Structuring rental properties

Posted by stubulman@comcast.net on December 4, 2008, 9:21 am

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I apologize if this has been asked and answered before. I am helping a
friend set up her books. She is a sole proprietor who owns three
rental properties. She has a dedicated business checking account and
credit cards. So far so good.

Scenario:

Three rental properties are owned by Ms. Jones. (I have designated
each rental property as a *class* for ease of tracking.)
The properties are managed by a property management firm.
The property management firm collects rent, provides and pays for
maintenance and other services, and also takes a commission.
The property management firm then provides the owner with a detailed
monthly statement of the above items along with a check for the *net*
proceeds.

Obviously maintenance and commissions referenced above are expenses
ultimately borne by the owner. However the owner receives a check only
for the net amount. The physical check received does not represent
gross income.

How do I structure this scenario to track gross income with attendant
expenses? Are some dummy/phantom accounts necessary?

Thank you,
Stu

Posted by Laura on December 4, 2008, 1:03 pm

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>I apologize if this has been asked and answered before. I am helping a

> friend set up her books. She is a sole proprietor who owns three

> rental properties. She has a dedicated business checking account and

> credit cards. So far so good.

> Scenario:

> Three rental properties are owned by Ms. Jones. (I have designated

> each rental property as a *class* for ease of tracking.)

> The properties are managed by a property management firm.

> The property management firm collects rent, provides and pays for

> maintenance and other services, and also takes a commission.

> The property management firm then provides the owner with a detailed

> monthly statement of the above items along with a check for the *net*

> proceeds.

> Obviously maintenance and commissions referenced above are expenses

> ultimately borne by the owner. However the owner receives a check only

> for the net amount. The physical check received does not represent

> gross income.

> How do I structure this scenario to track gross income with attendant

> expenses? Are some dummy/phantom accounts necessary?

> Thank you,

> Stu

All rents received are recorded as income and anything paid out of those
funds are treated as expenses. Nothing special needs to be done.

You can do this a couple of ways: easiest would be to set up a memorized
journal entry that records the income and expenses per the statement
received from the property management firm. The credit side will be income
and the debit side will be the expenses + the net cash received. Use
appropriate class values on your income and expense.

Posted by stubulman@comcast.net on December 4, 2008, 4:34 pm

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> >I apologize if this has been asked and answered before. I am helping a

> > friend set up her books. She is a sole proprietor who owns three

> > rental properties. =A0She has a dedicated business checking account and

> > credit cards. So far so good.

> > Scenario:

> > Three rental properties are owned by Ms. Jones. (I have designated

> > each rental property as a *class* for ease of tracking.)

> > The properties are managed by a property management firm.

> > The property management firm collects rent, provides and pays for

> > maintenance and other services, and also takes a commission.

> > The property management firm then provides the owner with a detailed

> > monthly statement of the above items along with a check for the *net*

> > proceeds.

> > Obviously maintenance and commissions referenced above are expenses

> > ultimately borne by the owner. However the owner receives a check only

> > for the net amount. The physical check received does not represent

> > gross income.

> > How do I structure this scenario to track gross income with attendant

> > expenses? Are some dummy/phantom accounts necessary?

> > Thank you,

> > Stu

> All rents received are recorded as income and anything paid out of those

> funds are treated as expenses. Nothing special needs to be done.

> You can do this a couple of ways: easiest would be to set up a memorized

> journal entry that records the income and expenses per the statement

> received from the property management firm. The credit side will be incom=

> and the debit side will be the expenses + the net cash received. Use

> appropriate class values on your income and expense.

Laura,

Thank you so much for your quick response. I really appreciate it.

Stu