on the Net Income (P&L) statements. Loan repayment is not considered an expense when it comes to your taxes or when calculating profitability. The principal paydown is on the Cash Flow or Balance Sheet reports.
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.
Fixed Asset Purchase
Fixed assets can be one transaction or a group of transactions that you can deduct over a number of years through depreciation. Fixed assets, also called capital improvements or expenditures, must be over $2,500 in value, and then you can claim depreciation for the asset's useful life.
This can be one large purchase, like a new HVAC system, or smaller purchases totaling one large project, like a kitchen renovation. Fixed assets are intended to add value to your property by bettering, restoring, or adapting an asset. Additionally, both labor costs and supply costs can be counted to the total of the fixed asset.
Credit Card Payment
A credit card payment transaction type is a transfer between accounts. Each credit card payment will appear in the import feed for two accounts — the withdrawal from the checking account and the deposit in the credit card account.
When you book the first, a booked transaction will be added to the system based on that payment record. When you click 'book' for the second, it will find the existing booked transaction and recommend a match that ties both imported transactions to opposite sides of the same journal, showing funds moving from your checking to pay down your credit card balance.
A credit card payment is not an expense, simply money moving from one account to another.
Owner Distribution
Funds coming out of your business accounts and moving to your personal accounts or paying your personal expenses are considered Owner Distributions.
Owner Distributions are not taxable events. Your taxable income is the same whether or not all funds have stayed in your business accounts or moved to personal accounts.
Security Deposit Refund
Use the Security Deposit Refunded transaction template when you return some or all of a tenant's security deposit to them. Even though this is money moving out of your accounts, it is not considered an expense as you are simply returning the tenant's money to them.
If you refund part of a security deposit and retain the other part of it, you will enter both a Security Deposit Refunded transaction and a Security Deposit Retained transaction.
Refund Issued
A refund issued transaction is most commonly used when reducing the balance of a revenue account.
In REI Hub, this is most commonly used if a tenant paid rent and it bounced for insufficient funds. In this scenario, you can book this transaction using the 'Refund Issued' transaction type. This reduces the balance of the same revenue account (Rent) you used for the initial deposit, correctly showing that you did not receive those funds as initially expected. After clicking 'Book,' you'll enter the appropriate property/unit and choose the 'Rent' revenue account.
When your tenant repays you successfully, the deposit should be recorded using the new revenue transaction to recognize the funds.
Other Options
Many of the "Other" options are added using the Add Transaction button in the top left corner (underneath the REI Hub logo). These are often manually added transactions that either help get you started in REI Hub or are once-a-year entries for transactions that wouldn't populate in your bank account's import feed.
Security Deposit Retained
Use the Security Deposit Retained transaction type when you keep all or part of a tenant's security deposit due to damages or past-due rent. The IRS considers this revenue because you are keeping these funds. If you enter Security Deposit Retained transactions, you will see the revenue reflected in your reports.
Therefore, if you are retaining some or all of the deposit due to damage, it is generally a good idea to make sure you have the expense corresponding to the damage entered into the system as well to ensure you are not showing net revenue from retaining the deposit.
Retained security deposits will always be a manual transaction in REI Hub as there is no imported transaction in your bank's import feed. Use the "Add Transaction" button in the top left corner and select "Security Deposit Retained" in the "Other" column.
Escrow Expense
REI Hub's Loan Payment Template feature helps you break down your monthly mortgage payment into its principal, interest, and escrow components on an ongoing basis. The escrow component of your mortgage payment is a transfer, not a direct expense. It is funding the escrow account associated with your loan with a monthly approximation of what your mortgage servicer thinks the annual escrow expenses will be.
The IRS requires you to report your actual expenses, not your estimated expenses. Therefore, you can't just report the escrow transfers as property tax or insurance expenses; instead, you must enter the actual expenses.
Since these expenses are paid out of your escrow account, you will not have an imported transaction from your operating bank account to prompt you to book them. So, if you have an escrowed mortgage, don't forget to book your escrow expenses!
Depreciation
Depreciation is the reduction in the value of an asset with the passage of time, due in particular to wear and tear. Many CPAs and tax preparers can provide this value for you, or REI Hub can calculate a general amount based on standard equations.
In REI Hub, you can make depreciation entries for an individual fixed asset or an uncategorized depreciation entry not associated with a specific asset.
Opening Balance
If you are moving to REI Hub from another accounting system or have already filed taxes on one or more of your rental properties, you may need to enter Opening Balances into REI Hub. An opening balance entry sets the account balance and allows you to keep accurate records without having to recreate detailed transaction histories.
Opening balances will be used most commonly with loan accounts and bank accounts.
Manual Journal
Manual Journals are skeleton keys—blank transaction entries that you can use to choose the appropriate credits and debits based on your needs. In manual journals, the debit and credit amounts need to match.
Transaction Scope
Portfolio
Some expenses, revenues, or transactions do not apply to just one property but to your entire portfolio. Sometimes called overhead, these transactions are referred to as portfolio-level transactions in REI Hub.
Portfolio-level transactions will apply to every property in your entire portfolio. These transactions can optionally be prorated, or split, evenly between your properties on your Schedule E report.
Sub-portfolio
By default, REI Hub's reporting is structured on a tiered basis, going down from Portfolio > Property > Unit. The optional 'Sub-Portfolio' feature adds an additional layer to that structure between the top-level portfolio and individual property layers.
The sub-portfolio layer makes it easy and convenient to pull reports based on groups of properties. This is helpful for investors who want to view subsets of their total portfolio or may be keeping the books for multiple legal entities inside one portfolio.
Property
By default, REI Hub's reporting is structured on a tiered basis, going down from Portfolio > Property > Unit.
Property is the most common transaction scope in REI Hub, as many of your transactions are incurred for a specific property.
Unit
By default, REI Hub's reporting is structured on a tiered basis, going down from Portfolio > Property > Unit.
Units are the most granular transaction scope in REI Hub. The totals filter up to the property level for reports like the Schedule E.
Vendors
The Vendors feature allows users to track payments made by service providers. Details such as the name, email, phone number, address, and tax identification number can all be recorded with the Vendor. The REI Hub system can be used to track Vendors and the totals paid to each, but does not directly create, file, or send 1099s to Vendors or the IRS.
Transaction Matching Rules
If you have transactions that reoccur, then you may enjoy REI Hub's Rules feature. Rules help the system recognize newly imported transactions by matching to either description-only or the exact amount of the transaction with a description and then assigning the property and accounts you have specified.
Still have questions? Reach out to our Support Team via email at [email protected] or call us at (888)939-6865.