All Forum Posts by: Kris Freeberg

Sounds like you're asking about allocating overhead.  Here's my short answer:

Don't.

Instead, think in terms of Contribution Margin.  Overhead Allocations are spurious, confusing, and unnecessary.  

In your accounting divide expenses into Direct Variable, Indirect Variable, and Overhead.  The variable expenses can and should be allocated, but the Overhead should not be.  It's the fixed cost of being in business, and you need to know that instead of obscuring it with arbitrary allocations.

Just a quick thank you again for building this community.  I had someone from another state reach out to me for property management accounting expertise because of BP & it looks like we may do some biz, so two thumbs up.  Thanks again.

8-12% depending on competence.

Hi @Matt Kowske, I'm a Controller for a PM company, currently researching the state of the art, all the major platforms (Buildium, Appfolio, etc.).

You have a great point about CapEx and Owner Statements. Conventional PM presumes the non-cash Assets and Liabilities are managed by clients, not PMs. Even mortgage payments are treated as "expenses" because the PMs don't track the mortgages.

Question for you:  if you're managing your own stuff, and ARE tracking non-cash Assets and all Liabilities, why do Owner Statements matter to you?  Do you have other parties/partners you need to pay?  Why not just work off your own financial statements?

Essentially what Owner Statements do is distribute net income, and one way to check to make sure it's working right is to examine the Equity section on your Balance Sheet, comparing total net income & retained earnings with net Distributions.  You can do that without having to run Owner Statements.

Does this help?

At your service,

Kris Freeberg

@Anna Dube - if you plan to hire a PM company use a vertical platform like Buildium, Appfolio, Rentec Direct etc.   If you plan to DIY use QuickBooks.  Either way, get the right help.  Winging it can cost you big time both out of pocket and in terms of lost opportunities.

Regardless which platform you choose, you must understand Trust Accounting otherwise you'll make a mess and lose money.

@Mike Dymski - 

I'm working on an Appfolio project right now.  It has robust financial statements that most PMs don't understand because they're PMs, not accountants.  It's a fear-of-the-unknown, beyond-here-there-be-dragons thing.  Appfolio is a great tool but you have to use it intelligently and understand accounting.

I have clients who live in expensive areas because they're nice and invest in cheap areas because that's where the deals are.   So, tool up with people & systems to do that.

Do they reconcile their bank accounts regularly?  Is their balance sheet right?  The accuracy of their statements to you depends totally on the answer to this question.  PM software is designed to be a full-blown double entry accounting system that generates all the financial statements that CPAs normally prepare; but PMs are not accountants and it's easy to become so preoccupied with the daily details of property management that the accounting falls by the wayside.

IMO property management should live inside accounting, not the other way 'round, as real estate should be part of a diversified portfolio.  The current state of affairs appears bass-ackward to me, with accounting living inside PM.  Be careful with that.  I love the point about turning data into information.  Amen to that.