This is for either those accountants out there, or else experienced investors that have solved this. From Note investing accounting. A note I assume would be considered a Loan Receivable. I know the direct cost of purchase would be included in it. However, is the value considered what you paid for it, or the unpaid principal balance?
I assume the bookkeeping for a non-performing loan is different. But maybe not?
@Peter Halliday For Quickbooks, we list our non performing and performing notes as "Other Assets." The purchase price is the opening balance and then all costs associated with that asset are added to the cost basis.
On our balance sheet, the cost basis is listed and not the UPB.
@Andy Mirza . Thanks for the response. That was my first thought. When you say expenses, I assume you mean the closing and due diligence expenses. Or do you mean even the ongoing like servicing etc. I assumed some of the ongoing expenses are more a cost of good sold, like the servicing fees.
We book everything to the asset and take the gain/loss all at one time when the asset liquidates. It makes sense for us to do this with non performing notes.
@Andy Mirza Do you handle Performing notes differently, or don't you do those?
Performing and non performing loans are handled the same. My recommendation is to spend 2-4 hours with a book keeper to set up your books and then from there you can easily do it yourself.
@Chris Seveney Any recommendations