I recently closed on my first rental and am working with a property management company. The company subtracts expenses for work (on the property) that I've already approved before disbursing rental income. While this minimizes the number of transactions that need to take place between us, it seems like a bad idea from an accounting perspective on my side. They provide detailed statements, but I won't be able to verify via bank statements income and expenses related to my business. Would you agree?
It shouldn't be a problem @Ryan H. . Your CPA can look at the statements and use those to prepare your tax forms. If you are just wanting accounting - then you could enter the expenses in manually into an accounting software like Stessa. You're right, they won't come into the program automatically or match to bank statements, but you should have a good record from the PM statement and the "Cash Out" or disbursement to you from the PM should match your bank statement.
The property management company should give you reports that will satisfy your accountant. I'd recommend getting an example report from your PM and send it to your accountant and make sure they're happy with it.
Absolutely. It is just shown in your bank account... one way or another - the end result will still be the same... NOI, which is what the lender will care about.
You likely get a statement from the property management company that reconciles to the cash that was deposited to you.
It likely has the gross rent collected along with expenses such as their property management fee along with repairs they made.
The thing is that these are not all the expenses that are associated with the rental business. There may be items that are not paid for by the property management company such as real estate taxes, mortgage interest, home owners insurance, etc.
You want to make sure you are working with an accountant who will be able to connect the two.
You should reconcile the PM statements to your books - either via software or a spreadsheet. That will help you to find any transactions that may have fallen through the cracks. Bank, cc, mortgage, and PM statements should all be reconciled to the books.