Do You Carry Your Properties At Historical Cost Or Mark Them To Market?

[Bryan Hancock]

When you do your accounting for your PFS, business books, etc. do you carry the projects at historical cost or mark them to market? If you mark them to market how do you determine "true" market value without cheating?

What do financiers generally want to see? Normally I would say historical cost is more conservative, but if property values have dipped this may no longer be the case :D

[J Scott]

It really depends on who the books are for.

From a pure accounting perspective, properties should be valued at their total cost (COGS for flips and total investment for rentals). From the perspective of creating a balance sheet for lenders, I use market value, which I determine by doing my own comp analysis.

Lastly, for my own personal balance sheet (so I know how I'm doing), I use market value minus the costs of sale, which represents my true net worth.