Profit and Loss Statement on Rental Properties.. Mortgage?

[Nathan Waters]

When you write up your profit and loss statement, how do you break down the mortgage? Is the interest, taxes and interest the only loss? I'm assuming principal is not written in the loss category even though it goes against your cashflow. I'm trying to create a profit and loss statement for a seller financing deal. I currently have 5 mortgages but have not been great at keeping track of the details such as costs associated with each individual property. I tend to lump everything together. Any advice? Thanks in advance.

[Nathaniel Aaron Chaney]

So as far as the accounting is concerned you wouldn't put the principle in the profit and loss statement.

The interest expense would be a "below" the line expense I.e. It is a non-operating cost. You'd put all the revenue from the properties first then you'd put all the expenses associated directly with the properties after that CoGS(cost of goods sold). Sum these and that's your Gross Margin.

Next take out G&A and all operating expenses. Sum with Gross Margin and that's your EBIT (earnings before interest and taxes).

Next subtract out interest expense and add in any interest income(probably none of that).

That gives you net profit before taxes.

Then subtract out tax expense.

That final number is your Net profit or loss.

The principle is accounted for on your balance sheet as you pay your loans you reduce your mortgage liability which increases your balance sheet.