When to Record Rental Income w/ Property Manager

Question

I use a property management company and they receive rent at the beginning of the month but don't disburse it to me until a few weeks later.

For my bookkeeping would I want to record the rental income when I actually receive it or when the tenant pays the property management company?

Dave Spooner · Answer

@Eric H. I also have had some clients run into this issue. I think this article breaks down step by step how to account for it.

Soh Tanaka · Answer

@Simon W. I just like to have all the information in one place. PM report/record only has rent, repairs, etc. but not mortgage interest, depreciation, insurance, etc. It's much easier, at least for me, to look at one report to show ALL the information, even if that means some extra bookkeeping. To each their own.

Simon W. · Answer

I have to disagree with that, but I understand the concern. All the places I worked for did the full accounting. A lot of the Mortgage/Interest payments are recurring and comes out directly from the Owner's bank. The accountant just records it as a Journal Entry.

Perhaps, there are just different types of PM companies that do different things.

Simon W. · Answer

That is correct. I was always the accountant for the PM so everything was completely recorded.

Soh Tanaka · Answer

@Simon W. Now I think finally understand why we keep going back and forth. So in your experience, PM records everything (insurance expense, interest expense, principal paydown, depreciation, etc.), so there's no need for the owner to have another book. Is that correct?

Well, I am a property manager, and I do NOT do that for my owners. I also hire property managers, and none of them do that. I also know a lot of property managers, and none of them do that.

Basit Siddiqi · Answer

Property management companies should never be responsible for paying the mortgage interest and insurance.That is billed directly from the bank to you.I wouldn't even want the property management company to be responsible for that.Imagine that they had to take care of that for their hundreds or even thousands of clients. It would be a mess.Property management company should be responsible for collecting rent, managing the tenant and the property which includes repairs and utilities.You record this transaction once when the property management company reports the monthly statement to you.

Simon W. · Answer

So the PM does not provide full accounting. I never had to work for a company that didn't do a full accounting.

Simon W. · Answer

@Soh Tanaka if the PM is doing the accounting work, you shouldn't have to do all of that. A quick Income Statement will show you how much money you received and the management fee will be in the expense side.

It just seems like you are doing extra work and I understand why you would want to do that, but if you look at the accounting records, that should be sufficient enough to tell you how much you income and expenses went in and out every month. The bank reconciliation report should also be provided to you so you know how much money is being held in your "account".

You should have access to the bank account since technically it is yours in which you can take out funds whenever you want. It would be up to the accountant to follow up on the money withdraws.

Soh Tanaka · Answer

@Simon W. Yes, it's easy to miscommunicate.

Regarding the original question, I do enter both, not just the date that PM got paid rent/paid expense but also the date that I actually received the owner draw.

Let's say on 12/1, the PM receives $1,000 rent and take out the management fee of $100 (made up number) on 12/10 and pays $900 to the owner on 12/20, I record the rent receipt on 12/1 to my "funds held by PM" escrow account and take out (pay) $100 on 12/10 from the same account, and then deposit $900 on 12/20 from my "funds held by PM" account to my bank account.

I got the impression that you were implying just to use the record from the PM. While the entries I do above is the duplicate of what I can get from my PM, by entering the transactions, plus the insurance, depreciation, etc. to my QuickBooks, I have a comprehensive record in one place. I use different PMs, so it's nice to have all the records in one place, QuickBooks.

Simon W. · Answer

Maybe there is a miscommunication. How would it be missing insurance, tax, depreciation, etc, if you don't record both?

The question is "For my bookkeeping would I want to record the rental income when I actually receive it or when the tenant pays the property management company? "

The date should be when the PM receives it, not when you receive it. PM is acting on behalf of the LLC. The LLC received the money and that is when it is recorded.

When to Record Rental Income w/ Property Manager

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