Step 1: Decide — Inventory or Fixed Asset?
Before recording anything, determine how long you plan to hold the property.
Fix-and-flip (intent to sell): Record the property as an Inventory account. The property is stock-in-trade — bought to improve and resell — and its cost will flow to COGS when you sell.
Long-term hold (rental or investment): Record the property as a Fixed Asset account. This allows you to track depreciation over time.
Tip: A good rule of thumb — if you plan to hold the property for less than 24 months, use Inventory. If you plan to hold it long-term or generate rental income, use Fixed Asset.
Fix-and-Flip: Recording the Purchase
Closing costs — title fees, recording fees, assignment fees, tax prorations — should be capitalized to the same inventory account as the purchase price. They are part of your cost basis in the property.
In Ambrook, navigate to Accounts and create a new Inventory balance sheet account named for the property (e.g., 4332 Wayland Dr).
Record the purchase price to this account.
Record all closing costs to the same inventory account — title fees, recording fees, assignment fees, and any tax prorations paid at close.
Create a Liability account for your mortgage, named for the property and lender (e.g., Lender Name - 4332 Wayland Dr).
Note: Closing costs that flow through your bank feed can be tagged directly. For costs paid outside of closing, or to capture the full detail of a settlement statement, a manual journal entry is required.
Fix-and-Flip: Capitalizing Renovation Costs
All renovation costs — labor, materials, contractor payments — should be added to the property's inventory account. This keeps your total cost basis accurate so profit is calculated correctly at sale.
Option A — Tag directly: Tag renovation transactions to the property's inventory account as they come in.
Option B — Categorize first, then capitalize: Tag transactions to expense categories (e.g., Materials, Subcontractors) for a detailed spending breakdown, then create a journal entry at the end of the project to move the totals into the inventory account.
Tip: Option B gives you a cleaner view of renovation spending by category while keeping your balance sheet accurate.
Fix-and-Flip: Recording the Sale
Record the sale proceeds as income (e.g., to a category called Real Estate Sales).
Create a journal entry to move the property's full cost — purchase price, closing costs, and all capitalized renovation costs — out of the inventory account and into a COGS category called Cost of Properties Sold.
Note: For businesses whose primary activity is buying and selling real estate, sale proceeds are typically treated as ordinary income, not gain on sale of a capital asset. Confirm the correct treatment with your accountant.
Long-Term Hold: Recording the Purchase
Navigate to Accounts and create a new Fixed Asset balance sheet account for the property (e.g., 4332 Wayland Dr).
Record the purchase price and capitalized closing costs to this account.
Create a paired Liability account for your mortgage.
Track depreciation over time. See Tracking Asset Depreciation in Ambrook for steps.
Tip: Land cannot be depreciated. If you're purchasing land and a building together, create separate Fixed Asset accounts for each so you can depreciate the building independently.
FAQ
What is "Cost of Properties Sold"?
What is "Cost of Properties Sold"?
Cost of Properties Sold is a COGS category you create in Ambrook to record the cost of each property when it sells — the equivalent of cost of goods sold for a product-based business. Create it under Expenses → Cost of Goods Sold in your chart of accounts.
Do I need a separate account for each property?
Do I need a separate account for each property?
Yes. Tracking each property as its own balance sheet account gives you a clear picture of costs and equity per property, and makes the sale entry straightforward.