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Community Explorer **

Receiving tenant prepayments

I have real estate tenants that pre-pay for triple-net expense (taxes, insurance, & maintenance) throughout the year. Their monthly payment is estimated based on the prior year's numbers. At the end of the year, I total up the actual triple-net expenses and bill them for the remaining balance (or issue a refund).

 

I am trying to keep up with their monthly pre-payments so they can be applied to the invoice at the end of the year. My issue is that their monthly pre-payment is released to the owner each month along with the rental income and needs to be shown as income on that month's income/expense report. But I also need to be able to apply those monthly pre-payments to the invoice at year's end.

 

For example: How can I receive the pre-payment in Feb 2019 and show that income on the owner's statement for Feb 2019, and apply it to the invoice that will be billed in Jan 2020?

4 Comments
QuickBooks Team

Re: Receiving tenant prepayments

Thanks for providing on-point details about your concern, @JRH11

 

You can use upfront deposits to record your tenant monthly prepayments. This way, you can apply these to your invoice at year's end. 

 

First, you'll have to set up a current liability account. Upfront deposits or retainers are liabilities, even though you deposit the money into your owner's bank account. Here are the steps: 

  1. Go to the Lists menu at the top.
  2. Select Chart of Accounts.
  3. Click the Account drop-down at the bottom, then choose New
  4. Select Other Current Liability as the account type.
  5. Enter a name for the account in the Name field, such as Prepaid Rent
  6. Click OK.

Second, you can create an item to use when you create the associated transactions. This is to properly track your upfront deposits every month. Here's how: 

  1. Go to the Lists menu at the top.
  2. Select Item List.
  3. From the Type drop-down menu, select the purpose of the deposits you collect.
  4. In the Item Name/Number field, enter an appropriate name.
  5. Choose the liability account you created from the Account drop-down list.
  6. Click OK.

 

Once done, you can enter sales receipts to record the monthly prepayments. These will show up on your Balance Sheet report. At the end of the year, you can create invoices to apply those payments. For more detailed steps on how to do this, you can proceed with the Step 3 on this article: Manage Upfront Deposits or Retainers

 

I suggest running any company and financial reports to ensure your books are accurate. 

 

I'm always here to help if you have other concerns. Have a good day. 

Community Explorer **

Re: Receiving tenant prepayments

Thank you for the response!

When I follow these steps, the only income I see on the Profit & Loss report is the regular rental income. The prepayment (liability) only shows up on the Balance Sheet report, but does not show up on the P&L as income. Am I running the wrong report?

QuickBooks Team

Re: Receiving tenant prepayments

Hello there, @JRH11.

 

I'd be glad to help share additional information about running reports in QuickBooks Desktop (QBDT).

 

The Profit and Loss (Income Statement) report summarizes your income and expenses for the year to know whether you're operating at a profit or loss. On the other hand, the Balance Sheet report gives you a financial snapshot of your company as of a specific date. It calculates how much your business is worth (business's equity) by subtracting your liabilities (money your company owes) from your assets (everything it owns).

 

In this case, only income and expenses accounts will show up on the Profit and Loss report and assets, liabilities and capital on the Balance Sheet. This is the reason why the prepayment (liability) is only showing on your Balance Sheet report.

 

You can check these articles for additional reference about running reports in QBDT:

Please let me know if you have any other clarification about running reports, I'll always be here to help. Have a great day ahead!

Established Community Backer ***

Re: Receiving tenant prepayments

Prepayments in rental real estate are monies you as a landlord have received prior to a monthly invoice having been issued to apply the prepayment to. 

 

Regardless of type of lease here is an example. I pay you in January for the first 6 months of the year. January tent is income but the other 5/6 of payment is all prepayment and not income until invoiced so on Feb 1 1/6 of original payment gets posted to income. Same on March 1 and so on. A P&L run on 3/31 will show 3 months of rent income even though I paid for 6.