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Hi Fishes, I recently joined Pwc AC and was informed to update my checkpoint portfolio where we update all our investments. If we have some investments and if we do not declare them, will it be a problem or can I update it as Nothing to report. Recently I joined here so I'm having some confusion regarding this.
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This is the accountant and me but I think you mean income statement instead of balance sheet in your question since you are talking about expenses and rental income. That said I’ll share my exercise in both. I’m about 2 years into MF investing.
Balance Sheet. You assets will be cash and the value of the house. liabilities will be your mortgage and other debt, equity will be the difference between assets and liabilities. In my experience your equity should remain positive unless you took on a lot of additional debt to do improvements, or the market value of your house tanked. I would find it pretty weird if your equity is negative.
Income statement: the first year was def a loss. Like others mentioned, the first year (sometime first couple) you are prob doing a lot of maintenance and upgrades. Most people sell their invest properties because they don’t want to pay for repairs they probably didn’t budget for. So the new owner gets left holding the problem most of the time. That said, I kept my units vacant for about 2 months and did all the repairs up front. Got them done and now have both units rented. I’m able to charge market rate and have no problems finding tenants. I was able to make a profit in year 2. That being said for tax purposes I’m still not making a profit because my depreciation expense wiped out the profit and a bit more.
I’m hiring a CPA do file for my taxes. Sorry, but i dont have answers to your questions. But would really love any insights or questions that i should be asking to make sure im getting good advice and value for my money!
Congrats! Did you invest into a group/fund, or managing the project as a sole proprietor?
Me and and wife brought the MF if that answers your question :)
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You’ll need to provide a lot more info before anyone can give any sense of an evaluation.
How many units are there? How much vacancy did you have? Are rents at market rates? Were the repairs fixing broken things, or upgrades? How much other stuff is near end of life?
It’s not uncommon to break even or have negative cashflow for the first 1 to 3 years while stabilizing a property. Many landlords sell because they defer maintenance for a long time, and they don’t want to spend the money. So as a new landlord, you need to expect to replace a lot of stuff initially.
Also someone should fact-check me as I’m not an accountant, but anything over $5000 (or 2,500 if you don’t keep a financial statement) should be capitalized probably and deducted over the life of the asset. Again, not financial advice.