I have rental properties and wanted to know how to record properly the fee/commission you pay your broker/agent when we sign a new lease. In the past the new tenant was making the check directly out to the broker, now the broker wants me to pay the fee/commission.
So in my case, ( the fee is 1 month rent) the new tenant paid me the 1st month rent that i have recorded as rent payment and now i need to record the check for fees/commission to the broker. How do you record this and what accounts do you use ? is it a negative rent income account ? or something else ?
The broker fee is an expense and, technically, it should have been recorded that way even when your tenant was paying the broker directly. So, the payment from your tenant to you is rent income and your payment to the broker is 'Broker Fee' or 'Broker Commission' expense. IMO, you want to record it as income (not a liability) so that your income received matches the tenant's rent paid. The bottom line is the same either way.
The rent the tenant pays you the landlord/manager is a liability, so it should be booked to a liability account.
Then you pay the owner of the property, on the payment liability account, total amount of rent your fee income account, amount of the fee as a negative number
The broker fee is an expense and, technically, it should have been recorded that way even when your tenant was paying the broker directly. So, the payment from your tenant to you is rent income and your payment to the broker is 'Broker Fee' or 'Broker Commission' expense. IMO, you want to record it as income (not a liability) so that your income received matches the tenant's rent paid. The bottom line is the same either way.
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