How to best track a real estate portfolio as a limited partner

harry askenazi

What is the best way to add a real estate portfolio or single property in which I am a limited investor and receive regular preferred returns as distributions and occasionally returns of capital? I am not the GP or the property manager so I don't need to track rents or expenses. I added a "home" and manage it that way, but is there a better way? I want Q to know this is an investment property.

Tom Young

I'd be tempted to set that up as an unlisted "security" inside an Investment Account.  It's much closer to a security than a physical piece of property.  Limited partnerships are difficult to account for as a limited partner since you generally don't know, with precision, how to account for distributions out of the partnership until you receive your Schedule K-1 some months after the end of the year.

Tom Young

I thought you had only one LLC investment that's why I replied in the singular.  If you own more than one I don't see any problem putting them all in the same Investment Account.  You'd associate each distribution with the appropriate LLC by reference to the name you give each "security."

Distributions can't generally be associated with any particular tax lot, only with the security (LLC) itself. 

Probably creating a Category of "LLC Distributions", with a sub Category for each distinct LLC, is about as far as you can go during the year.  When you get your Schedule K-1 you can reclassify a portion of the distributions as return of capital, if there are any.  Personally I wouldn't try to get more detailed than that.

Tom Young

I'd be tempted to set that up as an unlisted "security" inside an Investment Account.  It's much closer to a security than a physical piece of property.  Limited partnerships are difficult to account for as a limited partner since you generally don't know, with precision, how to account for distributions out of the partnership until you receive your Schedule K-1 some months after the end of the year.

harry askenazi

Interesting. Why not at least setup each llc as it's own investment account?

While I won't know how to account for distributions until I get the k1, I at least can categorize each distribution as just that, and assign a tax lot to that category. What do you think the drawback of doing that is?

Appreciate your reply and help!

Tom Young

I thought you had only one LLC investment that's why I replied in the singular.  If you own more than one I don't see any problem putting them all in the same Investment Account.  You'd associate each distribution with the appropriate LLC by reference to the name you give each "security."

Distributions can't generally be associated with any particular tax lot, only with the security (LLC) itself. 

Probably creating a Category of "LLC Distributions", with a sub Category for each distinct LLC, is about as far as you can go during the year.  When you get your Schedule K-1 you can reclassify a portion of the distributions as return of capital, if there are any.  Personally I wouldn't try to get more detailed than that.