Blog · Finance metrics and formulas
A real estate balance sheet records a property company's assets, financing obligations and equity at a reporting date. Work through property cost, depreciation, mortgage balances and a two-period reconciliation for an operating company.
A real estate balance sheet shows a property company's recorded assets, liabilities and equity at a reporting date. Read land, buildings and accumulated depreciation alongside mortgage debt and other obligations. The useful comparison explains how those balances changed and proves that both sides still reconcile.
Start with the legal entities covered by the report. A property-owning subsidiary, a management company and a consolidated group can show very different assets and obligations. Use consolidated balance sheets when the question concerns the group rather than one property company.
This example concerns a fictional US commercial-property operating company using a cost-based property ledger. It is a management reporting exercise, not a property appraisal or a recommendation to acquire real estate. Keep the ledger's recorded values separate from market-value estimates.
The SEC balance sheet presentation rule separately identifies property, accumulated depreciation and mortgage or other long-term debt disclosures. Those distinctions help an operating-company reader avoid treating a single net property amount as a complete explanation.
Assets = Liabilities + Equity
Net recorded property = Land + Buildings and improvements − Accumulated depreciation
For the broader statement structure, use the general balance sheet guide. Here, the focus is property balances, financing and the supporting schedules that prove them.
Use a closing trial balance with account codes, descriptions, reporting dates and signed balances. Add the fixed-asset register by property, the mortgage principal schedule, the rent receivables report and the tenant deposit reconciliation. Retain a property or entity identifier when comparing locations.
The property register needs opening cost, additions, disposals, accumulated depreciation and current-period depreciation. The mortgage schedule needs opening principal, proceeds, repayments and closing principal, plus the split between current and noncurrent balances used in the accounts.
Keep land separate from depreciable buildings. The IRS depreciation guide explains that land itself is not depreciable for federal tax purposes. That is tax guidance; use the company's book depreciation policy and book register for this balance sheet, rather than copying a tax depreciation schedule into it.
Fictional Cedar Court Properties LLC compares December 31, 2025, with June 30, 2026. It owns and operates commercial buildings in the US. The supplied balances below are in USD, with accumulated depreciation shown as a deduction.
| Asset | December 31 (USD) | June 30 (USD) | Change (USD) |
|---|---|---|---|
| Unrestricted cash | 600,000 | 750,000 | 150,000 |
| Rent receivables | 100,000 | 120,000 | 20,000 |
| Restricted cash | 200,000 | 230,000 | 30,000 |
| Land | 2,000,000 | 2,000,000 | 0 |
| Buildings and improvements, cost | 8,000,000 | 8,400,000 | 400,000 |
| Accumulated depreciation | (1,600,000) | (1,800,000) | -200,000 |
| Total assets | 9,300,000 | 9,700,000 | 400,000 |
The liabilities and equity reconcile to those totals:
| Liability or equity | December 31 (USD) | June 30 (USD) | Change (USD) |
|---|---|---|---|
| Accounts payable and accrued expenses | 250,000 | 300,000 | 50,000 |
| Refundable tenant deposits | 150,000 | 160,000 | 10,000 |
| Current mortgage principal | 300,000 | 350,000 | 50,000 |
| Noncurrent mortgage principal | 5,000,000 | 5,100,000 | 100,000 |
| Members' equity | 3,600,000 | 3,790,000 | 190,000 |
| Total liabilities and equity | 9,300,000 | 9,700,000 | 400,000 |
June liabilities are $300,000 + $160,000 + $350,000 + $5,100,000 = $5,910,000. Adding $3,790,000 of equity gives $9,700,000. The June balance check is therefore $9,700,000 − $5,910,000 − $3,790,000 = $0.
The supporting schedules explain why the closing balances moved. Assume the following recorded activity, with no property disposals, impairment, owner contributions or other equity movements during the period.
| Schedule | Opening balance (USD) | Recorded increase (USD) | Recorded reduction (USD) | Closing balance (USD) |
|---|---|---|---|---|
| Building cost | 8,000,000 | 400,000 additions | 0 disposals | 8,400,000 |
| Accumulated depreciation, positive balance | 1,600,000 | 200,000 depreciation | 0 disposals | 1,800,000 |
| Mortgage principal, all maturities | 5,300,000 | 300,000 proceeds | 150,000 principal repaid | 5,450,000 |
| Members' equity | 3,600,000 | 340,000 net income | 150,000 distributions | 3,790,000 |
Net recorded property starts at $2,000,000 + $8,000,000 − $1,600,000 = $8,400,000. It closes at $2,000,000 + $8,400,000 − $1,800,000 = $8,600,000. The $200,000 increase is additions of $400,000 less depreciation of $200,000.
Total mortgage principal increases by $150,000 even though the current portion rises by only $50,000. The maturity split is a classification within total debt; do not count a reclassification as new borrowing.
The equity bridge also shows why income differs from the change in equity. Net income is $340,000, while distributions reduce the increase retained in the business to $190,000. A supporting income statement proves that earnings input; the balance sheet alone cannot reconstruct it.
Two simple ratios answer different questions. Round the final percentages to two decimal places and keep full-dollar balances in the calculation.
| Measure | December calculation | December result | June calculation | June result |
|---|---|---|---|---|
| Mortgage principal / total assets | 5,300,000 / 9,300,000 | 56.99% | 5,450,000 / 9,700,000 | 56.19% |
| Mortgage principal / net recorded property | 5,300,000 / 8,400,000 | 63.10% | 5,450,000 / 8,600,000 | 63.37% |
Debt increased in dollars. It fell relative to total assets but rose slightly relative to recorded property. Neither ratio is an appraisal-based loan-to-value measure, and neither should replace a lender's defined covenant calculation.
The controller owns the book-property and equity reconciliations. Treasury owns debt balances, maturities and restrictions on cash. Property operations owns the supporting rent and tenant records. FP&A uses the combined comparison to identify questions for those owners, then develops specific movement explanations through flux analysis.
Bring your property-company balance sheet, fixed-asset and mortgage reports as a file or Google Sheet; Covirage maps the columns, and its tools compute comparisons and check the figures. The external AI model explains the result with every figure traced to its rows. Create a free Covirage account, which takes about a minute, then set up your business and bring a sample of your own data.
See FP&A reporting in Covirage for the supporting reporting context.
Not necessarily. The example here uses recorded property cost less accumulated depreciation. An appraisal is a separate valuation with its own date and assumptions. Do not replace book amounts with an estimate of market value inside a ledger reconciliation.
Separate principal from interest using the lender statement and accounting entries. Principal repayment reduces the mortgage liability. Interest affects the relevant expense or capitalized cost under the company's accounting policy. The full cash payment should not be deducted from debt.
A refundable tenant deposit represents an obligation to the tenant until it is settled under the lease terms. Keep the liability distinct from any restricted cash supporting it. Its receipt alone does not establish earned rent revenue.
No. Equity is the residual accounting interest after liabilities, and much of it may be represented by property assets. Distribution capacity requires a separate review of unrestricted cash, expected payments, financing terms and the company's approved distribution policy.