Tracking a personal investment.

If I invest $10000 with some others in a piece of property, and, then, 5 years later, I receive $13000 return on my investment, how do I zero out the account so I don't always have a $3000 cash balance on an account that is now closed?
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Best Answer

  • Tom Young
    Tom Young SuperUser ✭✭✭✭✭
    Accepted Answer
    I would take a different tack here.  While @Jim_Harman 's approach will have your balance sheet correctly stated at the start of the deal and at the end of the deal, it results in your financial statements leaving out an important, real, fact: you enjoyed a $3,000 capital gain as a result of the deal.
    I suggest creating a new manual "brokerage" Account, maybe named the "Land" Account, and then also creating a new "security' called "Property", a security with no ticker symbol. 
    Transfer the $10,000 you shelled out into this new Account and buy 1  "share" of this "security" @ $10,000.  Over the intervening 5 years, if you felt that you could accurately guestimate the value of the property, you might change this security's quote from time to time, or not.  At the end of the deal you'd get your $13,000.   At that point you'd sell this security for $13,000 per share, eliminating the security from the Account.  Then do a "transfer" of that $13,000 into your checking Account, where the money actually was deposited.  
    Your Income and Expense reports that include the month of sale would correctly show your $3,000 capital gain on the deal.

Answers

  • Jim_Harman
    Jim_Harman SuperUser ✭✭✭✭✭
    edited April 25
    One way would be to track the investment in an Asset account. (this simplified method does not account for potential tax consequences of selling property that has appreciated)

    Go to Tools > add account and at the bottom, pick Other Assets and Liabilities. Then pick Assets and give the account a name.

    When you purchase the asset, transfer the money from the account where it originated to the asset account.

    If the value of the asset increases, go to the gear at the top right of the account and pick Update Balance.

    When you sell the asset, transfer the proceeds to the account where the money went. This will decrease the Asset account to zero.
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  • Tom Young
    Tom Young SuperUser ✭✭✭✭✭
    Accepted Answer
    I would take a different tack here.  While @Jim_Harman 's approach will have your balance sheet correctly stated at the start of the deal and at the end of the deal, it results in your financial statements leaving out an important, real, fact: you enjoyed a $3,000 capital gain as a result of the deal.
    I suggest creating a new manual "brokerage" Account, maybe named the "Land" Account, and then also creating a new "security' called "Property", a security with no ticker symbol. 
    Transfer the $10,000 you shelled out into this new Account and buy 1  "share" of this "security" @ $10,000.  Over the intervening 5 years, if you felt that you could accurately guestimate the value of the property, you might change this security's quote from time to time, or not.  At the end of the deal you'd get your $13,000.   At that point you'd sell this security for $13,000 per share, eliminating the security from the Account.  Then do a "transfer" of that $13,000 into your checking Account, where the money actually was deposited.  
    Your Income and Expense reports that include the month of sale would correctly show your $3,000 capital gain on the deal.
  • Jim_Harman
    Jim_Harman SuperUser ✭✭✭✭✭
    That would work too, and would correctly account for the capital gain.
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  • jadashek
    jadashek Member ✭✭
    edited April 26
    Hello Tom:

    Thank you so much for your response which I like much better. What I have done in the past is buy a stock at $1 a share at the address of the investment (I have a bunch of properties that I am a co-investor.). So, if I invest $100k at 444 Maple street, I would make an investment/brokerage account called 444 Maple Street and then buy 100,000 shares of 444 maple street at $1 a share. Then, if I make $120k, I sell those 100,000 shares for a total of $120k, about a 15 cent/share profit.

    It just seems like there would be a better way to do it. Was this sort of the way you would recommend?

    Thank you for your help!!!

    Joey


    Joseph A. Adashek, MD FACOG
    Immediate Past President, Clark County Medical Society
    Associate Professor, University of Nevada School of Medicine
    Co-Owner, Desert Perinatal Associates
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  • Tom Young
    Tom Young SuperUser ✭✭✭✭✭
    What you've proposed is exactly the same as I've recommended, just with the decimal places moved around.
    1 share @ $10,000 per share = 10 shares @ $1,000 per share = 100 shares @ $100 per share, etc.
    Unless I anticipated a partial sale, e.g., sell half of your property to somebody else, I'd probably stick with "1" share, but it really doesn't matter.  Use whatever you feel is best.
  • q_lurker
    q_lurker SuperUser ✭✭✭✭✭
    @jadashek 
    I would take the approach of having one account (RE Investments, maybe) and multiple securities (444 Maple, 333 Ash, 222 Sycamore) as owned in that one account. 

    Your approach as X shares at $1/share is OK.  You could also own (buy) 1 share for $X/share and change the X (share Price/Quote value) as the value changes.  (Or base on 100 shares owned or 1000 shares owned, etc.)  Or, you might set the value as the 'real' full value of the property with your share count reflecting your ownership percentage.  (A $225,000 property valued at $225 / share means 1000 shares outstanding and you own 310 shares = 31%).  In other words, lots of ways to price and maintain each individual property. 
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