About the Author xi
Preface xiii
Chapter 1 Introduction to Real Estate 1
Types of Real Estate Assets 1
Common Industry Terms 8
Chapter 2 Basic Real Estate Accounting 17
History of Double-Entry Bookkeeping 17
Types of Accounts 18
Accounting Methods 22
Recording of Business Transactions in the Accounting System 23
Journal Entries 24
Basic Accounting Reports 26
Chapter 3 Forms of Real Estate Organizations 39
Sole Ownership 40
Common and Joint Ownership 40
Partnerships 41
Joint Ventures 43
Corporations 44
Limited Liability Companies 45
Real Estate Investment Trusts 46
Chapter 4 Accounting for Operating Property Revenues 49
Contracts with Multiple Components 49
Lease Classification 50
Lessor Accounting of Operating Leases 51
Types of Operating Leases 52
Additional Cost Recoveries 57
Operating Expenses Gross-Up 58
Contingent Rents 59
Rent Straight-Lining 60
Modification of an Operating Lease 65
Sublease of Operating Lease 67
Chapter 5 Accounting for Operating Property Expenses 69
Lessee Measurement and Recording of Operating and Finance Leases 70
Contracts with Multiple Components 71
Lease Liabilities and Right-of-Use Assets 73
Initial Direct Costs 74
Lessee Journal Entries of Operating and Finance Leases 75
Lessor Operating Property Expenses 81
Operating Costs 82
Chapter 6 Operating Expense Reconciliation and Recoveries 91
Most Common Recoverable Operating Expenses 92
Most Common Nonrecoverable Operating Expenses 92
Calculating Tenant Pro Rata Share of Expenses 93
Chapter 7 Lease Incentives and Tenant Improvements 97
Lease Incentives 97
Tenant Improvements 99
Tenant Improvement Journal Entries 99
Further Comparison of Lease Incentives and Tenant Improvements 100
Differences in Cash Flow Statement Presentation 101
Demolition of Building Improvement 101
Chapter 8 Budgeting for Operating Properties 103
What is a Budget? 103
Components of a Budget 103
Chapter 9 Variance Analysis 109
Sample Operating Property Variance Analysis 109
Salient Points on a Variance Analysis 112
Chapter 10 Market Research and Analysis 113
Market Research Defined 113
Market Analysis Defined 113
Market Research: Practical Process 114
Chapter 11 Real Estate Valuation and Investment Analysis 121
What is Real Estate Valuation? 121
Approaches to Real Estate Valuation 122
Chapter 12 Financing of Real Estate 133
Equity 133
Debt Financing 133
Other Financing Sources 136
Types of Loans 137
Debt Agreements 137
Financing Costs 141
Relationship Between a Note and a Mortgage 142
Accounting for Financing Costs 142
Chapter 13 Accounting for Real Estate Investments and Acquisition Costs 143
Methods of Accounting for Real Estate Investments 143
Purchase Price Allocation of Acquisition Costs of an Operating Property 148
Chapter 14 Accounting for Project Development Costs on GAAP Basis 153
Stages of Real Estate Development Projects 153
Pre-development Stage 154
Development Stage 156
Post-development Stage 161
Chapter 15 Real Estate Development Revenue Recognitions 163
Requirements for Revenue Recognition 164
Revenue Recognition Journal Entries 165
Revenue Recognition When Performance Obligation is Satisfied Over Time 166
Chapter 16 Real Estate Brokerage Accounting 169
Real Estate Brokerage Revenues 169
Brokerage Commissions in Real Estate Development Projects 174
Real Estate Brokerage Costs 176
Chapter 17 Audits 179
Audit Overview 179
Types of Audits 185
Index 191
