Fixed Assets (also known as capital expenses or capital expenditures) are your depreciable items: the investment property itself and the capital improvements you make to it. These non-operational costs are not written off against income in a single year; instead, they are recovered over a preset period through depreciation.
For example, residential rental property is depreciated on a 27.5-year timeline, while appliances are depreciated on a much shorter 5-year timeline. Read more details from the IRS here.
Understanding Fixed Assets in REI Hub
The Fixed Assets section in REI Hub serves as a vital tool for tracking property-related transactions and managing their financial impact, including depreciation and capital improvements. Below, we explain the purpose of this feature and how to manage different asset-related scenarios accurately.
Purpose of the Fixed Assets Section
The Fixed Assets section is specifically designed to help you:
Track depreciation for properties and major capital improvements, such as renovations or remodeling, over time. This ensures that your books properly reflect property value changes due to depreciation.
Manage fixed assets independently, enabling you to add each property as a fixed asset. Users can also record applicable improvements directly within this section instead of categorizing them as ordinary expenses.
By leveraging this feature, users can gain a clear and detailed overview of their property portfolio's financial standing.
Tracking Depreciation and Capital Improvements
To manage depreciation and improvements effectively:
Add each property owned as a separate fixed asset within REI Hub. These should be on a property basis, and improvements such as renovations or remodels should be recorded in a separate fixed asset account.
Record significant capital improvements, like renovations or remodels, in the Fixed Assets section. Avoid recording these as regular operating expenses, as that can obscure accurate financial tracking.
Managing Property Acquisition Details
While the Fixed Assets section tracks Land, Buildings, and Accumulated Depreciation, it does not automatically include down payment amounts or other allocations from property closing statements. To fully reflect these details:
Create a Property Purchase Journal for each property acquisition if it's within the current bookkeeping year. If you have owned this property before starting your bookkeeping in REI Hub, you should add the basis for buildings, land, and accumulated depreciation. This ensures that your books account for all purchase details from the closing statement.
Managing property basis is an optional process in REI Hub, so consult a tax professional to see if they are managing it on your behalf. If a tax professional is managing property basis and depreciation on your behalf, you can optionally choose to recreate their exact numbers in REI Hub, so your records match theirs.
You can easily keep your operational income and expenses in REI Hub without tracking fixed assets. However, fixed assets are essential if you want the full records of your investments in one location and the ability to create a balance sheet for your portfolio.
After creation, you’ll depreciate fixed assets over their useful life, lowering their recorded value in your books. Most investors record a single annual depreciation entry for each asset.
Lastly, you can track and report on your fixed assets and depreciation with the fixed asset schedule report.
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