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Property expense category

Hello, I would like to know the best way to categorize property expenses (purchase costs, holding costs, selling costs) for home flipping business. Should they belong to COGS or OPEX? or any other treatments that most commonly used by the home flipping industry? Thank you.

Answers

Gabe Burke
Title: Corporate Real Estate Specialist
Company: Cushman & Wakefield (formerly DTZ)
LinkedIn Profile
(Corporate Real Estate Specialist, Cushman & Wakefield (formerly DTZ)) |

In my opinion holding costs are the most appropriate category for property expenses. The reason being that they are ongoing expenses that occur between the purchase and sale of the property.

EMERSON GALFO
Title: CFO
Company: C-Suite Services
LinkedIn Profile
(CFO, C-Suite Services) |

1. Isn't holding cost contradictory to a flipper?
2. Selling cost should generally be a general expense unless extraordinary. (I hear of Teslas being used as an incentive).

Topic Expert
Christie Jahn
Title: CFO
Company: Prime Investments & Development
(CFO, Prime Investments & Development) |

The only reason for holding is if the property isn't sold in the current tax year to my knowledge. My husband is a GC and any house he buys we have to hold the expenses until the tax year it's sold. Very simple but we we put everything into an inventory account until sold. Once sold we value the gain on the sale of an asset. This suggestion came from our CPA after I was trying to expense everything and track it as a separate job class, which can get complicated and messy.

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