About Fixed Assets
Fixed Assets (also known as Capital Expenses) 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, but are instead recovered over a preset period of time 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 detail from the IRS here.
If you have basis and accumulated depreciation information in your old accounting system and want to transfer it over, you need to first create Fixed Assets in REI Hub. You should
create separate Fixed Assets for each Property and any tracked capital improvements (a kitchen renovation, a roof replacement, etc) that you are currently depreciating.
After the Fixed Asset has been created, enter the transactions that comprise the Asset. For transitioning accounting systems, you will use the
Opening Balance transaction type to set balances for accounts like Buildings (depreciable basis), Land (non-depreciable basis), and Accumulated Depreciation. More on that below!
Fixed Assets created
during your current accounting period (like a recent property purchase) will be handled slightly differently than
those being transitioned over from your previous system. To properly enter a property purchase, a journal entry should be created based on the closing statement. This entry sets the property basis and also reflects transactions that flow through to your operational P&L. An ongoing renovation might require a series of Capital Improvement transactions as bills are paid.
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.
If you are not currently tracking your Fixed Asset information - perhaps your tax preparer is doing so on your behalf. That’s OK, this is an optional feature in REI Hub. 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.
Track and report on your Fixed Assets and depreciation with the
Fixed Asset Schedule report.