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Rental Income/Expense how to record in QB

I use a Property Management Company to manage my rental. I receive the rent LESS expenses incurred for the month. I entered invoices for the full rent due each month, then allocated invoice payments  to undeposited funds,I then used Make Deposits to show that rent less expenses, which I entered as negative amount  I entered the expenses per unit/class in the Make Deposits window. So the amount deposited is the full rent due less expenses paid But when I run P/L report, Income shown is gross rent due but not received

How can I correct this as my Income per P/L is of course much higher than the money I banked for the year

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Best answer 12-10-2018

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Frequent Explorer **

Your rent income should be your gross rent.  Then you sub...

Your rent income should be your gross rent.  Then you subtract the expenses you incurred (which are taken out by your agent) to give you your Net Income.  If you are handling all transactions like this, your Net Income (not Gross income) is equal to the money you banked for the year.

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Highlighted
Frequent Explorer **

Your rent income should be your gross rent.  Then you sub...

Your rent income should be your gross rent.  Then you subtract the expenses you incurred (which are taken out by your agent) to give you your Net Income.  If you are handling all transactions like this, your Net Income (not Gross income) is equal to the money you banked for the year.

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Not applicable

What about the other way around. I am the property manage...

What about the other way around. I am the property manager, I collect $X in rent, take my % and send net rent amount to owner. I don't want the amount sent to the owner to count as expenses as it would skew my income vs expenses incorrectly as it is not really income received. THoughts?
Established Community Backer ***

Deposit rents collected into a liability account such as...

Deposit rents collected into a liability account such as Due To Owner (that is what one PM software that syncs with quickbooks calls it) Enter a Sales Receipt and charge to an asset account called Due From Owner. Write check to owner posting the entire rent collected from the Due To, and a negative from Due From and the check will be the net and you will not have shown income or expense

Example: in January you collect $2500 in rent. Deposit it in your trust bank account for property management. In the deposit detail you post $2500 to Due To Owner. If % is 10 you create a sales receipt for your property managemnet income account for $250 and it goes to Due From Owner.  Then you write a check for $2250 and the detail lines are Due To Owner $2500
Due From Owner -$250
Net $2250

If you are tracking each property and tenant in quickbooks then you need to set up the tenants as customers and you can even set up recurring monthly invoices to post rent received against.
Not applicable

When I follow the instructions in the above "Example:" fo...

When I follow the instructions in the above "Example:" for the "Due to Owner" account I first made it an income account (because I thought that made more sense) and then changed it to an asset account (as in the directions) and in both scenarios the sales receipt posts to the Due to Owner account as a decrease. Is this correct? When I write the check to the owner with the deposit detail containing the Due From Owner amount as a negative, it also appears as a decrease in the Due From Owner account. Is this also correct? It doesn't seem like the above two scenarios should both be correct. Am I wrong? Additionally, when I received the rent payment, I deposited it into our bank account. When I enter a sales receipt for the management fee it asks me where to deposit it, my bank account, or undeposited funds. The thing is, this management fee is supposed to come from the rent that was paid and already deposited, so it's like depositing twice. What am I missing? Thanks in advance!
Established Community Backer ***

Due To Owner should be a Liability account since it is wh...

Due To Owner should be a Liability account since it is what you as management owe the owners. That is why as an asset the transaction posts negative.  As long as you understand that a negative asset equals a positive liability you will be fine (unless you wish to change it to liability)

Due From Owner is an asset, accounts receivable and can represent not only management fees owed but also reimbursement for charges you paid ahead and need to collect from owner - Say you paid inspection fees or eviction filing from your account. These are not your expenses but are increases in Due From Owner.

Lets break it down.  You collect and deposit into your trust account $1000 in rent and have a 10% management fee.
You can collect the $1000 and post to rent income and reduce it later. Or you can split the deposit into $900 Due To Owner and $100 to Property Management Income.  Increased liability and increased income = deposit to bank.

But on your invoices to tenants you do not want the owner transactions to show at all so you still collect full rent as invoiced and then make the "movement" of funds later.  This can be one of the rare cases when a journal entry works better than a bill or receipt >>
Journal Entry
debit Rent Income $1000
credit PM Income $100
credit Due to Owner $900

Then write check $900 against Due to Owner.

OR skip the above, and write check for $900 as follows
Rent Income (as an expense) $1000
PM Income negative $100

This will perform the same end result but you may give up the interval tracking of what goes on, especially if you hold any money in reserve or do not pay owner in full each month.
Not applicable

Thank you!  That was helpful.  Another question - I do cr...

Thank you!  That was helpful.  Another question - I do create invoices for tenants but I don't send them these invoices.  I just do that to keep track for my own records and to be able to send the owner reports.  The invoice that really needs to be sent out is the one to the owner that shows income earned less repairs & maintenance less management fee, for each month.  But I can't figure out how to do the above recommended scenarios and include the management fee in the invoice because I need this fee to show up as income to my company and an expense to their property.  Additionally at the end of the tax year I want to send the owner a report with the total income and expenses for the property (that includes management fees).  I enter all the repairs and maintenance and other expenses that my company pays for as billable expenses labeled to the specific property (job)  which then permits me to add these to the invoice.  If I put the management fee directly in the invoice so it posts as income to my company, I can't (or so it seems) assign it to a job so that when I pull a report for that job the charge will know to show up as an expense for the property.
Thanks again!!
Not applicable

Re: Deposit rents collected into a liability account such as...

Hi John! This was really helpful, thanks! 

An additional question I hope you can help with. 

How would I go about recording expenses I paid on the owner behalf that will be deducted from the amount I send to him? I know it would go in the Due From Owner account but what account would that offset? I paid these expenses through my personal credit card before my LLC business checking was established. Should I also set up a liability account as a Due to/from (my name) for the reimbursement to myself for those expenses? This way I keep everything separate and not record them as my expenses? In addition, would I record these expenses through a JE or set up a vendor account for my CC? I hope that makes sense!  

QuickBooks Team

Re: Deposit rents collected into a liability account such as...

Thank you for joining into this thread, @Jess15161!

 

You can create a journal entry so you can record your business expenses paid with your personal funds. But I'd still recommend contacting your accountant for further guidance in choosing the account specifications.

 

Nevertheless, here's how you can create your journal entry:

  1. Go to Accountant.
  2. Select Make General Journal Entries.
  3. Choose your Expense account and the Owners Equity account.
  4. Under DEBIT, enter the amount you've paid for your expense account.
  5. From the CREDIT column, enter the amount you've paid for your Owners Equity account.
  6. Click Save & Close.

From there, you can write a check for the reimbursable amount. Let me show you how:

  1. Go to Banking.
  2. Select Write Checks.
  3. Choose your bank account.
  4. Under PAY TO THE ORDER OF, select a payee.
  5. From the Expenses tab, select your Owners Equity account.
  6. Enter the reimbursable amount.
  7. Click Save & Close.

As always, you can visit our Help Articles for QuickBooks Desktop if in case you need to learn some "How do I" steps.

 

It'll be always my pleasure to help if you have any other questions. I'll be keeping an eye for your response.

Frequent Contributor *

Re: Rental Income/Expense how to record in QB

The quickest solution I can think of is to Job Cost your expenses to each property or tenant/Unit. Your P&L should come out orrectly running a P&L by JOb (or Project) depending on if you're working in QBooks desktop or QBooks Online. Hope this is helpful. If you need more guidance, feel free to ask.

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