QuickBooks Desktop allows you to set up a company file that lets you run your property management business and do tasks such as receiving and tracking rent from tenants, paying property owners and management companies, fees and overhead charges for property maintenance.
As a property manager, you are actually performing the duties of two different types of companies. For one company, you act as an agent on behalf of the property owner. You collect rent and security deposits, pay for maintenance and repairs, and handle pass-through expenses to tenants. This is the "Rental Property company."
For the second company, you pay yourself by retaining a portion of the receipts, and ensure that the property owner receives the amount of money due. This is the "Property Management company." It's critical that you keep the transactions of the rental property company separate from your property management company. The way to handle this is to create two QuickBooks companies.
Before you start recording transactions, you need to complete the following tasks:
In QuickBooks, the Customer:Job list holds information about your customers and the individual jobs (or properties) that you track for them. You should set up each property owner as a customer in QuickBooks.
To create customers and job:
To add customized fields to describe property owners
You can use QuickBooks customized fields to add information about your customers. You may want to add the following information.
The tenants of a property you manage are jobs attached to the customers and the properties you manage for them. You should set up each tenant as a job in the Customer:Job list. The Customer:Job list stores information about each tenant, such as contact name, phone, property address, and work phone.
Categorize tenants by type
You can also categorize your tenants by type so that you can distinguish among different types of tenants. Customer types do not appear on QuickBooks forms, but you can create reports based on the information. You can also print mailing labels and statements based on customer type.
Here are suggested customer types for the rental property company:
In QuickBooks, you keep information about your vendors and subcontractors in the Vendor list. Your Vendor list will include your own property management company, and any other businesses you need to pay from the rental property company, for items such as taxes, mortgage, insurance, repairs, janitor, landscaping, homeowner associations, and so on.
The rental properties company is required to send 1099 forms to many types of vendors:
Be sure to set up QuickBooks for 1099 tracking. Refer to Set up and file 1099 forms for details.
The items on your QuickBooks Item list represent the services you provide to your customers and the charges you bill for on your statements. When you need to charge rent to a tenant, choose an item from the Item list and QuickBooks prints the name of the item with its description. If you enter a quantity for the item, QuickBooks also figures out the total and assigns that total to the appropriate income or expense account.
Here are some suggested items you may want to set up for your rental property company:
Items and subitems for commercial property managers
If you manage commercial properties, you may charge tenants for common area maintenance (CAM) fees. Most commercial property managers want to track CAM fees separate from other fees; you can use a combination of QuickBooks items and subitems to track the detail you need. For example, you can set up an item called CAM, with subitems for the types of CAM fees you charge tenants. You may want to create subitems for:
When you set up the CAM item and subitems, you can associate them with an income account called CAM Income.
You can set up properties as checking subaccounts, and as accounts receivable subaccounts. By setting up a checking subaccount and an accounts receivable subaccount for each property, you'll be able to keep cash and receivables for each property separate from cash and receivables from other properties. This is the recommended way to set up the properties your rental company handles.
An alternative method, setting up a class for each property, means that you can assign income and expense transactions to the appropriate property. However, using this method limits your reporting options.
Naming the properties
You must also decide how you want to refer to each property in QuickBooks. You can refer to the property:
The examples here refer to properties by address, but choose the way that best suits your business.
After completing the customer/vendors/services setup, you are ready to record and manage transactions for your property management company.
After you have entered the checks for fees due to your management company, create another Profit & Loss by Class report to determine how much is due to the property owner. By looking at this Profit & Loss by Class report (which now takes into account your management fees), you can determine the net income for the property. Use the net income figure to calculate what to pay the property owners. You may also want to print this report to send with your check to the owner.
Some property owners receive all of the net income from the property monthly, while others might elect to keep a percentage of the net income in their accounts until a reserve is reached.
If you generate another Profit & Loss by Class report (after writing the check to the property owner), you will see the net income for the property. If the property owner receives all the net income for the property, the net income for the property should be zero on the report. If the property owner leaves a reserve in the account, you should see the reserve amount in the net income.
Once you receive the rent and other payments from your tenants, you need to record the payments in QuickBooks.
To make reconciliation of banking records easier, follow these steps:
If you follow this recommendation, you will see bank deposits for each property listed separately when you reconcile your account in QuickBooks, as well as on your bank statement.
To receive payments by property:
To make deposits in QuickBooks
From the Profit & Loss by Class report, you can determine two important figures to determine the compensation for your property management company:
In many cases, the property management fee is a percentage of the total income of the property. By looking at the Profit & Loss by Class report, you can determine a property's total income. If the management fee is based on the total (gross) income of the property, use this figure to calculate your property management fee to determine the monthly income and expenses for properties.
If your management company keeps late fees, you can use the report to determine how much to pay the management company for late fees.
Once you have determined the management fees and late fees that should be paid to your management company, write a check in QuickBooks with your management company as the vendor.
When you write a check for the management fees, assign the expense to your management fee expense account.
If you pass the late fees to the management company, create an expense account for late fees and associate the late fee expenses with this account.
QuickBooks lets you bill your customers by sending invoices or billing statements. We recommend that property managers use billing statements rather than invoices, because they are better suited for the periodic billing used by property management firms.
A billing statement is similar to a credit card statement; it lists the charges and payments a tenant has accumulated over a period of time. You enter charges when they occur. If there are any special charges, such as tenant-related damages like a broken window, you can enter them as statement charges, and then print and send the statements. Don't confuse billing statements with reminder statements.
A reminder statement is used with invoices, and summarizes invoices sent during a specific period.
QuickBooks billing statements include the following:
Each time you want to charge a tenant (for rent, late fees, and so on), you'll enter a statement charge in that tenant's QuickBooks register, using an item from your Item list (such as Garage Rent). You should enter a separate charge for each item. If you have recurring charges (for monthly rental fees or CAM fees), you can memorize the statement charge and have QuickBooks automatically enter the charges for you.
You'll use the customer register to enter statement charges for rent, tenant-related damages, late fees, and so on. When you enter the charge in the register, you should assign it to the Accounts Receivable subaccount for that property. You should also choose the appropriate property in the Class field.
Many property managers assess late fees for rent that is not paid by a specified grace period. You can use the QuickBooks finance charge feature to set up late fees. With the QuickBooks finance charge, you can set up a minimum charge and an annual percentage rate.
To assess a late fee, you'll need to:
Most property owners require a deposit from their tenants at the beginning of a lease period. To track receipt of security deposits, you need to create a liability account (called something like Security Deposit) for tracking deposits. Deposits are liabilities because you may return all or some of the deposit to the tenant at the end of the lease, depending on the condition of the property.
After you create a liability account, you're ready to record the security deposits you have received.
To enter a security deposit:
In some cases you'll want to pass repairs or property costs to a tenant, rather than to the property owner. You might choose to do this when a tenant damages a property accidentally, or when tenants arrange with you to have work done on the property at their expense. If you have tenants who lease commercial properties, they may be responsible for common area maintenance fees (CAM), such as the utility fees on common areas like bathrooms and hallways.
You can use QuickBooks to write checks or enter the bills for such costs. Before you can assign costs to the tenant, you need to write a check for property expenses.
Then you can use this procedure to charge a tenant for costs.
You need to track expenses carefully so that you know exactly which expenses are for which properties. In QuickBooks, tracking expenses by property is simple because the properties are on the Class list.
QuickBooks gives you two ways to pay for property expenses: You can enter the bills for expenses and then pay the bills when they're due, or you can write a check when you receive the bill. The second method, described here, is recommended for property managers.
To write checks for property expenses when you receive a bill:
When you opened the checking account for the rental property company, you may have put money from the property management company into the account to get it started. If you did this, you'll need to account for that money, which belongs to the property management company.
To account for property management company money in the rental property company: