Initial acquisition and costs

We acquired another property last month. This will be our first property that we will track in Stessa from the very beginning. Couple questions:

Since we do not have our “property bank account” setup yet, we paid for the property and costs out of a personal checking account. For all acquisition costs and initial operating expenses paid from our personal checking, should we record two transactions: 1) record cost/expense and 2) record owner contribution? How does that affect reporting and metrics?

Is it necessary to record a transaction representing the closing? Or is the acquisition covered by updating all of the property information? Maybe a better way to ask - how should all of the costs from the Closing Disclosure (Settlement Statement) be recorded in Stessa?

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@macioceproperties Good questions. So, the “Owner Contribution” and “Owner Distribution” categories are really only intended for owners working with property managers. Otherwise, Stessa is designed to be used as a single entry cash-based tracking system. So you would only want to add transactions for the closing costs. Does that make sense?

The purchase price can simply be entered under “Financial Details.” See Basic Property Details: Add & Edit in the Support Center for more details on how to do this.

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@devin Makes perfect sense, and I thought that was the case. I just wanted to be sure that updating the “Financial Details” covered the acquisition. It seems like the only transactions to record from a closing are the loan costs and closing costs.

For purposes of tracking my investment (cash invested for acquisition and initial working capital) into a property, I’ll need to track that on the side?

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Copying something over I wrote in another thread. Am I accurate in what I am reporting? It is not complaint, because I love using Stessa. However, it is an important question because it will dictate what I will need to track outside of Stessa.

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Does this mean that using the “Owner Contribution” category to track personal cash infusions is not advised for those who self-manage?

Like others, I’m interested in being able to calculate CCR, so I added a positive Owner Contribution line item to account for the expenses I covered out of pocket. Will this cause any issues with Stessa reporting and calculations?

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Was this ever answered by Stessa?

No, but I see no downside to tracking owner’s equity using the “transfers” category. By definition, this category is used for non-business transactions so it will not affect your properties P&L.

Agreed, I’ve been using the “transfers” category.

Hi I’m brand new and just setting up. I have a few expenses I paid prior to setting up a bank accounts and credit card for my LLC.

I have the same question and i want to check my understanding if you don’t mind helping.

Example: I paid a legal expense from my personal card setting up my LLC.

  1. Enter a transfer / owner contribution for the amount of the expense.
  2. Enter separately a payment under Legal Catagory for the same amount.

This should increase my assets initially. Then show the expense for my end of year reporting, correct?

Thank you!

David

This is how I have been using it, but I too am new to Stessa. In your example, if you later withdraw an amount equal to your legal expenses (paying yourself back) this should accurately adjust Stessa to reflect your properties performance as a stand-alone entity? Basically… you’re giving your properties a 0% interest loan.

Which makes me wonder if I should be tracking this as a loan instead?

@david7 - I’ll give an accounting answer, and then try to explain how to make it work in Stessa. To continue with your example, if you paid $1,000 in legal fees to setup your business (your LLC) with personal funds, the accounting entry on your LLC’s books would be as follows:

DR Organizational Cost/Legal Fees (asset/expense account)*
CR Partner Contribution (equity account)

*Depending on your tax situation, you could either capitalize or expense start up costs. There is more to it; however, this isn’t related to your question.

To account for it on Stessa, there are two different approaches that I took.

  1. If your personal accounts are not linked to Stessa, manually add a transaction for the legal expense. On the reports, this will reflect as negative cashflow. Since you really can’t track “balance sheet” accounts in Stessa, create your own balance sheet in Excel or on a sheet of paper, and record it to “Due To Owner”. Once the property cash flows, pay yourself back BUT DO NOT RECORD a transaction in Stessa. Ultimately, the expense is recorded and the cash flow is accurate.

  2. Add manual transaction for the expense, and then add another manual transaction to Owner Contribution. Once you pay yourself back, you can record Owner Distribution.

For free software, Stessa is great when your accounts sync automatically consistently. After a few years of using Stessa, it seems like it would be best to open up new accounts (bank, credit card, etc.) separate from your personal accounts and have them linked into Stessa.

That is definitely one way to look at it. For me, since I am the only owner of my rentals, I can record it as a capital contribution, or an intercompany loan (record expense but defer the cashflow).