Accounting Questions
I've done a few searches here, and I think I have a pretty good idea of what I need to do.
I purchased my first rental property about 45 Days ago and I'm still renovating the property.
I purchased the distressed REO Property for $8,750 with $649.03 in closing costs, bringing total purchase price to $9399.03.
This property was in pretty bad shape and was not rentable. My question was, what can I expense and what do I have to capitalize?
From what I've read here, EVERY PURCHASE/IMPROVEMENT I complete before listing the property to be rent has to be capitalized. I'm assuming this is correct?
Things I've done is rented (2) 10 Cubic Yard Dumpsters, replaced the front porch, gutted the entire upstairs, put drywall throughout 75% of the property, rewired the electrical systems, re-coated the metal roof, landscaping and etc.
So EVERYTHING I purchased for the property such as materials, small tools such as pry-bars, drywall knife and etc must be capitalized or just the MATERIALS used for the improvements? The tools that were purchased were solely used to complete such projects.
The costs I incurred before I purchased the property such as inspections and etc would be expensed since I did not own the property at the time and was a routine business expense while investigating/inspecting properties?
So would the gas that I used to mow the grass be capitalized since the property isn't Rent Ready.
Lastly, do I add a "Capital Improvements" category account to my property under Assets for my accounting?