Property management accounting is the process of tracking and reporting a rental property\u2019s rent, expenses, security deposits and owner payouts. It keeps client money separate from the manager\u2019s own funds and produces owner statements, rent rolls and 1099s.<\/p>\n\n\n\n
In property accounting you handle other people\u2019s money, most states require trust accounting, monthly reconciliations and timely owner payouts. This blog covers what to track, which reports to prepare and how to build a monthly process that keeps owners informed and your business compliant.<\/p>\n\n\n\n
Property management accounting is the practice of recording and reporting rent, expenses, security deposits and owner payouts for rental properties. Unlike regular business bookkeeping<\/a>, it tracks money that belongs to owners and tenants and keeps it separate from the manager\u2019s own funds.<\/p>\n\n\n\n Every transaction is tied to a specific property, owner and tenant. Here is what a property manager tracks:<\/p>\n\n\n\n A rent roll is a report listing every unit in a property, its tenant, lease dates, monthly rent and payment status. Managers use it to calculate occupancy and delinquency.<\/p>\n\n\n\n Accounting is a huge deal for making daily decisions, keeping client funds safe and making sure a management company is playing by the rules. Here’s why it all matters.<\/p>\n\n\n\n Here are a loads of other points to help drive home why it’s so crucial,<\/p>\n\n\n\n At the end of the day, it all comes down to timing. With cash accounting, money gets recorded when it changes hands. With accrual accounting, income and expenses get recorded when they’re actually earned or incurred.<\/p>\n\n\n\n CAM (Common Area Maintenance) charges cover the shared costs of things like landscaping, lighting and snow removal that commercial tenants pay on top of their rent. They pay an estimate each month, and at the year end, the manager does a comparison to see if they matched the actual<\/p>\n\n\n\n Which to use:<\/strong><\/p>\n\n\n\n Quick example to follow it:<\/strong><\/p>\n\n\n\n A tenant\u2019s $2,000 rent is due October 1 but paid October 8, and a $500 repair is completed October 28 but paid in November.<\/p>\n\n\n\n These three statements answer different questions: Is the property making money? What does it owe? And how much cash is available?<\/p>\n\n\n\n A property level profit and loss statement gives you a clear idea of what a single property made and spent over a given month. To figure that out , take the rental income and other revenue and subtract the operating expenses from it – what you’re left with is your net operating income (NOI).<\/p>\n\n\n\n What it includes:<\/p>\n\n\n\n A balance sheet is a snapshot of what a property or owner entity owns and owes at a single given moment in time. It all boils down to one simple rule: the assets will always be equal to liabilities plus equity.<\/p>\n\n\n\n What it includes:<\/p>\n\n\n\n A cash flow statement is a handy tool for keeping track of the actual money coming in and going out of a property over time . It particularly helps with accrual accounting – that’s when you record income and expenses even before the cash has transferred.<\/p>\n\n\n\n What it includes:<\/strong><\/p>\n\n\n\n An owner statement shows the rent collected, bills paid, fees deducted and amount sent to the owner during the month.<\/p>\n\n\n\n Main elements to include are:<\/strong><\/p>\n\n\n\n Sample owner statement<\/strong><\/p>\n\n\n\n\n
Why Property Management Accounting Matters All Year Round<\/h2>\n\n\n\n
\n
Cash vs Accrual – Which Is the Right Way for Your Business?<\/h2>\n\n\n\n
What’s CAM reconciliation all about?<\/h2>\n\n\n\n
Situation<\/th> Better Fit<\/th><\/tr><\/thead> Individual landlord with a few residential units<\/td> Cash<\/td><\/tr> Tenants mostly pay on time<\/td> Cash<\/td><\/tr> Commercial leases with CAM charges or prepaid rent<\/td> Accrual<\/td><\/tr> Lenders or investors require GAAP statements<\/td> Accrual<\/td><\/tr> Multi-owner portfolio needing accurate monthly reports<\/td> Accrual<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n \n
The Financial Statements You Will Actually Use<\/h2>\n\n\n\n
Property Level Profit and Loss Stuff<\/h3>\n\n\n\n
\n
Balance Sheet Situation<\/h3>\n\n\n\n
\n
Cash Flow Statement<\/h3>\n\n\n\n
\n
What Belongs in an Owner Statement<\/h2>\n\n\n\n
\n