How to track income/expenses when income is net of fees

Question

My property manager uses Appfolio. When I receive my rent payment each month, it’s put into my account as a single deposit. This number consists of the combined rent for all of my properties. It is also net of all expenses like repairs and management fees.

I’m trying to figure out a way to use something like Quickbooks or YNAB to track all of the income and expenses for each of our houses but when I come to the point in which I need to reconcile the account, things don’t line up. For example, if there was a $100 repair for property #2, there’s no transaction in my bank account that exists for it. The one deposit into my bank account is simply $100 less than it would have otherwise been.

I need to track the income and expenses on a property by property basis for tax purposes and I’m having trouble figuring out how to get around this issue. The lack of continuity between the appfolio report and my bank account is something that I would imagine other folks have dealt with.

Any advice would be much appreciated!

Dan V. · Answer

@Dan Turkel You will need accounting software that can track transactions by property. We've been using Quickbooks so that's what I recommend, either the QBO Plus (with Class feature) or the QB Desktop. As far as the PM transactions, you will need to set up the PM as a bank account and treat it as such when bookkeeping. Request monthly owner statements from your PM then enter each line item to the PM "bank account". Then reconcile the PM statements every month to make sure all transactions were captured.

Drew Sygit · Answer

Your PMC should be giving you enough detail on your monthly statements to figure this out. Appfolio has a couple of different statement formats you can work with your PMC to select the one that best suits you.

Our goal is to give our clients an Annual Owner Statement with a 1099 each January that they can just hand to their tax professional and be done. Our owner statements have enough detail that re-entering the info in QB or other accounting software is a waste of time for most.

Todd Lennig · Answer

@Dan Turkel. If you are still having trouble figuring this out in Quickbooks I would be happy to schedule a time to do a screen share and walk you though how to do it.  The first couple times are tough but it can be done.

Basit Siddiqi · Answer

@Dan TurkelThe correct way to do it.You record an 'adjusting journal entry' for your PM transactions that indicate what the PM mentions in their monthly PM Report.The net amount owed to you is either ' Due from PM' or 'Due to PM'.When you receive the payment from your PM, it updates the Due to / Due From account.Example - A monthly PM company reporting $1000 of rental income and $100 of PM FeesDue from PM - $900PM Fee - $100               Rental Income               $1000Cash           900               Due From PM                  $900Difficult for most non-accountants to understand.best of luck

Soh Tanaka · Answer

I'm not an accountant, but my accountant is pleased with how I do it.

You need to set up an "Other Asset Account." Enter all the transactions that happen within the property management company there (such as receiving rent, taking the management fee, paying for repairs, etc.) The single deposit ("owner draw") can be recorded as a deposit from the "Other Asset Account" to your bank account. This way, you have all the transactions recorded per the property, and also the actual bank transactions match the QB (or other accounting software) transactions.

Bill B. · Answer

Quickbook’s little brother quicken is overkill for 20 properties and imho much easier for the non-cpa.

What you need, and obviously your PM better be providing is a report each month that shows all incomes and expenses.

When I get that report quicken let’s me do what nothing simpler let’s me do. I looked at YNAB and intuits personal product mint. Hey just aren’t set up for subcategories of expenses.

I go to my checking account and enter a “split deposit”. You enter the amount deposited and then enter s many lines.  You need (at least 40 or 50 sometimes in my case.) of individual “reasons” for income and expenses (property #1 rental income, #1 management expenses, #2 income, #2 management expense, #2 plumbing repair, #3 income, #3 management expense #3 landscaping expense #3 commission to realtor finding tenant, #4 income #4 management #4 landscaping…etc etc..) this will then either equal your deposit or have a last line that shows the amount you are out of balance where you missed an item or entered an incorrect amount.

Doing this let’s you produce a report of any property’s  income or expense over any time period. Or a report of how much you spent on any time of expense over any group of your properties. I literally spend 10 minutes per month on the accounting for a dozen properties instead of 5 so that I can show the expenses by type and property.

At year end I give my cpa a 1 page report for each property that shows the dates of each income and expense and the totals for each kind for the last year. He can then account for each property in less than 5 minutes for the year.

Dan Turkel · Answer

I appreciate the offer and will let you know if this is necessary! I believe I may have it figured out now though

How to track income/expenses when income is net of fees

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