Our topic today is property finances and how a property manager can handle your accounting. Most management companies will have a trust account at a local bank, where they hold funds for the properties. Sometimes, there will be a second account, where security deposits paid by the tenants are held.
These trust accounts have to be handled in a very specific way in order to comply with California real estate laws. Each trust account must be reconciled every month. You also have to be careful about not co-mingling the funds between one holder and funds belonging to another property owner. Everything has to remain separate and documented.
Most property managers will collect the rent funds from the tenants every month, deposit them and wait for all those checks to clear. Once they do clear, the property manager is then free to pay any bills relating to the property. So, a property manager can handle paying the gardener, the pool service and sometimes other expenses such as the mortgage or taxes as well.
In addition to collecting funds and paying necessary bills, the property manager must also keep the property owners informed about how their money is coming in and where it is going. Most companies will provide their property owners will a statement at the end of every month. In this statement, each property owner will see where their account began at the beginning of the month. This starting balance is at the top of the statement. Under that starting balance, the property manager will record all of the income, which is typically rent, and all of the expenditures, which will include the monthly bills or any repairs that may have been made to the property. Finally, you will have an ending balance which will always match your beginning balance the following month.
When you own rental property, taking care of the bill paying and keeping track of where your money is coming from and who it is going to can seem a bit overwhelming. Your property manager needs to make sure your funds are kept in a separate trust and that you are getting regular information on how those funds are being managed. If you have any questions about trusts or the way we will handle your bill paying and your rental income, contact us at Windsor Pacific Property Management. We look forward to helping you.