How to manage Renovation of the house?


M

Margaux

We bought our home 3 years ago for cash, and value of the house is about
doubled since then. Also we made improvemen such as kitchen, bath renovation,
adding pool and SQFT, etc. I set up account "Home" with purcesed price, but
how can I reflect the cost I paid for renovation with "credit card" or "Bank
acc't" ? Do I have to input manually each time I have a transaction? and how
to add the market value??
 
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C

Chris Cowles

Margaux said:
We bought our home 3 years ago for cash, and value of the house is about
doubled since then. Also we made improvemen such as kitchen, bath
renovation,
adding pool and SQFT, etc. I set up account "Home" with purcesed price,
but
how can I reflect the cost I paid for renovation with "credit card" or
"Bank
acc't" ? Do I have to input manually each time I have a transaction? and
how
to add the market value??
That's an iffy question. The simple answer is to categorize them as a
transfer to the asset. That assumes they're adding to the capital value. If
you're doing that for tax purposes, you'll need to follow tax rules to
determine that.

You could also have a separate account called 'home appreciation' and
consider the value of the home to be the sum of the two. That more
accurately tracks appreciation vs acquisition costs.
 
T

Taylor

Margaux said:
We bought our home 3 years ago for cash, and value of the house is about
doubled since then. Also we made improvemen such as kitchen, bath
renovation,
adding pool and SQFT, etc. I set up account "Home" with purcesed price,
but
how can I reflect the cost I paid for renovation with "credit card" or
"Bank
acc't" ? Do I have to input manually each time I have a transaction? and
how
to add the market value??
The simplest way is to create a category called "Renovation Expenses".
Categorize all such transactions. That way, you can do whatever you want
with the numbers. This is what I do. I have a category for Home, and
subcategories for expenses such as telephone, electricity, and one for
Repairs/Maintenance. I plan to use the last category to adjust my tax basis
when I sell the house.

Unfortunately, Money does not have an easy way to track an increase in the
equity of property. I simply change the purchase price to reflect market
value, and indicate the purchase price in the Comments field. Money could
expand this area, I think.
 
M

Margaux

Thanks! Your idea may be work for us best. Hope Money will be improved in
home value area in the future.
 
D

Dick Watson

I must have missed this the first time around.

If you have an equity account representing the home, just add a transaction
adjusting the value of the equity account by adding or subtracting (new
perception of value of house - old balance of equity account) for some
income category set to be tax neutral like, say, Other Income : Unrealized
Capital Gains. Yes, a memo explaining what made you think this was a good
new valuation would be a good idea. What could be simpler? What could the
Money team add that wouldn't screw things all up?

 
T

Taylor

Dick Watson said:
I must have missed this the first time around.

If you have an equity account representing the home, just add a
transaction adjusting the value of the equity account by adding or
subtracting (new perception of value of house - old balance of equity
account) for some income category set to be tax neutral like, say, Other
Income : Unrealized Capital Gains. Yes, a memo explaining what made you
think this was a good new valuation would be a good idea. What could be
simpler? What could the Money team add that wouldn't screw things all up?
I think you have identified the problem. That is that Money does not have
equity accounts, like a true general ledger accounting program, it only has
income/expenses and assets/liabilities.

You could list the purchase price and equity values in the asset account,
which is probably better than my system, but what I would like to see is my
mortgage payments that go to principal to increase my equity. That cannot
be done in Money as far as I know.
 
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D

Dick Watson

For precision, I should have used Asset account in my previous reply, not
equity account. Equity is derivative of Asset and Liability.

1) Money does not have equity accounts. But it has Asset Accounts which are
what you may have meant and certainly what you want to track, not equity
directly, as noted in the following.

2) Mortgage payments that go to principal do not increase asset value. They
decrease liability. Equity (i.e., contribution to net worth) is the value of
the Asset account less the balance of the Liability account. Money supports
accounting for Asset value (you supply the value) and Liability and
reporting net of these. What more do you need?

As an example, going back to the original thread, let's say Initial
Condition is:
"My Home" Asset Account balance: $240,000
"My Dumpy Home Mortgage" Loan Account balance: ($160,000)
(equity: $80,000)

Refinancing and renovating transactions:
"My Contractor" payment Transfer:My Home Asset account: $100,000
"My Dumpy Home Mortgage" is rolled over into a new loan "My Show Home
Mortgage" Loan Account balance: ($300,000)
(other Expenses along the way of $40,000, assumes that the $100,000 is
realizable on the market)

New Condition is:
"My Home" Asset Account balance: $340,000
"My Show Home Mortgage" Loan Account balance: ($300,000)
(equity: $40,000, Expenses: ($40,000), impact to Net Worth ($80,000))

Go to sell house and discover it's over-priced for the market; net only
$300,000 after $27,000 of expenses to sell:
Transfer from "My Home" Asset Account to "My Show Home Mortgage" Loan
Account: $300,000
Expense ($27,000) to sell it

Then Condition is:
"My Home" Asset Account balance: $40,000 but you don't own it anymore so you
have to enter one last Expense transaction ($40,000) for capital loss
leaving Asset Account balance of $0)
"My Show Home Mortgage" Loan Account balance: $0
(equity: $0, cumulative Expenses: ($67,000), impact to Net Worth ($147,000))
 
T

Taylor

Dick Watson said:
For precision, I should have used Asset account in my previous reply, not
equity account. Equity is derivative of Asset and Liability.

1) Money does not have equity accounts. But it has Asset Accounts which
are
what you may have meant and certainly what you want to track, not equity
directly, as noted in the following.

2) Mortgage payments that go to principal do not increase asset value.
They
decrease liability. Equity (i.e., contribution to net worth) is the value
of
the Asset account less the balance of the Liability account. Money
supports
accounting for Asset value (you supply the value) and Liability and
reporting net of these. What more do you need?

As an example, going back to the original thread, let's say Initial
Condition is:
"My Home" Asset Account balance: $240,000
"My Dumpy Home Mortgage" Loan Account balance: ($160,000)
(equity: $80,000)

Refinancing and renovating transactions:
"My Contractor" payment Transfer:My Home Asset account: $100,000
"My Dumpy Home Mortgage" is rolled over into a new loan "My Show Home
Mortgage" Loan Account balance: ($300,000)
(other Expenses along the way of $40,000, assumes that the $100,000 is
realizable on the market)

New Condition is:
"My Home" Asset Account balance: $340,000
"My Show Home Mortgage" Loan Account balance: ($300,000)
(equity: $40,000, Expenses: ($40,000), impact to Net Worth ($80,000))

Go to sell house and discover it's over-priced for the market; net only
$300,000 after $27,000 of expenses to sell:
Transfer from "My Home" Asset Account to "My Show Home Mortgage" Loan
Account: $300,000
Expense ($27,000) to sell it

Then Condition is:
"My Home" Asset Account balance: $40,000 but you don't own it anymore so
you
have to enter one last Expense transaction ($40,000) for capital loss
leaving Asset Account balance of $0)
"My Show Home Mortgage" Loan Account balance: $0
(equity: $0, cumulative Expenses: ($67,000), impact to Net Worth
($147,000))
I understand the concepts. However, in Money there is no way to report the
equity in the property. Money does not calculate the equity using the asset
value or the loan value. In addition, it does not calculate the equity
using your mortgage payments.
 
D

Dick Watson

If you are looking for something called, say, "Equity Report," no, it
doesn't have it. If you want to get it to report the answer there are any
number of reports that could be customized to get the answer.

I'm clueless why you think equity is related more than indirectly to
mortgage payments. Equity = Asset Value - Loan Balance. Loan Balance is
related to a loan balance at some point less the sum of some portion of
mortgage payments over time. Just knowing about mortgage payments does not
tell you squat about equity.
 
D

Dick Watson

Let me ask you a question: given your interest in reporting Equity, how are
you determining an asset value that is anything more than a wishful guess at
a point in time?

Unless/until you actually sell it, that's all any asset value can be for
something like a house. We're not talking an ounce of gold or a barrel of
oil with a liquid market and a commodity pricing market. For this reason, it
seems a little odd to be hung up on reporting/calculating/displaying Equity
like it's some kind of "take it to the bank" number.
 
T

Taylor

Dick Watson said:
Let me ask you a question: given your interest in reporting Equity, how
are you determining an asset value that is anything more than a wishful
guess at a point in time?

Unless/until you actually sell it, that's all any asset value can be for
something like a house. We're not talking an ounce of gold or a barrel of
oil with a liquid market and a commodity pricing market. For this reason,
it seems a little odd to be hung up on reporting/calculating/displaying
Equity like it's some kind of "take it to the bank" number.
I use Zillow.com to value a property, which is what mortgage bankers use.
It is a "take it from the bank" number, as you can use equity in your
property as collateral for a line of credit.

Once I have an asset value, as you say, I need the loan amount due to
calculate the equity. When I make my mortgage payment in Money, it
automatically calculates the interest and principal. To calculate the loan
balance, per payment, and hence equity, one needs to know the principal
payment amount. Only the principal decreases the loan amount. Money does
not tell you the principal amount per payment, only the total loan amount
due. I could take the total loan amount due and deduct it from my Zillow
search, but Money is an accounting program, shouldn't it do the math for me?

On the account settings for my house asset, I enter the purchase price, and
"Associated Loan". Money is already tracking these, I should have a report
that shows me the calucated equity in real time. All it needs is the actual
asset value. In fact, here's an idea for Money programmers: link to
Zillow.com to update your real estate asset value to instantly calculate
your property's equity.
 
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D

Dick Watson

Comments.

Taylor said:
I use Zillow.com to value a property, which is what mortgage bankers use.
It is a "take it from the bank" number, as you can use equity in your
property as collateral for a line of credit.
But you may or may not be able to sell for that amount today or a year from
now.
Once I have an asset value, as you say, I need the loan amount due to
calculate the equity. When I make my mortgage payment in Money, it
automatically calculates the interest and principal. To calculate the loan
balance, per payment, and hence equity, one needs to know the principal
payment amount. Only the principal decreases the loan amount. Money does
not tell you the principal amount per payment, only the total loan amount
due.
Look in splits. It's there. Look in the register for the loan account. It's
there.
I could take the total loan amount due and deduct it from my Zillow
search, but Money is an accounting program, shouldn't it do the math for
me?

Money does lots of math for you. If you set up a customized report that gets
to loan+asset balances, it will odo this math for you as well.
On the account settings for my house asset, I enter the purchase price, and
"Associated Loan". Money is already tracking these, I should have a report
that shows me the calucated equity in real time.
So create one. But it'll not bne in real-time as the vaslue of your property
cannot be known in real time, no matter what whoever.com says.
All it needs is the actual
asset value. In fact, here's an idea for Money programmers: link to
Zillow.com to update your real estate asset value to instantly calculate
your property's equity.
Look at how they struggle with stock market quotes. You want them to take
this problem on?
 
D

Dick Watson

BTW, "real time equity" would have to take into account accrued but unpaid
interest, among other things.
 
T

Taylor

Dick Watson said:
Comments.



But you may or may not be able to sell for that amount today or a year
from
now.


Look in splits. It's there. Look in the register for the loan account.
It's
there.
Ahh, it's not in the split, but it does appear in the register seperately.
me?

Money does lots of math for you. If you set up a customized report that
gets
to loan+asset balances, it will odo this math for you as well.
I was mistakenly looking in Income/Expense Reports. You're right, it works
on the Asset and Liabilities group. I haven't used any of these reports;
maybe it will do what I want.
So create one. But it'll not bne in real-time as the vaslue of your
property
cannot be known in real time, no matter what whoever.com says.


Look at how they struggle with stock market quotes. You want them to take
this problem on?
Heh, sometimes we want the software to do it all. :)
 
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D

Dick Watson

comments inline.

Taylor said:
Ahh, it's not in the split, but it does appear in the register seperately.
It's in mine... Are you using Essential Register? Don't.
Heh, sometimes we want the software to do it all. :)
Frequently we regret having asked when we see the results of the developers
trying to make it do so.
 

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