When clients have investment properties that they use to generate income, it’s essential to add the value of the property to your client’s net worth and create a stream of income in the client’s cash flow.
Keep reading below to learn how to enter rental properties in Facts, set up a rental income schedule, and ensure the accuracy of your work in Reports.
Adding Real Estate in Facts
First, go to Advanced Facts under Property > Real Estate > to add the rental property.
Note: Use Personal Property for anything valuable to the client that would contribute to their next net worth such as jewelry, or a car collection.
Some of the fields in the Real Estate fact are simply for record-keeping, while others are more essential to their financial plan. In the Basic tab, make sure to:
- Enter a descriptive property name that will show on reports and the Client Portal.
- Select Non-residence as the Property Type when entering rental properties. This option will enable you to add income in the Schedule tab.
- Leave Available in Year blank unless the client is inheriting a property in a future year.
- Include the property value. Value is the total value of the property, including land, buildings, and home improvements and is essentially the expected sale price. Home value is the value of the building only and used for insurance purposes.
- Enter a tax basis. If left blank, we assume the tax basis is equal to the value.
- Add a Growth Rate.
- Select an owner. If there’s unique ownership and multiple entities split the rental property, use the Ownership tab.
Next, you can use the Mortgages tab to add a new mortgage and fill out the loan details. You’ll tie the mortgage to the real estate property using the Property field. If you already have an existing mortgage connected or manually added, click into that fact and select the Property.
Creating a Schedule
Once you’ve entered the Property Type as Non-residence, you’ll now create an income schedule under the Schedule tab:
- Select Free Form schedule.
- Enter start and end dates, annual depreciation, annual income, annual expenses, and index rate.
- Click Create Schedule. This will calculate a full schedule from start to end year.
- Scroll to the bottom of the schedule to Save before navigating off the page.
It’s important to note that if you use a buy/sell transaction to sell the asset in the future, the system will automatically stop income and expenses associated with the rental property.
Finally, you can check your data entry using the Cash Flow report. You can ensure that the rental property is included in a client’s financial plan by viewing Other Inflows > Real Estate Income and Total Expenses > Real Estate Expenses.
Are you interested in learning more? Check out our webinar Understanding Real Estate in eMoney for more information on data entry, buy/sell Transactions, and additional real estate reports.