Have you ever mistakenly grabbed the wrong card and bought something for yourself with your dedicated rental credit or debit card? Or maybe you haven't yet completed the transition to fully separating personal and business expenses and routinely sift through imported transactions full of personal and rental expenses. Either way, being familiar with the different ways to handle personal transactions is helpful if they come across the import feed of your rental business bank and credit card accounts.
There are three main ways to handle personal transactions in the import feed of your operating accounts. Each option impacts your records differently in REI Hub and is appropriate for a different scenario.
1) Book it as an Owner Distribution
Funds coming out of your rental operating account, moving to your personal accounts, or paying your personal expenses are considered Owner Distributions. After selecting Owner Distribution as the transaction type, select Owner Funds as the equity account. Owner Funds represent your personal funds that are not currently tracked in REI Hub.
Owner Distributions (or Contributions) are not taxable events as your taxable income is the same whether or not all funds have stayed in your business accounts or moved to personal accounts. Owner Distributions reduce the balance of the Owner Funds account on the Balance Sheet.
If you want to reconcile your rental business accounts, you should handle personal transactions this way. Every single transaction must be booked in some fashion to reconcile an account. Using the below options (Ignore, Delete) for personal transactions in a business account will throw off your balances in a reconciliation.
On the other hand, if the account in question is NOT mostly used for business, or you will never attempt to reconcile it, booking all personal transactions as Owner Distributions may not be worth the extra clicks. In this scenario, the Ignore or Delete options may be a better fit.
Please note: Credit card accounts do not include 'Owner Distribution' as a default transaction type, as credit cards are not typically used for traditional distributions.
You can still book a personal transaction as a distribution by selecting 'Transfer Between Accounts' and then selecting 'Owner Funds' as the transferred to account.
2) Ignore the imported transaction
Ignored transactions are still shown on the import feed. The Book button turns into an Unignore button, allowing you the option to return the transaction to unbooked status if you ever need to.
To ignore, click the three dots next to Book, select Ignore, and click Ignore.
3) Delete the Imported Transaction
Deleting the transaction lets you completely delete the imported record. Like ignoring, no booked transaction will be created, and the deleted transaction will not impact your REI Hub rental property financials.
Unlike ignoring, it is gone forever when you delete an imported transaction. You will no longer see it in the import feed and cannot recover it in the REI Hub system.
If you're positive it is a personal expense, you don't want to see it anywhere in REI Hub, and you know you'll never reconcile that account, delete away! But if you're unsure about any of those, Ignoring is the safest option.
If you later realize that a deleted transaction was a rental property expense, manually adding that transaction to the system (using the Add Transaction button in the top left) would be easiest.
Personal Bookkeeping Alongside Rentals
The steps listed above are for one-off transactions that accidentally happen in a business bank account. If you want to do your full-time personal bookkeeping in REI Hub, we recommend creating a new portfolio to keep your personal and business finances totally separated and don't commingle.
If you want to keep your personal and business in the same portfolio, even though it's strongly discouraged, there are two updates that are incredibly important: 1. Create a sub-portfolio for your personal transactions with no property included, and create a sub-portfolio with all your properties and 2. Create new revenue and expense accounts in the chart of accounts. Please note that personal revenue and expense accounts should not be sub-accounts under the Schedule E expense accounts. For personal bookkeeping alongside your rentals in REI Hub, you'll want to create entirely new, top-level revenue and expense accounts.
If you are keeping both personal and rental transactions in the same account, it is incredibly important that you are diligent when booking transactions to use the correct transaction scope. If you have sub-portfolios enabled (one for your personal transactions and one for your rental properties), then every transaction scope should be a sub-portfolio, property, or unit -- NEVER the total portfolio.
Again, if you choose to keep your personal bookkeeping in REI Hub, it's best to keep it in a separate portfolio from your rental properties for the best, smoothest experience.
Still have questions? Reach out to our Support Team via email at [email protected] or call us at (888)939-6865.