How to enter a refinance in REI Hub

How to enter a refinance in REI Hub

For many real estate investors, refinancing investment homes is a normal part of the process. Refinancing can help you take advantage of better interest rates for a lower monthly payment, or to pull cash out after the property has risen in value. This guide outlines how to make and enter a journal entry based on the closing statement from your recent refinance.

Refinances, like property purchases and sales, are complicated transactions that touch multiple accounts and require slightly more accounting knowledge and the use of manual journal entries.  If you work with a CPA or tax preparer they may plan to handle it on your behalf; in which case you may choose whether or not to enter this information into REI Hub.  

To enter in a refinance journal entry:

1) Add a Loan account for the new loan

Create a new Loan account for your new financing. A loan account must already exist before we can assign transactions to it or select it in a manual journal.

2) Open a manual journal entry

From the Portfolio Dashboard (or the Booked Transactions page) click the Add Any Transaction button:

And then select Manual Journal from the 'Other' column:

3) Enter in the base details

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.

4) Add the debit lines

The Debit lines will be:
  1. The old loan account and the amount of loan payoff.  This should zero out the loan account.
  2. Your bank account receiving funds and the amount of those funds.  Owner Funds could be used alternatively if you are not tracking funds into your bank account.
    1. If your refinance did not include a 'cash-out' component, you will omit this line.
  3. Capitalized closing costs, summed together.  These include title fees and insurance, surveys, recording fees, legal fee, and transfer taxes. 
  4. Expenses incurred in the financing process. These will be entered with the specific expense account (eg Insurance) and the amount, which will flow through to your Schedule E/ PnL and be deducted against income in the same year. These costs can include property taxes, property insurance, HOA assessments, and prepaid mortgage interest.
  5. Initial escrow account contribution. 
    1. If your new loan is not escrowed, you will omit this line.
5) Add the credit line:

The only credit line will be:
  1. The new loan account and it's full amount.
6) Save the journal entry

Optionally add a file or image of the closing statement, and save the transaction.

7) Mark the old loan as inactive

After a refinance, you can mark your old loan as inactive.  This will prevent it from displaying on the Properties page and in dropdowns, but preserves the financial information and reports. 

8) Reach out to us with any questions! 

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