Microsoft Vista has implemented stricter security settings that change the way users access folders and files on their computers and in the process did make things more complicated for ProAPOD Real Estate Investment Software users.

Primarily, Vista’s default security setting prevents our real estate software users from saving their work, and in turn prompts an error message when attempting to Save As. This issue, of course, has been extremely frustrating, but not just for users of our software. Do a search for “Vista Read Only” and witness for yourself the countless inquiries and complaints made by Vista users on the web.

Why this problem with Vista? Microsoft attempted to make it more difficult for malware to access your folders and files but in this process (whether by design or oversight) also makes it more difficult for owners of those folders and files to access them.

After much research and some trial and error I discovered that the issue lies with the “permission” settings Vista applies to the folders by default, and the resolution is for the user to manually change those “permissions” in order to gain back the rightful control of those folders.

If you are currently using ProAPOD® Real Estate Investment Software on Windows Vista please read the following instructions to resolve the issue.

1. From your desktop right-click My Computer and then click Explore.
2. Click the plus (+) symbol on your C: drive to open the list of folders.
3. Scroll down to Program Files and click the plus (+) symbol to open the list of folders.
4. Locate and right-click the ProAPOD folder and then click Share…
5. Open the Security tab.
6. Under Group or user names click on Users. (Note in the Permssions for Users panel below that there are limited permissions; we want to achieve “Full control” for each group).
7. Double-click Edit.
8. Under Permissions for Users click Full control.
9. Click Apply and then click OK.

Result: ProAPOD will open normally (not as “Read Only”) and you can properly Save and Save As your files. If not, repeat these steps for each other group of names.

If you would like to read this article with screen shots please go to http://www.proapod.com/Articles/vista-perm.html

By Stephen L. Nelson, CPA

You can and should track any improvements and repairs you make to a property by using your Money account and category information. However, the steps you take to record improvements to a property and the steps you take to record repairs to a property actually differ.

Recording Capital Improvements

In the case of a capital improvement, you can’t legally charge off the cost of making the improvement as a deduction. In other words, you can’t include the cost of improving your property on your Schedule E as an expense. Rather, you need to add the cost of the improvement to the cost basis of the property. To do this, you record the check in the usual way but with one significant difference. Rather than categorize the check as falling into some expense category, you record a transfer transaction.

The transfer transaction moves money from your checking account to the property’s asset account.
By recording a transfer transaction, you reduce the balance of your checking account for the effect of the check. And you bump up the value or cost of the asset for the improvement. The first line of the register shows the opening balance, which is actually the original purchase price of the property. The second line shows the cost of the new roof improvement. This improvement adjusts the cost basis of the property.

Recording Capital Repairs

Repairs, in contrast, work just like any other expense. If a repair doesn’t significantly extend the life of a property, you simply use an appropriate real estate expense category for categorizing the check. The Schedule E shown earlier in this chapter includes a maintenance expense category. You probably use this to record any repairs you make as long as the repairs are not considered improvements.

How do I track depreciation on a real estate investment?

You can use Money to record the depreciation expense you have charged for a real estate investment. To do this, display the real estate asset’s account register. Then record expense transactions in the register equal to the amount of depreciation calculated for a year. The expense category you use to categorize such transactions is a real estate depreciation expense category. The depreciation expense transaction reduces the account balance of the asset account for the depreciation expense reported for the year.

You typically would not calculate the depreciation expense yourself. This value is calculated by looking up a depreciation factor in a table that is available in federal and state revenue agency publications. The rules for looking up the appropriate depreciation factor involve looking at the type of property you are depreciating, the date you originally put the property into service, the month of the year you put the property into service, and the number of years you have already depreciated the property.
Because the rules are complicated, most real estate investors get this information from their tax advisors. You will probably want to do so, too.

NOTE If you do want to make depreciation calculations yourself, you can obtain publications from the IRS that explain how to do this. You can also obtain any tax form or publication from the IRS web site at http://www.irs.ustreas.gov/.

About the Author

CPA Stephen L. Nelson is the author of do it yourself kits for Incorporating in California, California S corporation and California limited liability company.

Cash flow is all of a rental property’s cash inflows less all of its cash outflows. Just think of it as all the money flowing in such as rent, loan proceeds, and interest on bank accounts less all the money flowing out like operating expenses, debt payment, and capital additions and you’ll get the idea.

There are two types of cash flow connected with real estate investment property: Cash flow before taxes (CFBT)—does not consider the owner’s tax liability—and cash flow after taxes (CFAT)—does account for tax liability.

How to Calculate Cash Flow

Net Operating Income
less Debt Service
less Capital Additions
plus Loan Proceeds
plus Interest Earned
= Cash Flow Before Taxes (CFBT)

and,

Cash Flow Before Taxes (CFBT)
less Income Tax Liability
= Cash Flow After Taxes (CFAT)

Just to be sure you understand the formula let’s cover its components. Net operating income (NOI) is gross scheduled income less vacancy allowance less operating expenses. Debt service is the total loan payment (first, second, third loans) including principal and interest. Capital additions (different from maintenance and repairs) are improvements to the property having a useful life of more than one year and likely to increase (not merely maintain) the life of the property. Loan proceeds refer to the proceeds obtained from subsequent financing not to the original mortgage, where you might obtain a $40,000 second mortgage to cover the cost of constructing a $40,000 garage for instance.

The key to forecasting the cash flow a rental property you’re planning to purchase generates is to be realistic during your evaluation. It’s always better to anticipate a small or negative cash flow you can handle with personal funds rather than to encounter a surprise after you purchase the property. Avoid pie-in-the-sky rents and include all operating expenses when you conduct your rental property analysis. Remember, you’ll be paying for the cash flow a property generates, so be sure you know what the cash flow is most likely to be.

ProAPOD® Real Estate Investment Software computes cash flow before tax (CFBT) and cash flow after tax (CFAT) automatically as you enter the property data. Each is recalculated in real time whenever you make changes to the financial data. Reports such as the APOD, proforma income statement, and rent scenarios include cash flows you can preview on our website.