Balance sheet structure
I need to build a balance sheet for my properties. What I have so far... Assets, cash and the properties. Liabilities, balances owed on properties, credit cards and lines of credit. Am I missing anything there? Also, under the assets... how do I value the properties? I know they are all worth more then what I paid, but how do I figure this out for banking purposes? Local comps? Rents/expenses? Please help
Bookkeeping can be done for two purposes. It has to be done for tax paying purposes. The balance sheet that will result from this would have the property as an asset, plus any improvements that have to be depreciated (like a new roof, for example.) The dollar values assigned for these assets are what you pay for them, not what you guess, suppose, theorize that they are worth today. The IRS will not care about what it's worth 'today' until the 'today' that you actually sell it and know for sure that that's what it's worth. Depreciation will get included (subtracted) each year (I always date that on December 31.) You, or your bookkeeper, or accountant should be keeping track and their software can easily print a balance sheet.
Another purpose of bookkeeping is to give you an idea of what you're worth. The main things that will change from what I've stated above is that your properties have (hopefully) gone up in value. In my experience, banks are interested in my best estimate of how much equity I have in my properties. Another difference is that the properties probably have not gone down in value as the depreciation calculation assumes. So remove depreciation.
I only produce the balance sheet using the bookkeeping required by the IRS. I can look at it and easily add an amount I think the properties have appreciated, subtract out the depreciation and get a rough idea of what I'm really worth (financially speaking.)
I would recommend a Profit First certified bookkeeper, I have been so happy with ours and because they work primarily with Real Estate professionals, they are doing everything that I need to do my taxes properly. I also recommend using Cost Segregation Analysis
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@Garrett Blanchard. I would be happy to chat with you and answer your questions about getting your balance sheet set up.
Quote from @Carini Rochester:At this time it's needed for renewal of biz line of credit...
Bookkeeping can be done for two purposes. It has to be done for tax paying purposes. The balance sheet that will result from this would have the property as an asset, plus any improvements that have to be depreciated (like a new roof, for example.) The dollar values assigned for these assets are what you pay for them, not what you guess, suppose, theorize that they are worth today. The IRS will not care about what it's worth 'today' until the 'today' that you actually sell it and know for sure that that's what it's worth. Depreciation will get included (subtracted) each year (I always date that on December 31.) You, or your bookkeeper, or accountant should be keeping track and their software can easily print a balance sheet.
Another purpose of bookkeeping is to give you an idea of what you're worth. The main things that will change from what I've stated above is that your properties have (hopefully) gone up in value. In my experience, banks are interested in my best estimate of how much equity I have in my properties. Another difference is that the properties probably have not gone down in value as the depreciation calculation assumes. So remove depreciation.
I only produce the balance sheet using the bookkeeping required by the IRS. I can look at it and easily add an amount I think the properties have appreciated, subtract out the depreciation and get a rough idea of what I'm really worth (financially speaking.)
Quote from @Kate Barry:
I would recommend a Profit First certified bookkeeper, I have been so happy with ours and because they work primarily with Real Estate professionals, they are doing everything that I need to do my taxes properly. I also recommend using Cost Segregation Analysis
Do you recommend anyone particular?
You don't put the values of the properties on the balance sheet. Only what you have paid on the property and the improvements that have been made. It can get a little complicated than that. You are also missing the equity section. Assets have to equal liabilities+Equity.
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Quote from @Markus Shobe:
You don't put the values of the properties on the balance sheet. Only what you have paid on the property and the improvements that have been made. It can get a little complicated than that. You are also missing the equity section. Assets have to equal liabilities+Equity.
It really depends on the financial statement being provided. There are some financial statements where the balance sheet items are reported at FMV.
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CPA
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If you haven't been doing your books in the past, it is hard to just 'create' a balance sheet.
A balance sheet is a picture of the company at a specific time.
If the business in recent, you may be able to start from the start.
If the business is really old, you may want to start doing the books from the start of a year.
Asset items include items such as Cash, Real Estate, Land, Earnest Deposits, etc
Liabilities include items such as credit card payable, mortgage payable, security deposit
Equity items include items such as capital contributions, distributions to date, etc
Best of luck!
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CPA
- Basit Siddiqi CPA, PLLC
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