Mortgage Loan setup

[OCPL]

Hi Manager Guru’s
I’m still bashing my head on this setup for tracking my personal investment property mortgages.

This question is more about the pro’s and con’s, or feel free to fill me in what I’m missing …

So, I’ve tried dozens of prototypes, but landed with two methods, each having an upside and a downside, or is there another way with just all upsides? I’m all ears

I’ve been given some advice to either keep all mortgages grouped under a single control account, and other competing advice to have each mortgage under their own control account, I prefer to have them all appear separate on the Balance Sheet, to I’m preferencing separate.

Next advice has been to setup the mortgages as Bank Accounts, put them under their own Control Account & Group in Liabilities. I prefer this as it allows me to more easily use the Bank Reconciliation feature for Bank Accounts to verify if any transactions have been missed, HOWEVER, the big downside, this method doesn’t allow me to do receipt/payment transactions.
I can only use Inter Account Transfers, and this gets worse when trying to make Principle & Interest payments (Principle to the Mortgage in Liabilities as Inter Account Transfer and Interest to the Property Expenses as a stand alone Payment). This is super ugly

The other method using Special Accounts instead of Bank Accounts can achieve the same outcome on the Balance Sheet per se, and is much easier to make the Principle & Interest Payments, HOWEVER the downside is not being able to setup the Mortgages for Bank Reconciliation.

Is there a different way, which allows both Bank Reconciliation and Payments of Principle & Interest on Mortgage / Bank Loans, please share how this can be done.

[Tut]

@OCPL

…either keep all mortgages grouped under a single control account, and other competing advice to have each mortgage under their own control account…

This is purely a matter of personal preference, depending on your own style of decision-making. There is absolutely no accounting basis for adopting either approach.

@OCPL

Next advice has been to setup the mortgages as Bank Accounts…

I don’t know where you got such advice or who gave it to you. But doing so would contradict fundamental principles of accounting. Because it would, it also runs afoul of Manager’s basic design. Bank accounts are assets; mortgages are liabilities.

@OCPL

…this gets worse when trying to make Principle & Interest payments (Principle to the Mortgage in Liabilities as Inter Account Transfer and Interest to the Property Expenses as a stand alone Payment). This is super ugly

What would you expect when you are treating the mortgages as something they are not? Mortgage payments are exactly that, payments, and nothing more. The payments can be split into multiple line items as necesssary—principal, interest, fees. Transaction reports can easily be constructed to summarize whatever you want using drill-downs and advanced queries. This would, in fact, be much easier than going through the bank reconciliation process.

@OCPL

The other method using Special Accounts instead of Bank Accounts can achieve the same outcome on the Balance Sheet per se…

Special accounts are a fine alternative to individual control accounts. There is no basic difference from an accounting perspective. So this, too, is a matter of individual choice. But special accounts are not an alternative to bank accounts.

@OCPL

…much easier to make the Principle & Interest Payments…

No kidding! That is because the program is not designed for making payments from a liability account.

@OCPL

…the downside is not being able to setup the Mortgages for Bank Reconciliation.

Why would you consider it a downside to be unable to perform a task without financial meaning? As I wrote above, you can easily get confirmation of activity by several other methods that are simpler.

[eko]

@Tut gave almost similar feedback to another topic you raised on similar. There emphasis was on your distrust and overpayment of accountants near you because you believed that you should have paid less tax if these “expensive” accountants did their job. Even in that discussion you never explained or gave details where these accountants did you a disservice. You concluded it but without sharing for example: I paid this amount of tax but should have been reimbursed with that amount if my accountant had submitted the right amount.

You then decided to do it all yourself and figured things out which is excellent. So in this new topic you present two options that seem to work for you and want input from other users which one they would prefer. That is just odd. Whatever works for you is what you should go for. Will this end-up in less taxes? No-one could ever comment because that is specific to your situation. Would your alternative lead you to pay less tax? How would anyone of us know?

So, please, just proceed with one of your options that may be suitable for your situation and maybe ask someone local if that would be worth the effort.

From my own experience, whenever I thought I paid too much tax because our accountants seem not to be conversant with tax law, they always were right in the end. Yes I studied such but that does not mean I know for every single jurisdiction what is acceptable or not. So I leave it to local experts and thus will need to trust them. If they are registered accountants they would and at least should do the right thing. Does it sometimes cost more than expected, yes! Does it save more than expected absolutely!b Reason being that when you are wrong the fines we face from authorities are much worse. So better to be on the safe side, especially when you are not that familiar with the local tax laws, rebates, etc.

Finally, as @Tut says, I would recommend to keep this as simple as it should be. You earn rent (Receipts) and you repay a loan and interest (Payments). As you own the properties these are Fixed Assets and Depreciate over time, except for land. So alway if you bought land before building try to separate the cost because land should not be depreciated.

All other costs are Expenses in the P&L.

[OCPL]

Thanks again @Tut , I was already leaning strongly towards using Special Accounts over using Control Account/Bank Accounts as Liabilities, however I’m a little disappointed that it’s not possible to use a Reconciliation feature or similar for checking mortgage loans, I feel this could be a very useful feature for picking up omissions.

[OCPL]

@eko

There emphasis was on your distrust and overpayment of accountants near you because you believed that you should have paid less tax if these “expensive” accountants did their job. Even in that discussion you never explained or gave details where these accountants did you a disservice.

@eko I am not going to upload the last twenty years of personal accounts to satisfy you that I’ve had some very poor experiences with local accountants, but I will try to give you (and others) some basic context that may (or may not) change your view of why I’m doing what I’m doing and adjust the thinly veiled attituded towards my questions.

For context:

When comparing similar investment portfolios between myself and my colleagues living interstate, they pay accounting fees on average $1,500~$2500/annum and literally just hand them a box of unsorted documents, where I live, I have everything filed in respective folders, and in order and all annual statements, etc and pay on average $5000~$6000 for the same service.

My colleagues on average end up $10k~$15k/annum better off for a similar portfolio!

I have found many legitimate expenses, such as rates, utilities, Owners Corporation Management fees and property repairs, omitted, and no record of depreciation on one property, etc.

When I challenge the accountants, they literally don’t care, they are overflowing with clients and just pick the easy ones who will pay the most, this is not an exaggeration, if you challenge, they literally tell you to go somewhere else.

Also, to commenters who’ve suggested that I ask a local accountant to assist in any way to setup my own accounts, this gets a very hard NO, they will take money and do the accounts for you, but will not take any amount of money to show how anything is done, I’ve tried so many times.

For smaller accounts like mine, they will mostly use temporary interns to do most of the bookkeeping, all the way up to final submission to ATO and the accountant just gives a brief look over at best. I know this because I’ve been in meetings where the intern brings in the final accounts for me to sign and the account is also reading (glancing over) my accounts for the very first time.

I’ve changed accountant firms five times in twenty years (some lasting only a year or two, because they were so bad)

Geographically I live in a very remote region, where it’s over 4,000km from the nearest major metropolitan city where I might have the luxury of shopping for hundreds of better accountants.

A number of years ago, in utter frustration, I set myself a personal goal to learn enough to be able to competently create a set of reliably accurate books in Manager, to be able to reflect my investment properties, and that I could at a minimum be able challenge an underperforming accountant on areas of discrepancy with some degree of confidence and facts (which they in turn can challenge).

I come to this forum to ask genuine questions to fill knowledge gaps, in the pursuit of learning and bettering my situation, sometimes just to have more accountants telling me in a not so direct way, to give up and go pay an accountant.

[Tut]

This forum is not for learning accounting. It is for issues specifically having to do with Manager.

[OCPL]

@Tut

It is for issues specifically having to do with Manager

In what way does my original question on how to best setup Manager.io to track specific transactions related to a personal investment property, not relate to Manager.

I’m not asking how to setup a business, build a website, create a QMS system, hire, train & fire, market, industrial engineering or any other unrelated topics, even though I can do all these with great ease.

I’m certain that other legacy accounting software’s setup screens and approach can be quite different to Manager.io (as there are plenty of YouTube tutorials on their products / methods of doing the same tasks, but very little on Manager, go check for yourself).

Is this Forum intended to be only for elitist accountants? for them to provide free software glitch detection and product enhancement advice for software development purposes, if so, please direct me to another Manager.io Forum explicitly for community support, as most software’s have, I’ll gladly leave here.

[OCPL]

Getting back to my original question and some of the responses, in summary, it sounds like the advice to use Bank Accounts under Control Account in Liabilities was poor advice, whereas using Special Accounts under Control Account in Liabilities was the better advice, however there is no function to reconcile these Special Accounts in the same way as is possible with the Bank Accounts in Assets. Is this correct?

[Joe91]

Correct

[OCPL]

Thanks @Joe91

[Tut]

It wasn’t your first question. It was your post #5.

[OCPL]

Hi Manager Guru’s

In my latest attempt, only Personal Bank & Credit Card are setup as bank accounts and therefore only they can be reconciled (wish I could do reconciling for the four mortgages too).

I’m using the following Control Account types:

My understanding is this was the correct way to setup mortgages, if not, how?

I’ve created these three Divisions:

For Personal Bank & Credit Card, I’ve not selected any Divisions, because these accounts are common to all Divisions

Under Fixed Assets, the two Properties have their respective Divisions setup

Under Special Accounts the four Mortgages have their respective Divisions setup

When I try to make a Payment of Principal and Interest, the Interest allows selection of Division for the P&L, but not for the Mortgage on BS, it doesn’t allow selection for Division (greyed out).

What might I be doing wrong?

Also, I’m still uncertain on the validity of some of the advice I’m getting from the Forum about whether to use a Bank Account or Special Account, being the correct method for a mortgage / bank loan?

[OCPL]

SS of summary page for reference:

[eko]

@OCPL

but not for the Mortgage on BS

If you setup the mortgage special account properly you would already have designated a division. Hence being greyed out as already set.

[eko]

@OCPL

My understanding is this was the correct way to setup mortgages

Mortgages are longterm loans and this is the correct treatment. The confusion you have is that you could also use bank accounts as you did before but then can not track the mortgages as well as you can with special accounts.

[OCPL]

I thought I set it up correctly as Special Accounts, what am I missing?

[OCPL]

Only the actual Bank Checking Account & Credit Card are treated as Control Accounts - Bank and Cash Accounts … is this not correct?

[OCPL]

[OCPL]