This article details how to create a journal entry for a recent property sale and enter it into REI Hub. Manual Journals are used for property purchases, sales, and refinances as these are all complicated transactions touching multiple accounts, so they cannot be templatized to the same degree as simple income or expense transactions.
If you work with a CPA, tax preparer, or tax preparation software, they may handle this transaction on your behalf, and you should be sure to provide them with your closing disclosure. Many financial professionals can also provide you with the journal entry after they have done it so you can enter it into REI Hub.
If you'd prefer for REI Hub to complete this journal entry on your behalf for a $75 charge per journal, please email your closing disclosure to [email protected]!
To complete the journal on your own, make sure to have the closing disclosure from the property sale handy, as most of the required values will be pulled from it.
To Make a Property Sale Journal Entry
1) Open a Manual Journal transaction
Click Add Transaction from the top of the left menu and then select Manual Journal from the 'Other' column.
2) Fill out the base information
Enter the closing date and appropriate property. Add a description of your choosing, such as 'Property Sale Journal.'
If you already have a fixed asset for this property where you entered a property purchase journal entry or fixed asset basis, select it from the dropdown. If you do not currently have any fixed assets or basis information in REI Hub for the property in question, simply leave the fixed asset field blank.
3) Enter the debit lines
Your bank account receiving funds and the amount of those funds. Owner Funds could be used alternatively if you are not tracking sale proceeds in your bank account.
The loan account and the amount of loan payoff (assuming the property is financed). This should zero out the loan account.
Accumulated depreciation is the amount of depreciation taken to date. This should zero out the accumulated depreciation account.
Note: If you have not been tracking fixed assets, property basis, and depreciation in REI Hub, you will omit this line.
Expenses incurred in the sale process will be entered with the specific expense account (e.g., Insurance) and the amount, which will flow through to your Schedule E/ Net Income (P&L) and be deducted against income in the same year.
4) Enter the credit lines
There should be a line for each fixed asset account (e.g., Land, Buildings, Capital Improvements, etc.) and the required amount to zero them out.
Gain on sale is the effective sale price less the book value of assets.
Include a line for any prepaid expenses (e.g., if you paid the tax bill for the whole year before selling - you will get prorated credit for that).
Note: if you have not been tracking fixed assets, property basis, and depreciation in REI Hub, the only credit line will be autobalance in the same amount as the debit side of the journal to ensure the transaction balances.
5) Save the journal entry
Optionally, add a file or image of the closing disclosure and save the transaction.
6) Optionally match the deposit in your Import Feed
If you selected a linked bank account in the Debits and entered the exact same amount as was deposited into your bank account, the REI Hub system will present a match when you go to book that imported transaction (assuming the dates are both transactions within +/- 7 days). The match will recognize that the manual journal and the imported transaction are part of the same transaction and combine them without duplicating.
You can also simply Ignore the imported transaction if preferred.
7) Optionally mark the property as Inactive
After a property has been sold, you can mark it as inactive. This will prevent it from displaying on the Properties page and in dropdowns but preserves the financial information and reports.
Still have questions? Reach out to our Support Team via email at [email protected] or call us at (888)939-6865.