How to categorize acquisition / closing cost transactions

I purchased a new property and the payment to title shows up on the bank account that I have linked to Stessa. Unfortunately there is no purchase or acquisition category that I could choose for the transaction. All that I could find was Down Payments. How would you recommend categorizing this transaction?

@investing929 Good question. Stessa does indeed have appropriate categories for closing costs, but you’ll need to first figure out whether you are expensing it in the year incurred or capitalizing it as part of your cost basis. This is a tax/CPA question, for which we do not provide official advice.

Some of the Stessa categories that might be appropriate for various acquisition costs include:

  1. Capital Expenses > Closing Costs
  2. Capital Expenses > Loan Costs
  3. Taxes (and related sub-categories)
  4. Utilities (and related sub-categories)

Thanks for the answer @devin. I assumed that “Closing Costs” was the fees associated with the closing, not the acquisition cost. But alright, I guess I’ll be using this category then.

@investing929 Sorry, just to be clear, the entry for funds used to purchase the property should be categorized under “Transfers” so that it does not impact cash flow reporting. Acquisition prices and original loan balances should be entered via the Properties page, not the Transactions page.

@devin I see. Would be great to have categories for initial purchase and initial rehab that don’t count towards the cashflow. The transaction is there since it was made from a linked account. Feels kind of counter productive to either delete it or to mark it as transfer just so it doesn’t mess up the cashflow numbers.

For the transactions that come in under a linked account, I Move them to a portfolio called “For Audit” That way they are not part of the ‘real portfolio’, not deleted (from an audit point of view is ‘sub-optimal’), and have a real place to go (which is optimal from an audit point of view). Obviously you can name your audit bucket anything you wish.

I have done the same thing for my ‘personal bank account’ Assign all transactions to “Personal Account Audit” then reassign the few items that should be associated with one of the other companies or properties.

@devin Would you recommend using transfers for things like Home Inspections pre-closing, and appraisal costs or what do you recommend there? If so, which specifically of the sub-categories do you think fits those the best?

@christopher.mikle There’s a Capital Expenses > Closing Costs category specifically for closing costs that will be capitalized. For items that will be expensed in the year incurred, you can simply use the most appropriate regular category. If you’re not sure which expenses must be capitalized, check in with a good CPA.

1 Like