Property & Debt [how to track a property sale]

El Hud

Hello, I track a rental property in Property & Debt (there is no mortgage on the property) and update the value monthly. I've recently sold the property. In the ledger of the property, how do I journal the selling of the property? Do I need to Journal a "Sold" transaction or just do a transfer? Will it show a cash value after the journal entry is made? Lastly, do I then transfer that cash amount to the appropriate account in Quicken? Thank you

Frankx

Hi @El Hud,

Since you originally entered your rental property into Quicken at its cost (commonly referred to as its "Cost Basis"), it appears as an asset on your "Net Worth" report - likely as an "Other Asset".  But because you have been periodically updating that original Cost Basis to reflect a market value, you'll need to first decrease the value shown in Quicken to that original cost basis.  To do this, I suggest that you simply reverse those market value entries and get the "value' back to what you paid for the property.

To record the sale, you need to enter the "sale transaction" into Quicken.

To use a simple example transaction, suppose that you had an original purchase price (or cost basis) of $100,000.00 .  And you recently sold it for $130,000.00.  The entry to record the sale (that you would enter in your bank account register in Quicken) would be:

Cash deposit to bank account             $130,000.00
Remove the Rental Property (asset account)                                  $100,000.00
Gain on sale of rental property (income account)                           $ 30,000.00

Once the entry is made - the Rental Property (asset account) will show a zero balance.  And since you made the entry using your bank account, a transfer won't be necessary.

BTW - I have tried to keep the above simple for now, and in doing so I haven't given details on other pieces of the transaction (such as the sales commission, and other expenses of closing the sales transaction).

Hope this helps.

Frankx

Frankx

Hi @El Hud,

So the entry you made to decrease the "amount to the sold amount" was not correct.  In order to have Quicken correctly calculate your gain/loss on a sale, you need to make the "cost value" of the house be equal to what you paid for it plus any improvements you made over the time that you owned the property.

You should not have "decreased the amount to the sold amount". Instead, you should have adjusted the amount of the property's value as currently shown in Quicken to the "cost basis" (which is the original purchase price plus the amounts that you spent (over the years you owned the property) for closing costs at purchase plus improvements (but not maintenance).  That is your "cost basis" and it typically is less than the property's current value.  And because you were using Zestimate to update the account's balance in Quicken to what Zestimate estimates as the "current market value", that number is likely more than your cost basis.

Unfortunately Quicken doesn't have a "drop down for Purchase Price or Cost Basis".  So you need to:

a) first determine the amount of your "cost basis" in the property;

b) adjust the account balance displayed in Quicken for that property to that "cost basis".  (NOTE - In Quicken, Zestimate uses a "Market adjustment" entry to bring your house account to market value and therefore if you simply delete that entry that would be the first step to bring your account's value to cost basis.  Then you might also need to add the costs of improvements over the years you've owned the property to complete the "cost basis'.) 

c) Once you've done the above - you can then make the entries for the sale of the property, which should result in the determination of the gain/loss on the sale of your home.

Let me know if you have any followups.

Frankx

NotACPA

In Q, what type of account is used for this rental property?  Is it a "House" account?  Or simply an "Asset" account?

But, in either case, a simple transfer will probably work.  And, after you adjust for selling expenses, the value of the rental property account should be $0.

Frankx

Hi @El Hud,

Since you originally entered your rental property into Quicken at its cost (commonly referred to as its "Cost Basis"), it appears as an asset on your "Net Worth" report - likely as an "Other Asset".  But because you have been periodically updating that original Cost Basis to reflect a market value, you'll need to first decrease the value shown in Quicken to that original cost basis.  To do this, I suggest that you simply reverse those market value entries and get the "value' back to what you paid for the property.

To record the sale, you need to enter the "sale transaction" into Quicken.

To use a simple example transaction, suppose that you had an original purchase price (or cost basis) of $100,000.00 .  And you recently sold it for $130,000.00.  The entry to record the sale (that you would enter in your bank account register in Quicken) would be:

Cash deposit to bank account             $130,000.00
Remove the Rental Property (asset account)                                  $100,000.00
Gain on sale of rental property (income account)                           $ 30,000.00

Once the entry is made - the Rental Property (asset account) will show a zero balance.  And since you made the entry using your bank account, a transfer won't be necessary.

BTW - I have tried to keep the above simple for now, and in doing so I haven't given details on other pieces of the transaction (such as the sales commission, and other expenses of closing the sales transaction).

Hope this helps.

Frankx

El Hud

Thank you for the response. I did decrease the value to the sold value and then transferred the amount into my account in Quicken. Perfect! Thanks again!

El Hud

So, I guess I spoke too soon. I decreased the amount to the sold amount and transferred it and this does not show capital gains. In my ledger, I have an Opening Balance line which is blank. The next line shows the value of the house from Zestimate. Can I log a "Cost Basis" line before all the update? If so, is there a drop down for Purchase Price or Cost Basis? Thanks again

Frankx

Hi @El Hud,

So the entry you made to decrease the "amount to the sold amount" was not correct.  In order to have Quicken correctly calculate your gain/loss on a sale, you need to make the "cost value" of the house be equal to what you paid for it plus any improvements you made over the time that you owned the property.

You should not have "decreased the amount to the sold amount". Instead, you should have adjusted the amount of the property's value as currently shown in Quicken to the "cost basis" (which is the original purchase price plus the amounts that you spent (over the years you owned the property) for closing costs at purchase plus improvements (but not maintenance).  That is your "cost basis" and it typically is less than the property's current value.  And because you were using Zestimate to update the account's balance in Quicken to what Zestimate estimates as the "current market value", that number is likely more than your cost basis.

Unfortunately Quicken doesn't have a "drop down for Purchase Price or Cost Basis".  So you need to:

a) first determine the amount of your "cost basis" in the property;

b) adjust the account balance displayed in Quicken for that property to that "cost basis".  (NOTE - In Quicken, Zestimate uses a "Market adjustment" entry to bring your house account to market value and therefore if you simply delete that entry that would be the first step to bring your account's value to cost basis.  Then you might also need to add the costs of improvements over the years you've owned the property to complete the "cost basis'.) 

c) Once you've done the above - you can then make the entries for the sale of the property, which should result in the determination of the gain/loss on the sale of your home.

Let me know if you have any followups.

Frankx

El Hud

Thank you again! Not sure if this is correct to do in accounting practices (I don't export Quicken data for my taxes; use it for tracking and reference purposes only) I reduced the value of the house to my purchase price. (Cost Basis) I made one adjustment, categorized as "Invest Inc" and then input the capital gains which then brought the value up to the selling price. The capital gains now records in my Income/Expense properly. Thank you!