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Is there a category for home appreciation when you update the value of a property?

pfiscal

I recently updated the value of my home which I have as an asset in quicken (linked to a mortgage and escrow account). This resulted in a transaction in the register for the asset itself with a payee "Balance Adjustment". I was just wondering what category to use with this, if any? Should I create a new one for "property appreciation" or is there one already that I should use? Or should I be going about this in a completely different way?

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Accepted answers

NotACPA

The customary method is to use the name of the home account itself as the Category in the appreciation transaction and record it in the home asset account.

That way you don't need to mess around with a infrequently used category, and you can always create a report that shows ONLY these increase transactions.

Any category that you create would have to be an Income item, and whereas this DOES increase your net worth ... it's not 'income" that you need to report anywhere.

All comments

JLP1976

I setup a category for automobile depreciation, but the concept could be used for appreciation as well. I put it in a Group called Miscellaneous, which I use as a catch-all for categories that I don't want included in day-to-day expense or income reporting.

NotACPA

The customary method is to use the name of the home account itself as the Category in the appreciation transaction and record it in the home asset account.

That way you don't need to mess around with a infrequently used category, and you can always create a report that shows ONLY these increase transactions.

Any category that you create would have to be an Income item, and whereas this DOES increase your net worth ... it's not 'income" that you need to report anywhere.

I too do the exact same way as @NotACPA recommended (category=same account name) for both, appreciation and depreciation which I write accordingly in the memo. In a sense you are adjusting the account or asset value in either direction and you can create custom reports to additionally filter values in the memo field. Yields the same result but cleaner since not only you are not creating yet another set of categories but also not affecting your income/expense.

Boatnmaniac

@pfiscal - As you can see, there several different ways you can do this. It really boils down to what your preferences for Payee and Category are.

My preference is to use the "Balance Adjustment" category for both appreciation and depreciation of value and then to Tag it with the appropriate Asset. This way this category can be used with all assets (house, car, etc.) without needing to create unique categories for each.

I also make sure that my Budget and income/expense/spending Reports are customized to not include the "Balance Adjustment" category.

q_lurker

Just to be clear on a subtlety --
@pfiscal cited a transaction with "Payee = Balance Adjustment" and no category and asked what category to use.

@JLP1976 suggested a user-created category such as "House Appreciation"
@BK and @NotACPA suggested the account as the category as "[House Asset]" (or however the account is named).
@Boatnmaniac suggested a user-created category of "Balance Adjustment" (different than the OP's citation of a payee by that name).

I didn't want that difference to go unnoticed or cause confusion.

Boatnmaniac

q_lurker said:

Just to be clear on a subtlety --
@pfiscal cited a transaction with "Payee = Balance Adjustment" and no category and asked what category to use.

@JLP1976 suggested a user-created category such as "House Appreciation"
@BK and @NotACPA suggested the account as the category as "[House Asset]" (or however the account is named).
@Boatnmaniac suggested a user-created category of "Balance Adjustment" (different than the OP's citation of a payee by that name).

I didn't want that difference to go unnoticed or cause confusion.

Thanks for summarizing it so well, @q_lurker .

BTW, a user-created category of "Balance Adjustment" is more intuitive if it is used with a spending, investment or loan account. For an asset like a house or a car perhaps a user-created category of "Market Adjustment" might be more intuitive.

pfiscal

Thanks everyone, super helpful!
I've had issues with income showing up and trying to customize reports to exclude specific categories so I think I'll go the route of assigning the accounts itself as the category for now and see how that goes.

Douglas Laudenschlager

Today I discovered that Quicken no longer seems to allow a transfer back into the same account. I've been doing this, as discussed in this thread, to update the value of our house in an asset account. The account you're in no longer appears as an option in the Category field. Quicken must be hiding it to prevent transfers back into the same account.

I really don't want to use an income category for a change that isn't income! Suggestions? Are you also finding that a transfer back into the same account is no longer possible? Thank you!

GeoffG

Douglas Laudenschlager said:

Today I discovered that Quicken no longer seems to allow a transfer back into the same account. I've been doing this, as discussed in this thread, to update the value of our house in an asset account. The account you're in no longer appears as an option in the Category field. Quicken must be hiding it to prevent transfers back into the same account.

Nothing has changed with Quicken. I just checked and can add/delete/modify like always the self directed category. You may want to validate your data file. File>File Operations>Validate.

Douglas Laudenschlager

OK, my foolish oversight. Thanks for encouraging me to look more closely. The asset account had somehow got marked as "Hide in transaction entry lists." I don't remember doing that and don't know why I would have, since I do a monthly transaction, but then I am getting older. ;-)

So yes, I can still increase the value of an asset the usual way, by recording a transfer back into the same account.

NumberCruncher

@q_lurker For those still following this discussion, I'd like to add one more option to Q_Lurker's summary. Has anyone thought of converting a house to be an investment item instead? Then one could track the value in the same way as a stock. Any appreciation/depreciation would be inputted as an increase/decrease in the "house stock" value. Value changes would be tracked by the hidden investment report categories of "_Unrlzd Gain". One could include/exclude the "House stock" Fund and/or Account from investment reports as desired (exclude if you want to view your stock market investment return prowess, include if you want your actual estimated net worth). Downside: It might take some creative transactions to capture capital improvements, both cost and impact on value.

Tom Young

@NumberCruncher

What you suggest absolutely could be done and I've suggested that approach in other, similar situations.

One approach someone could take to address your "downside" issues is to enter the house cost as a Buy transaction with shares valued at $1/share. Capital improvements would be accounted for as additional Buys of the house "security" also at a $1/share, immediately followed by an entry in the Holdings window of the security's Quote/Price to adjust the estimated current market value of the house after the improvement.

The downside to this approach is that the unrealized gain on the house is lumped in with with all the other real securities' unrealized gain on income statements, and we all know that the unrealized gain on the house is a much softer number than the unrealized gain on market-traded securities.

If I were to put my house on my balance sheet I'd probably take the approach of creating a generic asset Account for it and create a separate "House Unrealized Gain" Category to handle adjustments.

q_lurker

@NumberCruncher. Appreciate the call out, but I was truly trying to summarize prior thoughts from others; not all the possibilities.

Certainly an investment account could be used. I’d think more in that direction with a portfolio of real estate investments - 123 A Street, 456 B Ave, each as a separate security. Buy one property (security) and sell another. Makes a lot of sense.

For a personal home, I’ve chosen to use an asset account. In that account, I try tracking basis. I don’t currently try to represent fair market value because it is too soft (unknowable) of a number. If I did try to represent that, I’ve been more swayed toward the creation of a second asset account. [123 A St -Basis] and [123 A St - FMV Adj].

JamesPhillips

I want to track my home basis to capital gains reduction purposes AND its current value so that my net worth reports are more accurate. I created a Property Asset called "123 Main Street Basis" and record the purchase prices and all significant capital improvements there. I created a second Property Asset called "123 Main Street Appreciation" and record the DIFFERENCE between the current market value and my basis as a balance adjustment once per year. When both are included in the net work report they add up to the current market value. I also know my basis in the even I sell the house.