Rent credit program accounting, allocation of house payments, and depreciation

There have been some older posts on this but wanted to refresh the topic.

For any park owners doing a rent credit program, how are you handling the accounting? How are you classifying the house payments, and how are you handling the house asset on your balance sheet?

I’ve been classifying the house payments as income, and then depreciating the house on a 27.5y depreciation schedule. If the house is sold before the house is fully depreciated, I write the remaining basis off as a loss. This keeps things somewhat simple, but is somewhat tax inefficient. I’m curious how others are handling this.

Noel, I am doing something similar. Under a rent credit program the home is technically a pure rental. When the tenant has enough rent credits to redeem for the home, we sign over the title for no additional charge. Essentially, we are giving away the Home for free at that point and so we write it off the balance sheet.

For day to day bookkeeping, we have three rent lines - lot rent, home rent, and home rent subject to earning rent credits. we do this because it is compatible with our management software but other software may have a better way to do it.

Each home is assigned a cash value upon document signing. However over the years we may make repairs to the home, which are added to the ultimate home price.

What management program do you use to input that? RM or something else?

We use Buildium but have considered switching.

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