I'm sorry if this has been posted before, but I'm just not having a lot of luck finding the answer I'm looking for.
My company has been managing its own portfolio of properties for about 60 years and just in the last 3 or so started managing properties for 3rd parties. Typically we have had no issue providing detailed accounting of the revenues and expenses for these clients as it is usually a very straightforward process. In my experience, what's provided is really more of a cash reconciliation/statement of cash flows because we typically don't have full accounting knowledge to give owners full financial statements (Balance Sheet, P&L, Statement of Cash Flows). Our latest client however, wants us to take a portion of the rents collected and make mortgage payments on their behalf as well. I'm struggling to figure out how to account for this because mortgage payments are not exactly an expense. They are a cash outflow, but only the interest portion is an expense. The remainder is a reduction of the mortgage principal balance, which is a liability. The problem is we don't have the full balance sheet, so there is no mortgage liability to apply the payment against, and I can't just add the mortgage without throwing the rest of the books out of balance.
So my question is:
Are there any PMs out there who make mortgage payments on behalf of their owners? If so, how are you accounting for the payments? Are you providing owners with more than a statement of revenues and expenses? If so, what, and how are you coming up with the correct info?
Thanks for reading and any help you can provide.
The Loan Manager in QuickBooks does this correctly. It assigns the correct amounts to interest expense and liability reduction.
That sounds pretty useful, but identifying the portion of interest expense and liability reduction isn't what I'm struggling with. The problem is how to get the liability into the system so that I can reduce it with each payment. I was given the mortgage statement, so I have the total liability, but we don't have the cash proceeds or building acquired to add as an asset to offset the liability and keep the balance sheet in balance.