How to Categorize Down Payment Received?

We’re selling a rental property. We received a non-refundable “Due Diligence” fee.

How should this be categorized?

When the transaction closes, how should we categorize the proceeds from the sale?

Thanks for any help and suggestions.

Some of this may depend on what your plan for the proceeds may be and how soon you plan to implement that.

We recently sold and bought houses ourselves.

Personally i categorized the income of equity from the sale as proceeds from sale of house and have this category hidden, after a month or two it was hidden. As far as this due diligence “fee” it sounds like it was income? Therefore me personally i would tie all real estate financial income transactions to this category.

Then when it came time to purchase i associated all of the expense of that to a closing cost category i.e. appraisal, inspection, and all closing fees and down payment. Shortly after processing i also changed this category to hidden.

Another approach would be to use tags and the tags report.

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Thanks, bentuyre1:

Yes. The Due Diligence fee is income. In effect, it’s part of the Purchase Price if the transaction closes. If it doesn’t actually close, we (the seller) get to keep the Due Diligence fee. In our state (North Carolina), the Due Diligence fee is different and separate from Earnest Money which is refundable if the sale doesn’t close for any reason.

Not being an accountant,. I wondered about the proper way to record this as well as the closing expenses (which you covered) and the income coming from the final close. In Tiller, we don’t have an asset category for our rental real estate and I haven’t been using Tiller to track expenses that affect our basis for tax purposes. I’ve only been using Tiller for about 1 1/2 years and we’ve had the rental property for over 10 years so I’ll need to enter them manually, if at all.

Thanks for your thoughtful reply.