I wanted to reach out to any other commercial real estate investors who own STNL NNN investment properties.
I recently closed on my first NNN property in South Carolina. The tenant reached out to me requesting an Operating Expense Reconciliation for 2019.
This is my first real estate property, and I was curious if any of you put this together yourselves? If so, how do you go about drafting the document, and is their a template that you prefer? Or is this something you ask of your accountant in addition to normal tax duties?
Investor · Austin, TX · Member since 2016 · 11 posts · 10 votes
6y
Hi Sean,
You said that you "recently closed" on this property: presumably you meant in 2020? If so, it probably would have been best for whoever sold you the property to have completed the reconciliations before closing.
Since that doesn't appear to have been the case, you would do your reconciliations based on the 2019 income & expense statement that the seller provided to you. If you have a third-party property manager whose management contract includes handling reconciliations, then they would be responsible for that. If you're self-managing, I would say reconciliations are not hard calculations (just the difference between what the tenant contributed towards common area maintenance, insurance, taxes, management fees, etc. and what the landlord actually spent), so if you are handy with Excel you could produce something professional-looking pretty easily. Certainly if you felt more comfortable with an accountant doing so, you could also do that.
The last thing I would point out is if the tenant asks for clarifications on your reconciliation calculations, then you may need to go back to the seller to get receipts, utility bills, etc. Also in some leases that I've dealt with, tenants have a limited time window to contest your reconciliation calculations--you'd just need to read the lease and understand those terms.
Property Manager · TX · Member since 2019 · 327 posts · 69 votes
6y
@Account Closed what did you end up doing? Were you producing the reconciliation yourself or your CPA did it for you? I am managing my first property too and looking for a template to copy from. Thanks!