Property Manager vs Property Owner Accounts

When it comes to managing the financials of a Short-Term Rental (STR) business, the accounts maintained by a property owner can differ significantly from those maintained by a property manager. Here are some key accounts that a property owner would have that a property manager typically would not:

1. Property Ownership-Related Accounts

Mortgage Payable

• Description: Represents the loan taken to finance the purchase of properties.
• Importance: Property owners need to track mortgage payments and the outstanding balance.

Property Taxes Payable

• Description: Represents the taxes levied on the property by the local government.
• Importance: Property owners need to budget and pay property taxes annually or semi-annually.

Property Insurance

• Description: Insurance costs to cover the property against risks like fire, theft, or natural disasters.
• Importance: Essential for property owners to protect their investment.

2. Depreciation and Amortization Accounts

Depreciation Expense

• Description: The allocation of the cost of fixed assets over their useful life.
• Importance: Property owners need to account for the wear and tear of their properties and other fixed assets.

Accumulated Depreciation

• Description: The total depreciation taken on fixed assets over time.
• Importance: Reflects the reduction in value of the property and equipment.

3. Capital Expenditures

Capital Improvements

• Description: Expenses related to major improvements or additions to the property.
• Importance: Property owners need to track investments that increase the value of the property.

4. Equity Accounts

Owner’s Equity

• Description: The owner’s investment in the property.
• Importance: Reflects the owner’s financial stake in the property.

Retained Earnings

• Description: Cumulative profits retained in the business after dividends are paid out.
• Importance: Shows the portion of profit reinvested in the property.

5. Direct Revenue and Expense Accounts

Rental Income

• Description: Income generated from renting out the property.
• Importance: Primary source of revenue for property owners.

Maintenance and Repairs

• Description: Costs for ongoing maintenance and repairs of the property.
• Importance: Property owners are responsible for the upkeep of the property to ensure it remains in rentable condition.

Accounts Typically Managed by Property Managers

1. Operational Accounts

Management Fees

• Description: Fees charged by the property manager for managing the property.
• Importance: Property managers need to account for income generated from management services.

Cleaning Fees

• Description: Fees charged to guests for cleaning services.
• Importance: Property managers track these fees as part of their service offerings.

Marketing and Advertising

• Description: Costs for promoting the rental properties.
• Importance: Property managers incur these expenses to attract bookings for the properties they manage.

2. Accounts Receivable and Payable

Accounts Receivable

• Description: Money owed to the property manager by guests or booking platforms.
• Importance: Property managers track receivables to ensure timely collection of rental income.

Accounts Payable

• Description: Money the property manager owes to vendors, such as cleaners, maintenance workers, or suppliers.
• Importance: Property managers track payables to manage cash flow and ensure timely payment of expenses.

3. Operational Expenses

Utilities

• Description: Expenses for electricity, water, gas, and internet services.
• Importance: Property managers often manage utility payments on behalf of the property owner.

Supplies

• Description: Costs for guest supplies, such as toiletries and kitchen items.
• Importance: Property managers handle these expenses to ensure the property is well-stocked for guests.

Conclusion

While there is some overlap in the accounts maintained by property owners and property managers, the key differences lie in ownership-related accounts. Property owners need to track long-term investments, mortgage payments, property taxes, and depreciation, which are directly related to owning the property. In contrast, property managers focus on operational accounts, receivables and payables, and managing day-to-day expenses related to running the STR business.

By understanding the distinction between these accounts, property owners and managers can effectively collaborate and ensure comprehensive financial management of the STR properties.