Rental Management Company

Here is my suggestion -

Setup each property as a class, each unit (tenant) as a customer, and each landlord as a vendor.

Then, apply the class to every income and expense transaction.  This will give you the Profit and Loss by Class (property).

I might keep one file for the properties and a separate file for my business.  That way you can track the P & L for the Landlord in that file . . .and your management fee income and operating expenses in another file.

>> My thinking is this - the rent income is not income to you, but a liability - since you are sending the rent (less fees and expenses) to the landlord.  But, if you want to track the P & L of each property, you would want to record it as such. . .

I hope this helps,

Laura D

I would setup each owner with their own QB company data file... So that way if you have any problems with the property owner you won't have to give them a data file with someone else property information.(they have the right to a copy of the data file if they leave or fire you) You really should have separates bank accounts for each property owner. You can't commingle funds of property owners together. At least not here is Calif. you can't... and in most states... Check with your local real estate board.. When you pay yourself you should write out a check for your fees from each property owners bank account made payable to you. This way, you leave no questions about how much your fee is...

Good point, Ted.

However, is one 'obligated' to turn over the QuickBooks file?

If obligated, your point is definitely something I should have considered in my previous post.

Thanks,

Laura D

Say I am an property manager with 2000 properties and 500 owners:

• Agreement letter: It is very important for the property manager and the property owners to mention in detail about what services and documentation they would provide and date. Its all about putting policies and procedures in place.
• Turning data file to owner:  That is news to me. There is no written documentation by any state. Please keep me update on the links.  Yes you have to account for money received and spend and give a PDF or printed report to the owner. Check out the state listing for the Real Estate Commission Board
• Creating separate data file for each owner: Are you advising a client to keep 500 QuickBooks files. Do you know how many times does a property manager have to open a file? In the first 6 days 15 times or more for one data file. I disagree.
• Separate bank accounts: so if I manage 1000 owners property, I have to reconcile 1000 bank accounts?  That is so not true. I disagree.

If I am wrong, please let me know. I definitely would like to learn more. Keep us all posted.

I agree not to commingle owners funds and your business funds. It is very important for a property management company to get advice, laws from a property management professional, association and/or their state.

Join us "Year End with QuciKBooks Property Management" with Intuit December 1st, 2009 @ 1 pm EST send me an email

Gita Faust
Advanced Certified QuickBooks ProAdvisor®
Enterprise Suite Certified | Point-of-Sale/Retail Solutions Certified
Member of Intuit Trainer/Writer Network
Author of "Accounting for Real Estate Agents" | "Manage Community Associations with QuickBooks" for Condo & HOA | "Manage Properties with QuickBooks" for property owners | "Manage Properties with QuickBooks" for property managers
http://community.intuit.com/me...
 

If one has that many properties, they are not using QuickBooks, they either have a high priced financial software program that costs !0,000, and they have a large staff.  Most of us here are not that big.  So we need to keep it simple, and we must take into consideration our clients.

No law that we have to give our clients a copy.  But it is a good idea and they too need to file their taxes.  And by giving them their own data backup, they can do so.

Just my 2 cents worth

Nancy Neville, Certified QuickBooks Pro Advisor

http://www.nancyneville.homested.com

Laura rent is income not a liability.  Security Deposits are called Other Current Liabilities.

A Liability is something you pay back.  Rents are income.  They are ours to keep.

Nancy Neville, Certified QuickBooks Pro Advisor

Landlord Consultant, Author and Owner of the Landlord School

http://www.nancyneville.homestead.com

Yes, Nancy - I see that my post wasn't really clear.

Rents are not income to the Property Manager, but to the Landlord.  (This I know.)

I meant that you (the property manager) might want to track your own business in a separate file and keep the Property Management accounts in its own file because the income is income to the property owner and not income to the manager.

Laura D

LauraD - i have read several posts and an old QB helpfile chapter that recommends setting up 2 companies.  The "Properties Company" and the "Management Company".  From the helpfile, The purpose of the "properties company" is to track income and expenses for each property being managed.

Per your comment "Rents are not income to the Property Manager, but to the Landlord.", rents are income to the "properties company", correct?

In my situation (typically short term renters), the renter is charged for a variety of costs... rental price, extra person fee, cleaning fee, process fee, secdep, sales tax, and lodge tax.  Together these costs represent the renter's total costs for their stay. I am creating an INVOICE for each renter that lists these costs using ITEMS.  Each INVOICE is tied to a CUSTOMER/JOB (the renter), to a class (the property), and to an account (the property's A/R subaccount). 

Each property has its own ACCOUNTS RECEIVABLE subaccount under the parent A/R account.  The invoice is assigned to the corresponding property's AR subaccount.  The class for each item on the invoice is assigned to the CLASS defined for that particular property.

When a payment is received, the RECEIVE PAYMENTS option in QB is used to record the renters full or partial payments, which pays down the invoice.  When receiving payments,  the RECEIVED FROM value is the renter (customer/job), and the specified A/R Account is the property's A/R subaccount.  This appears to work fine.

But playing with the Profit And Loss by Class report, i found that the ITEMS i am using on INVOICES were tied to inccorrect COA type accounts (income v. expense).  Back to your comment "Rents are not income to the Property Manager, but to the Landlord.", my "rental price" item (and extra person charges both of which are 'earned' by the property owner) used on invoices has to be tied to an INCOME account.  All the other ITEMS (processing fee, cleaning fee, secdep amt,) used on the invoice need to be tied to an "Other Current Liability" account so that those items are not reflected on a property's PROFIT AND LOSS BY CLASS report.  Per the renter's invoice, the property owners are only earning the rental price. And there are no property owner expenses on the renter's invoice.

The MGT company earns the processing fee, the cleaning fee is paid to a cleaner, the secdep is held and later partially or fully returned to the renter.

Property owner expenses (plumbing, electrical, reservation commissions we earn,...) are entered as BILLS in QB. For each bill entered in QB, you specify the ACCOUNT, the CUSTOMER/JOB and the class. The ACCOUNT used is an EXPENSE account (such as REPAIRS AND MAINT). The CUSTOMER/JOB is the property itself (each property is defined as a customer), and the specified CLASS is the property (each property is defined as a class).

This way, the P&L BY CLASS report lists the income (rental price) and the expenses (the bills) to give a net amount.

Does this sound like a valid approach?