Bookkeeping - Recent Threads

Chart of Accounts

Emmett — Mon, 06 May 2013 00:04:03 GMT

Does anyone know where to get a sample chart of accounts for the real estate industry?

Thanks,

Emmett

How do you manage the tenants deposit?

angelapeng — Thu, 25 Apr 2013 19:40:29 GMT

Hi, REIN members,

I would like to know how most people manage their tenants deposit? I understand that small amount does not matter too much, however, if you have tenants deposit over $20K every year, what do you do about it?

--Put into a high interest savings account
--Use it as a contingency reserve fund for repair and maintenance
--Invest into a financial product such as term deposit

What others?

Thanks,

Need help on GST/HST tax issue when declaring more self-employment income

financefree2018 — Thu, 18 Apr 2013 15:27:07 GMT

Hi there! We need your expert advices on clarifying our concerns on GST/HST payments when we declare more income so as to qualify for the bank when we start our real estate business.

Both my husband and I are self-employed in Vancouver BC. My husband specialized in various home renovation areas and has been in business since Oct 2010 and I do mainly interior painting job starting in early 2012. Before that, I stayed at home taking care of two of our babies.

Both our renovation businesses consist of 10% subcontract and 99% of all our jobs are paid in cash which mostly include only labor and material charges. Most of our clients are not willing to pay the extra tax and it is also extremely hard to have GST/HST charge included in the job quotation because it will make the number too high to get any deal. And if we cannot get any deal, we have no way to stay in the business. As such, both of us have a hard time collecting GST/HST on behalf of the governments in our businesses and I declared only small amounts on my husband’s tax returns, $4000 gross income with $0 GST/HST in 2010 and $9000 gross with $0 GST/HST in 2011, to make sure the Governments would not come back to us for GST/HST from our hard-earning money which is not the money paid from our clients for taxation.

However, we decided to start our real estate business so we can achieve financial freedom in the next 5 years last month. We understand that we have no way to qualify for the bank given our current income level on our tax returns. We need to declare more. But we are very concerned about declaration of more income.

My questions are shown below:

If we start to declare more of our income this year, $45000 gross for our husband and $25000 gross for me, do we have to pay the Governments for the corresponding 12% GST/HST (Form T2125 E line i)? What consequences we will be facing if we report $0 on this line?
Both of us have many expenses, e.g. CCA, motor vehicle expenses, adverting, supplies, your name it, which can be offset the gross income, shall we use that? If we use them all, we get a very small net income on line 150. Then again, we have a problem in qualifying for the bank. What should we do?
What other questions we need to be asking that we are not asking?

Prompt reply on this will be highly appreciated! Thanks in advance for your answer and your time!

Xiao Ji Pan from Vancouver BC

Setup of JV bank account when not on title

rfilion — Wed, 17 Apr 2013 19:20:24 GMT

Hi!

Couldn't find an answer yet on the forum... I keep noticing comments to keep control of the money, etc.

Here is the situation:

JV Partner A: Financial Manager, RE Expert
JV Partner B: Money partner, silent partner

JV Partner B is on title and has the mortgage registered to their name. (JV Partner A is not on title)
JV Partner A & B have a JV agreement registered against the title.

Note:
- The bank specified that JV Partner B's name must be on title and must be on the bank account where the mortgage payments are drawn from.

1. How would you go about setting up the bank account for this so that JV Partner A can manage this deal?
2. Does that mean that no matter what, JV Partner A & B must have a joint bank account? (I don't see any way around this so far) Investors in the posts that I read so far regarding joint bank accounts and JV recommend to "avoid" a joint bank account. How are you guys making this happen?

Thoughts please and thanks!

REIN Membership tax write-off

patrickmarsden — Sat, 13 Apr 2013 04:34:49 GMT

Hello,

I'm sure this has been asked and answered many times before, but I'm wondering if most REIN members write-off their membership fees? I own several rental properties and consider REIN to be a vital educational tool for my business, however my accountant was not able to give me a clear answer as to whether Revenue Canada would agree. Can you recommend whether this is an appropriate write-off?

Many Thanks,

Patrick

How do you treat renovation expenses?

angelapeng — Fri, 12 Apr 2013 22:34:46 GMT

Our investing model is to buy, renovate and rent it. For the renovation part, it norally costs between 8K to 15k, including new paint, floor, change doors, lighting, blinds, sometime, add on a dishwasher or washing machine.

The accountant said that all the renovation expenses shall be added on the building cost, and depreciated over the 25 years, not 5 years like the legal fee, appraisal etc. Is this correct? I thought those renovation are not capital upgrades, purely cosmetic facelift.

Is the accountant right?

Thanks,

Angela

Deducting for meals.. Accountant says no?

kfort — Wed, 10 Apr 2013 20:33:22 GMT

Wondering what's the scoop on this? My new accountant says its a no go but I did I last year. I thought 50% of these were covered? Obviously I document who I talked to and about what on each receipt. Thoughts?

cost benefit analysis--need expert's opinion

angelapeng — Tue, 09 Apr 2013 22:31:19 GMT

Hi, REIN Members,

This is a cost/benefit question regarding a tax issue. I need your thoughts and suggestions.

Background information:

I have two companies, one has been totally inactive for 5 years, however, it did accumulate some taxable losses. According to the accountant, the taxable loss is equivalent to $27K tax savings over the next 20 years. (among the $27K, $8500 tax savings has to be used before 2015).

The second company is the real estate holding company with assets in it, currently it also has taxable losses, and I expect the breakeven time or profit time will be years away.

I am comparing the costs and benefits of the following two options:

1)Closing the inactive company and only keeping the holding company.
Costs: lose the taxable loss credit of about $27K.
Benefits: save one bank and annual filing (corporate and accounting) fee - about $1000 per year.

2) Merge the two companies together.
Costs: $4000-5000 to: re-instate the inactive company, get it's book in order and complete the merger transaction (legal and accounting).
Benefits: keep the $27K tax savings.

Also, another challenge is the time value of the money. Do you want to spend $5000 today for restructuring the two companies for the purpose of saving $27K in the future (over the 20 years time) is it worth it?

Thank you for sharing your thoughts and opinions.

Angela

Tracking your refinance expenses

nicholsons — Thu, 28 Mar 2013 21:00:32 GMT

Hi I'm currently refinancing my property so I can get a LOC which I'll eventually use to purchase a new property.

My question is

1. Are the cost deductible? (lawyers fees, Bank Fees, Appraisal, etc)
2. If they are added into the mortgage how do I show/track? I currently use a spreadsheet.

CNIL - What is it and does it matter to real estate investors?

joanhlee — Mon, 25 Mar 2013 05:00:16 GMT

My tax software is giving me a warning to enter data for CNIL (Cumulative Net Investment Loss). Can anyone explain what this is in layman's terms? I'm not sure if this is pertinent for real estate investments or if everything I needed to have entered is already in the real estate rentals section.

Looking for a lawyer to set up MIC

Teresale — Wed, 20 Mar 2013 17:12:19 GMT

I am looking for a lawyer in Ontario to help me and my investors to set up MIC (RRSP mortgage).
Your help is really appreciated.

Regards
Teresa Le
416-558-5571

Insuring Deductibility of L.O.C. Cost

j3r4m3 — Wed, 20 Mar 2013 15:56:20 GMT

Greetings All,

I'm planning to use available funds in a current rental property to pay the downpayment and some renovations in a recently acquired condo. The available L.O.C. has a balance of 0, as I understand, I should be able to claim this interest payment as long as I have a paper trail confirming that the use of these funds are for the investment property.

My question pertains to what justifies an acceptable paper trail? If I use my visa to pay for work done, and items required, then transfer same amount from L.O.C. would that be considered acceptable?, or should I be doing this a different way?

Also, I understand I could use a Purchase plus Improvements Mortgage, instead of using the L.O.C. I plan to spend 6000 replacing dated kitchen, and tile, tub surround. As I'm planning to do the majority of the work myself, I'm assuming it would be simpler to use the L.O.C., as I can't give the bank the required quotes for my work.

Any advice from members who have been down this road would be greatly appreciated. This will be my 3rd door, 1st since joining REIN. I'm looking forward to applying the strategies offered by all of you Real Estate Experts out there. Thanks in Advance.

Jeramy Davis

Do I need two separate accounting/filing systems?

curiousLo — Mon, 18 Mar 2013 12:14:59 GMT

As a new real estate investor, I plan to buy/hold/rent properties in my own name. I have expenses and revenues in this business, for which I have established a separate bank account, credit card and accounting/filing system.

I am also a licensed rental property manager working at a brokerage. I am an agent of this brokerage who pays me commission for each property I manage. In reality, I pay them a monthly fee plus a percentage of the gross rents collected. So from my perspective I do PM as an independent business. I have to do my own marketing, find clients on my own, etc. However, when a new landlord signs a PM contract, it is signed between the landlord and the brokerage. All moneys go through the brokerage account, and later I get my split from the brokerage. I believe I will get a T4 (or a similar statement) at the end of the year.

To do this job as a property manager I have travel, networking, marketing, advertising, etc expenses. These are my PM business expenses for which I do not get compensated by my brokerage. So, for tax purposes I am sure I would get to charge these expenses against my income.

So my accounting question is, can I mix them with my real estate business because they are both related to real estate and my expertise in one makes me good at the other? Some of the expenses will also be hard to distinguish between the two businesses. Like I will be driving the same car for both businesses, attending networking events, etc?
Or I need to keep a separate bank account, credit card and accounting/filing system for the PM business also?

Is this OK with CRA? Trust Declaration - have mortgage in personal name and have corporation named as the "beneficiary".

aaronmoore — Thu, 14 Mar 2013 20:13:33 GMT

I'm looking for some input from an accountant. Or maybe you can tell me your experience, or any input from your accountant.
I'm buying a property and considering having the mortgage in my personal name and having my corporation named as the "beneficiary". My lawyer will complete a "Trust Declaration".
I'd rather just have mortgage & title in the corporate name, but there are more mortgage options if I use my personal name.

MY QUESTION: Is using the Trust Declaration OK according to the rules of the CRA?
For taxation purposes, does CRA consider closing in the corporate name the same as closing in my personal name and having the Trust Declaration?

FYI... Here are some other posts I read about using Trust Declarations in this way...
1) http://myreinspace.com/search/rein_members_only/Legal/85-15490-78626-Lender_wont_let_me_use_a_corporation_for_my_RTO.html#78626
2) http://myreinspace.com/search/public_forums/General_Discussion/61-23690-117781-Self_Employment_and_Mortgage_qualification_.html#117781

Lost Builder deposit used against income tax?

dalwil — Wed, 13 Mar 2013 18:39:28 GMT

I have a $6000 deposit with a builder to build a revenue property that I'm thinking of walking away from. I made about $64,000 on flips last year...would I be able to deduct this deposit off of that income? Thanks!

Cost to prepare Statement of RE Rentals? Separate its payment from my personal tax filing although integral part of it (as for JV partner too)?

Nir — Wed, 27 Feb 2013 01:37:19 GMT

Hi,

Based on JV agreement with partner, all accounting fees are paid 50/50.

Question is about properties owned with JV partner under personal names (no corporation involved):

Should I ask accountant to split bill for my personal tax filing to two - first portion will be paid from JV joint bank account just for preparing our "Statement of RE Rentals". and the 2nd amount will come from me for preparing my personal tax filing minus amount already charged above (first portion) to prepare our "Statement of RE Rentals"!?

Assuming accountant receives a good summary in excel for all properties under personal names - please assume only 1 table/tab in excel and all properties under same bank account.. only 1 bank account so easier for accountant.. How much approximately should preparing "Statement of RE Rentals" cost in this case in your opinion - $100? $200?

Do you do the same separate your personal tax filing from Statement of RE Rentals preparation as only the last should be paid 50/50 by partner and you?

Just complicates things a bit hence curious to know how others do it. usually try not to ask questions about stuff that costs only $100 or $200:)

Thank you and Regards,
Nir

Book Keeper Referral

BradEarthWide — Sat, 16 Feb 2013 22:55:43 GMT

I am looking to hire a book keeper with real estate experience. Any referrals would be appreciated.

Thanks,

Brad

Stay and Flip Strategy!

Sarya — Fri, 15 Feb 2013 03:03:48 GMT

I want to understand how long i have to live in a house for tax man to consider it my primary residence.

Can I buy a run down house, flip it during that duration while keeping it as primary residence and then sell and buy another run down house to repeat the same process. Is it legal. Is it a good strategy to save on Capital Gains. I am new here and any ideas on this will be really helpful.

Do I qualify for "Active Business Income" and is my company structured correctly?

johnapfeifer — Thu, 14 Feb 2013 18:17:49 GMT

Hi REIN members,

Over the past several years I have purchased commercial properties as well as farmland and an up/down duplex, which are owned primarily by two corporations that I setup. 2012 was the first year that more significant revenues/profit occured and I am currently working on my 2012 taxes with my accountant.

One fact that I was unaware of before until now is that for 2011 and previous years my companies were treated as not having Active Buisness Income and as such were taxed at a much higher rate. In 2012 I chose to work and focus solely on managing and growing my real estate business, and yet my accountant is telling me that my business still does not qualify for Active Business Income, and hence I will have to pay much more tax.

Is my accountant correct? Are there other company structures that will help me to legally pay less tax? I did see one page on REIN discussing family trusts but don't know if that would work in my situation or not... Help!

I appreciate any assistant or experts in this area that you can point me towards - Thanks!

Pre-sale condo or home - what does the law currently say?

Nir — Sat, 09 Feb 2013 22:20:07 GMT

Hi All, Based on current law, what is the minimum period you have to live in your pre-sale condo in order to pay zero tax when selling? Thanks Nir

Should I have separate bank accounts for each property?

KGuthro — Sat, 09 Feb 2013 00:14:32 GMT

I have a separate bank account for my investment properties but I was wondering should I have a separate account/bank card for each property or is it ok to to put multiple properties under the same "business" account?

ex. if you had 15 properties would you have 15 bank accounts

Appreciate the feedback

Kyle

Looking for a property management software

GreenStar — Fri, 01 Feb 2013 17:50:29 GMT

Hello,
We are looking for a property management software product for a 600+ unit portfolio. We are looking for a software that will allow us to improve our marketing, rent management and collection, tenant screening, on-line maintenance requests and monitoring, and overall communication and reporting functions within the organization. We have been searching through a number of different software products, but haven’t been able to find anything that is Canadian based and has all of the functionality that we are looking for.
Just wondering if anyone has any ideas?
Regards,
Jeff Marshall

when to go inc

DerekMitchell — Wed, 30 Jan 2013 05:00:57 GMT

hello , im a farily new rein member , just a question , at how many properties does one become or rather should become incorperated , and how does that work for who owns property and the cash flow / fianicing ?
currently own 2 properties thanks guys !!

Technical Dividend Bookkeeping Question

Nir — Fri, 18 Jan 2013 01:52:58 GMT

Hi All,

An account told me that for the purpose of showing say 40K dividend (which will be shown on your NOA), you do not
even have to technically put the money in the business account then withdraw it. The accountant can just generate a T5 - Statement of Investment Income showing the 40K dividend. and the amount will be reflected in the NOA

Is this because CRA rarely investigates that, or does not expect bank proof, because from their point of view you are kind of volunteering to pay tax! (on the dividend), not steal:)

Also, perhaps as long as Corp owned 100% by you, it's understood it's redundant to deposit then withdraw same amount, hence not required by law(?).

Is this correct or did I not understand him well?

Thanks and Regards,
Nir

Getting the banking/accounting structure RIGHT from day one

Brookd — Sun, 13 Jan 2013 18:40:45 GMT

Hey Everyone,

I am just getting started with REIN. So far I love the support, content and just about everything about the organization!

I am closing on my first property this month and want to add several more within the next couple of months (Hello Edmonton). I want to get my banking and accounting processes implemented correctly from the start. And am looking for some advise. I have read some posts about one bank account per owner (not per property) and that makes sense. Initially, I will be purchasing the properties without partners. So here are my questions:

1. Should I just use my personal account. Or should I open a new 'personal' account used specifically for real estate. I like the idea of a seperate account just for RE. Does that make sense?

2. Should I setup quickbooks (I have it for my other biz) for my RE to track income and expense via this new personal account? Does anyone use xero.com or any online service for this use?

3. How the heck would I manage LOC payments (when a portion of the LOC was used for a downpayment for example) from this personal account? My LOC is shared between, for example, my car loan (which is a Biz expense) and my RE investments. Would I just need to pay a percentage of the monthly LOC payment from my deticated RE account and another percentage that applies to my biz related expenses? This part sounds tricky to me..

4. What about the mortgage(s)? Should they be linked to this personal 'RE' account? What about downpayments? How do I track that and work it into the equation or should I just be focused on monthly income vs expense?

5. What about misc RE expenses. Like flights to Edmonton, hotel stays, things that both do and don't correspond to a specific property. For example, REIN membership fees. How do you track those expenses that don't apply to a specific property?

Any advise is appreciated!!! I just want to make sure I get off on the right foot here.

Thanks for your help!

Brook Davies