I am a commercial real estate investor. How do I categorize the fees I pay to a property management company?

Is it not just an Expense? 

Create an Expense Account called Management Fees.  And on the chance your business grows and you end up using multiple management companies, I'd create a Sub Account with their name.  So it would look something like:

Management Fees                     Expense

- ABC Managment

- DEF Management (Future)

- GHI Managment (Future)

I'm here to help categorize fees on your QuickBooks account, kevin-hrproperty.

I can see that you're tagging this post under QuickBooks Self-Employed. Expense categories in QuickBooks Self-Employed are based on IRS Schedule C categories.

You can use the Legal fees and professional services category for assistance with specific business deals, sales transactions, or yearly taxes. To learn more about this, check out this link: Schedule C and expense categories in QuickBooks Self-Employed.

To categorize those fees, follow these steps:

1. Go to the Transactions menu.
2. Find a transaction on the list.
3. Select Business if the transaction was for business.
4. Review the category in the Category column. QuickBooks tries to categorize transactions for you.
5. If you need to change the category, select the category link.
6. Select a general type, and choose a more detailed category.
   
   

Each time you categorize a transaction, QuickBooks matches it to a line on your Schedule C. I'm adding this article for additional information: Categorize transactions in QuickBooks Self-Employed.

You can also create and manage category rules to quickly categorize common expenses and income.

If you're using QuickBooks Online, you can follow the instruction provided by Pete_Mc in this thread.

Let me know if you need more help with categorizing bank transactions in QuickBooks. I'm always glad to help you.

My question is actually twofold, since I use both QuickBooks Online and Self-Employed.

For Online: Yes, it is an expense, but I was wondering under what subcategory. I'm assuming office/general administrative expenses. These are monthly expenses paid to a legally separate but "in-house" management company that handles general property management, administrative, and bookkeeping work.

For Self-Employed: Self-Employed does not allow users to add categories. Would this expense fall under other business expenses or legal and professional fees?

Hello, @kevin-hrproperty.

Choosing the right expense category for your transactions ensures that you're able to record it to your books properly. Also, this ensures that your taxes are accurately calculated especially for QuickBooks Self-Employed. Let me share some information to help address your questions.

When tracking the fees you paid for short-term professional advice (including lawyers and accountants). It's for assistance with specific business deals, sales transactions, or yearly taxes. You can categorized it under Legal Fees and Professional Services. Here are the type of expenses included in this category:

• Professional association membership fees
• Organization dues (including state bar dues)
• Legal fees for business matters
• Accountant fees
• Short-term consulting fees
• One-time management consultation fees
• One-time marketing consultation fees
• One-time engineering consultation fees
• One-time technical consultation fees
• Fees paid for Web site analysis
• Other outside consulting fees for short-term advice on specific deals
• One-time logo and web design fees
• Fees paid to talent agents or business and personal managers who aren't paid as employees

Meanwhile, you can put transactions that are quite tricky and complicated under Other Business Expense. Here are some examples of transactions:

• Memberships/subscriptions
• Printing
• Uniforms
• Apps/software/web services
• Computers
• Copiers
• Furniture
• Other tools and equipment
• Phone
• Photo/video equipment
• Other business expenses

You can refer to these articles as your guide in categorizing other expenses:

• Categories in QuickBooks Self-Employed.
• Custom categories in QuickBooks Self-Employed.

On the other hand, I'd recommend consulting with an accountant so you'd be guided in assigning the right expense category. 

Please feel free to leave a message to this thread if you have more questions. I'll be happy to help you. Have a great weekend!

I just discovered that QB Self-Employed does not allow you to create Categories. I guess it is to make sure things fall in line with your Schedule C tax form.  So may be a quick call to your Tax Accountant is in order.

From your suggestions though, I'd use Other Business Expenses and these are NOT Office expenses.  Nor, as pointed out, Professional Fees.

And to dig down a little deeper...  Since  you're you're dealing with the Mgmt Company, I'm guessing you own the property and you're not just an investor.  If that's the case, I'm assuming the Mgmt Co is keeping a fare amount of cash to pay the bills and are collecting the rent, etc.?  Do you have a  Trust Acct set up in QBs to track all of their reports?  If not, set up what appears to be a Bank Acct with no actual bank listed.

In this account you can enter the various monthly expenses and income that the Mgmt Co actually is processing.  Use the appropriate Categories so that the transactions they are doing for you flow into your books correctly.  So rent for each tenant will show up as Income:Rental Income (or whatever QBSE calls it).  Same with Expenses, but don't go crazy trying to put in every entry.  You have the statement and the Mgmt Co's records for details. 

Put in the basics for what you (or your Accountant) want to track.  But some suggestions might be Building Repairs for the month as one entry vs. all the vendors they may use for the little repairs.  Grounds Keeping may be another one, there could be different vendors if you have a parking lot, grass, gardens, etc.  Doubt your Accountant needs them all listed individually in QBs.  Again, quick call to the Tax Acct to make sure it's all going into your books correctly so that there is not a lot of corrections at the end of the year.

Thank you, @Pete_Mc.

If I'm using QB Online, why wouldn't I create it under the subcategory of office/general administrative expenses?

On Investopedia, it seems to broadly fall under this definition of general and administrative expenses: "the necessary costs to maintain a company's daily operations and administer its business, but these costs are not directly attributable to the production of goods and service. Typical items listed as general and administrative expenses include rent, utilities, insurance, executives wages and benefits, the depreciation on office fixtures and equipment, legal counsel and accounting staff salaries, office supplies." True, many of these examples have their own categories/subcategories on QB Online, but I do not see another good category for management fees (a necessary and major expense of any real estate business). The management team handles not just property management but also administrative and bookkeeping work. The management company gets a monthly check paid from each property bank account. I own the real estate but do not own the management company, though it is in house.

I do not see it fitting under legal and professional fees either (at least not on Online, as opposed to Self-Employed, which has limited categories), because that is more for professional consultants, accountants, lawyers, etc.—not regular fees I pay monthly to an in-house management company.

Hello kevin-hrproperty,

We can walk you through categorizing transactions. However, we're unable to advise which category to choose since each business has a unique way of handling transactions. It would be best to consult an accountant about this matter. You can also check out the articles that Juviel shared above.

If you have other questions, feel free to go back to this thread.

I see office/general administrative expenses related to expenses for YOUR business, not it's Investments.  So if  you go buy paper or a fan for your office, that's an Office Expense.  Anything that has to do with your day-to-day operation.  

But as @JessT  pointed out, all business are different.   And depending upon their specifics, things can be assigned to different Categories than things in my business would be.  So that's why that quick call you your Tax Accountant to review what you've done and confirm what they want where can save a lot of grief later.

Usually such costs are identified as project maintenance or in-line management costs. It is best to consult your lawyer and accountant. They will advise you on the best option for you.

It is best to consult with your lawyer and accountant. Usually such costs are defined as project maintenance costs or line management costs. They will advise you on the best option for you.

Here is an article & video [Setting up a Chart of Accounts for a Commercial Real Estate Company]
you can check out that has a Chart of Accounts that will help you clearly outline your overhead and recoverable expenses. There is a sample COA included as well that is based on best practices we have seen with Commercial Real Estate. When in doubt though, ask your CPA for assistance.