Property management accounting differs from ordinary small-business accounting in one respect that organises everything else: much of the money passing through is not yours. Rent collected for an owner, deposits held for tenants, and in associations reserves collected for future work are all other people's money in your hands. This page is that distinction and what follows from it.
Whose money is whose
Your income is the fee, the commission or, if you own the property, the rent. Everything else is passing through. Booking gross rent as income and the owner's remittance as an expense inflates both sides of your accounts and misstates what the business earned. It also makes your own tax position harder to explain than it needs to be.
Three accounts keep it visible
An operating account for your own money, a client account for money held on behalf of owners, and a deposit account for tenant deposits, separate where your state requires it and worth separating even where it does not. Three accounts make the position readable at a glance and make a reconciliation something you can finish rather than something you postpone.
Reconcile on a schedule you actually keep
Monthly is enough for most small operations and weekly is better once several properties are moving. The value is not the reconciliation itself, it is that an error is found within weeks rather than at the year end, when the person who could explain it has forgotten. A short regular reconciliation beats a thorough annual one every time.
The tax record follows the property
Rental income and expenses are reported per property, and the IRS sets out what a rental owner is expected to be able to show. A chart of accounts that tracks category but not property answers your accountant's question and never the owner's, and reconstructing per-property figures from invoice descriptions at year end is the most avoidable work in this business.
Questions people ask about property management accounting
Do I need a separate bank account for deposits?
Several states require it and all of them make it sensible. Blending deposits into operating cash makes the balance look healthy and the position wrong.
Cash or accrual?
Most small operations use cash basis and it is simpler. What matters more is that the same basis is used consistently and that your accountant knows which.
Does Lettza do accounting?
No. It keeps the record of the let that accounting is done from: what was charged, what arrived, what is outstanding, per property and per tenancy.