Best Practices for handling property sales

Cindi Anderson
Cindi Anderson Member ✭✭✭
edited July 2023 in Investing (Windows)

I've been using Quicken for windows for years but have never figured out a great way to manage my registers when I purchase and sell a property. Especially when there's a loan involved. Anyone have a good way figured out? Another problematic issue I struggle with is refinances.



  • Tom Young
    Tom Young SuperUser ✭✭✭✭✭
    edited June 2023

    Property sales, even with a loan on the property, really aren't all that difficult to handle and I'd guess that where many people drop the ball since Quicken doesn't have a sale of property "wizard", is that any sale must have a "gain" or "loss" entry as part of globally balance entry. Let's do a super simple example:

    1. Asset Account for House (cost basis) $250,000
    2. Loan Account on House $175,000
    3. Sold House for $329,000 (net of fees)
    4. Net to you $154,000

    Global entry for sale:

    Of course real sales of property involve more moving parts, there may be property tax allocations, credits to buyer and so forth, but by really sitting down and doing some not too difficult analysis you can typically sort these things out.

    Let's take property tax allocations for example, using the same $154,000 "cash to you" number as above, but $900 of that is a refund to you of property taxes. Then the $79,000 gain number is reduced to $78,100 and a new "Credit" line for $900 is introduced to the above entry, accounted for as a reduction of your property tax expense.

    You really don't need to make the above entry in one fell swoop, you can do it piecemeal instead, "swinging" the entries through the cash Account (fictitious entries) and that's fine as long as you come to the correct "bottom" line numbers.

    Or, you can make self-referential entries* (entries where the "Category" is really the name of the Account, surrounded by square brackets), in the Loan Account and House Account, zeroing them out, then split the $154,000 deposit into two parts: the $79,000 being Categorized to the Gain on Sale Category (that you create), and the balance of the deposit as self-referential entry to the Cash Account.

    There are a lot of ways to skin this cat when it comes to how you make the actual entries in Quicken but what's most important here is that you analyze the entire transaction so you know what the final results look like.

    *Self-referential entries are a bit of Quicken "magic" where a balance in an Account gets changed without showing up in any Category or other Account in your file. "Opening Balance" entries when you create an Account are an example. These entries are still "balanced" entries in that your Net Worth is changed in the same amount.

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