Are you using REI Hub to keep your books as a third party property manager, but aren't sure how to get started? You're in the right place! With just a few steps, you can use REI Hub to create a P&L statement for your property management business and for the properties and owners you are managing.
Let's now look at how you can differentiate between your property management business and your customer's rental businesses, how to appropriately update your chart of accounts, and discuss transaction entry and reporting.
SET UP A SUB-PORTFOLIO PER OWNER
Sub-portfolios are an additional reporting layer that are used for groups of properties or legal entities. Setting up sub-portfolios allows you to delineate separation between the different businesses represented within your portfolio and to pull reports for them.
You will create a sub-portfolio for your property management business and one for each property owner. Properties will be tagged into the appropriate owner sub-portfolio. Your property management company sub-portfolio will not have any properties tagged into it.
To add and setup sub-portfolios:
Open the right side menu and select Portfolio Settings. Find the 'Enable Sub-Portfolios' option, and toggle to Yes. Click Update Settings.
Navigate to the Sub-Portfolios page on the left menu. Click on Portfolio on the left menu, and then Sub-Portfolios when the options expand.
Click Add Sub-Portfolio in the upper right corner. Add a Sub-Portfolio for each property owner, and assign the properties as appropriate. ALSO, add a Sub-Portfolio for the property management company.
UPDATE THE CHART OF ACCOUNTS
The REI Hub default chart of accounts can be added to as needed. In a property management environment, you should add an equity account for each owner/ sub-portfolio so that we can clearly differentiate contributions and distributions by owner. This also includes adding an equity account for the property management business itself. There should be a unique equity account for each sub-portfolio.
Additionally, you should add any additional revenue or expense accounts that you may want at this time. At a minimum, you'll need a new, top-level (not sub-account) revenue account for the property management company's revenue. There is already a default expense account titled 'Management Fees' so you may want to create your new account as 'Management Revenue' or something similar.
You may also choose to add additional expense accounts, either for increased reporting detail to your owners, or for your property management company's expenses. The default expense accounts in REI Hub exactly match the IRS Schedule E.
Access and update the chart of accounts from the same right side menu as above, selecting the Chart of Accounts page and clicking Add Account in the upper right.
KEEP THE BOOKS
Book income and expense transactions on behalf of the property owner to the appropriate property. Make sure the Transaction Scope field is set to 'Property/Unit' and select the property the transaction is associated with. This will be the majority of your transactions - rents, expenses, etc. - and will populate the property-level reports for your owners.
Book distributions to your owners using the 'Owner Distribution' transaction type, selecting the appropriate owner equity account you created above. If you send individual distributions for each property, set the Transaction Scope to 'Property/Unit.'
If you send a single aggregated distribution per owner, set the Transaction Scope to 'Sub-portfolio' and select the appropriate owner's sub-portfolio. As above, select the appropriate owner equity account as the 'Distributed To' account.
Book transactions to your property management company by setting the Transaction Scope to 'Sub-portfolio' and selecting the appropriate sub-portfolio. This allows you to create a P&L for your property management business if desired.
For example, you probably have an operating account for your property management business, and a trust account per property owner. When property management fees are paid from the owner trust account to your operating account, you will book the funds leaving the owner trust account as an expense to the appropriate property so they show on that property's statement. In your operating account, you will book the arriving funds as revenue to the property management company sub-portfolio (using the new revenue account you created).
For reporting to your owners, use the Owner Statement report, filtered to the appropriate date range and sub-portfolio. This will show all the revenues and expenses from all of that owner's properties as well as the beginning and ending owners funds balances and distribution amounts.
Additional reports like the Net Income by Property may also be useful to your owners and can be pulled by setting the report scope to an owner's sub-portfolio.
For reporting on the property management company, use the Net Income report, filtered to the property management company's sub-portfolio.
Questions? Please feel free to contact our chat support team!