Which account does property managers hold Reserve funds?

Question

Hi guys,

I recently obtained my brokers licensed in Tennessee and I am launching a property management business in June. In Tennessee, brokers are required to maintain an operational account and trust account. The only thing I am unclear on is which account does owner reserves belong?

Also, which method for setting up bank accounts seems less complex as it relates to accounting and reconciling.  I hear some say they have separate accounts per owner and others who just keep it simple with 1 operating and 1 trust account. I guess either would be fine as long as the bank statements are matching up to the balance statements. Please chime in on how your company is set up.

Thanks!

Kim Meredith Hampton · Answer

@Candace Ellison hi Candace

We actually have three accounts, and make sure they are all labeled correctly. We have a Trust account, which is where all rents are posted, bills paid on each property, and any reserves you have set aside for each owner. We are required to reconcile every month, with all documents attached to the reconciliation that outlines what each owner has in their account.

We have a second account that is called Escrow, that is where all security deposits, Advanced rents, or pet deposits. This is also reconciled every month, with a report that states what each and every tenant has in their account.

Our third account is our operating account for our company, from there, all company bills, payroll, mortgage or rent etc,,,  are paid from. We are not required by law, but we also reconcile this every month as well

Each state has different rules and regulations, so please check and verify

All the best to you on your new adventure