Follow these concise steps to accurately track investment performance from purchase to refinance, and all the way through to the eventual sale.

Just be sure to check with your CPA before expensing the champagne!

Set Up Your Acquisition Details

To accurately track cash flows associated with property purchases, you'll need to take two specific steps in Stessa:

Step #1
Visit your Properties page and click the appropriate cell in the "Acquisition Price" column. This will bring up the "Financial Details" modal, which you can then fill out with as much detail as possible. Be sure to include the actual contract purchase price only, without including any closing costs or other expenses.

Step #2
Create a new transaction via your Transactions page. Just click the "+ Add" button at upper right (assuming you have not already imported the transaction via a linked financial account or data file upload) and fill out the details with the same contract purchase price. Be sure to categorize the transaction under "Capital Expenses > New Acquisitions." For the "Name" field, you can input the street address, or any other unique identifier. Use asterisks or special characters if you want this line item to stand out on your transactions page, like this:

Finally, set a Date Placed in Service and select "27.5 years" for the useful life.

Step #1 above establishes a baseline and starting point for most Dashboard metrics, while step #2 ensures that the acquisition shows up in your Net Cash Flow and other key reports.

What About Closing Costs?

It's best to account for closing costs as specific line items on your Transactions page. This will allow you to more easily reconcile final settlement statements and all the related credits and charges associated with a typical investment property acquisition. Some closing costs are capitalized while others can sometimes be expensed in the year incurred. You'll definitely want to consult with a good CPA to figure out how best to handle various closing (and loan) costs.

Stessa does not provide tax advice and while our platform is designed to be flexible and handle many different scenarios, we strongly advise you to consult with a qualified CPA.

Once your transaction entries are complete, you'll see that items categorized under "Capital Expenses > Closing Costs" and "Capital Expenses > Loan Costs" will now appear on your Net Cash Flow report under the "Purchase, Sale, & Refinance" section.

Track Mortgages & Loans

The process for setting up your mortgage and loan details is very similar to the two steps outlined above for acquisitions:

Step #1

Visit your Properties page and click the appropriate cell in the "Loan Balance" column. Click on "Add a Loan" or simply confirm that your existing loan details are all correct. Be sure to enter both a "Current Principal Balance" and an "Original Loan Amount."


Step #2

Create a new transaction via your Transactions page. Just click the "+ Add" button at upper right (assuming you have not already imported the transaction via a linked financial account or data file upload) and fill out the details of the original mortgage or loan funding. Select the "Money In" option since these are funds that the lender disbursed at closing to help fund your purchase. Be sure to categorize the transaction under "Mortgage & Loans > Proceeds & Payoffs." For the "Name" field, you can input the lender's name or some other unique identifier to distinguish this line item from your regular mortgage payments.

What About Mortgage Refinances?

Mortgage and loan refinances are a bit tricky to capture accurately because they typically involve a payoff of the existing loan, the funding of a new loan, and various loan costs, sometimes on both ends of the transaction. You'll want to update your new loan details and balance in Stessa in the same way we updated the loan details in Step #1 above.

Paid off mortgages should then be deleted from your Property Details page, but the original funding transactions for these old mortgages should remain in place on your Transactions page.

To log the refinance on your Transactions page, you'll need to make at least two new entries, perhaps more if you also have loan costs to track. For starters, create a new transaction using the "+ Add" button (assuming you have not already imported the transaction via a linked financial account or data file upload) and record the payoff of the old mortgage as a "Money Out" transaction. Categorize it under "Mortgages & Loans > Proceeds & Payoffs." Do the same for the new loan funding, but as a "Money In" transaction and then use the same "Proceeds & Payoffs" category.

Follow a similar process to account for various loan costs associated with the refinance transaction and be sure to consult a qualified CPA regarding the proper categorization of these line items, including the useful life and date placed in service options.

You'll now find your refinancing activities on your Net Cash Flow report, under the same "Purchase, Sale, & Refinance" section. The proceeds of the new loan and payoff of the old loan, less loan costs, should now net out to the actual dollars you either received or contributed to the refinance.

Log Property Sales & Selling Expenses

Once you've sold a property and downed the last glass of champagne, you'll close out the investment in two easy steps:

Step #1

Visit your Properties page and click the appropriate cell in the "Acquisition Price" column. This will bring up the "Financial Details" modal. Check the box next to "This property has been sold" and then input the month and year of the sale along with the final sale price.

Step #2

Create a new transaction via your Transactions page. Just click the "+ Add" button at upper right (assuming you have not already imported the transaction via a linked financial account or data file upload) and fill out the details with the same final sale price. Be sure to categorize the transaction under "Transfers > Sale Proceeds." For the "Name" field, you can input the street address, or any other unique identifier. Use asterisks or special characters if you want this line item to stand out on your transactions page, like this:

*** 123 Easy Street Sale ***

Don't forget to also capture your selling costs like brokerage commissions, etc. under the appropriate expense categories, just like you did for the original purchase transaction.

Extra Credit: Run an IRR Calculation in Excel

Now that you've captured all the relevant purchase, sale, and financing details in Stessa, run an updated Net Cash Flow report to see how your investment performed. If your purchase was more than a year ago, be sure to use the "Custom" date range feature to run a single report covering the entire hold period.

If you have some basic Excel skills, you can then run a quick internal rate of return (IRR) calculation on the "Net Cash Flow" line using Excel's "XIRR" function. Note that it's important to use XIRR instead of IRR whenever the columns in your report represent months (or any time period other than full years).

Questions?

Please direct all accounting questions to your CPA! If you have other questions about house hacking with Stessa or other best practices, check out the Community Forums to see what other owners are discussing. If you need to reach us directly, click the blue circle at lower right to open a new support conversation.

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