Property management accounting can seem complicated at first, but it becomes much easier when you think about each property as its own business.
Every property has money coming in and money going out. Your job is to track where that money comes from, where it goes, and make sure the correct bank accounts are used.
Think of the Property as a Business
A common mistake is thinking that property management accounting is about tracking money for tenants or owners. Instead, think of the property itself as a business. Just like any business:
Money comes in
Bills need to be paid
Records need to be kept
Any remaining profit belongs to the owner
Every transaction should answer one question:
"How does this affect the property's finances?"
Visualizing the Flow of Money
The Golden Rule of Property Management Accounting
One of the most important rules in accounting is:
Always record where the money actually came from and where it actually went.
When entering transactions in Propra, you should record the real movement of money, not just the reason the money was used. This is important because your accounting records must match the actual movement of funds between your trust accounts, bank accounts, tenants, owners and suppliers. This makes bank reconciliations and trust reporting easier and accurate!
Think Like a Bank Statement
A good question to ask yourself is:
"If I looked at the bank account, where would I see this money coming from?"
The answer to that question should determine how the transaction is recorded.
Accounting is not about who benefited from the transaction. Accounting is about where and why the money physically moved.
Accounting entries are always recorded with at least 2 lines, this is what is called double entry accounting.
One line represents how the money is moving: in or out of a bank or through a credit card or loan
The other line explains why the money moved: did it pay for an office expense, was it management fee revenue earned or did it change how much is owed on a loan
Example: Security Deposit Used for Damages
A tenant moves out and there is a $500 damage charge. Some property managers will say: "The tenant paid the $500 damage charge." But that is not what actually happened.
The tenant may have paid a security deposit a year ago, and that money has been sitting in the Security Deposit Trust Account ever since. When the damage charge is paid:
Money is transferred from the Security Deposit Trust account, reducing the bank balance
The Security Deposit liability account is reduced, representing those funds are no longer held in trust for the tenant
The funds move into the Rent Trust account, increasing the bank balance
The bill or "charge" for the damage bill is paid from the Rent Trust account to the supplier
No new money was received from the tenant
The tenant did not make a payment today
The money came from the Security Deposit Trust account
Incorrect Thinking
❌ Tenant paid $500 today.
What Actually Happened
✅ $500 was transferred from Security Deposit Trust and used to pay the charge.
Example: Last Month's Rent
A tenant gives Last Month's Rent when they move in. The money is held in the Security Deposit Trust Account. When the tenant's final month arrives, many people say: "The tenant paid rent." But the tenant did not make a new payment.
The money was already collected months or years earlier. What actually happened was:
Funds were transferred out of Last Month's Rent Trust, reducing the bank balance
The Last Month's Rent liability account is reduced, representing those funds are no longer held in trust for the tenant's final rent payment
A credit is created for the tenant's final rent invoice
The money moved into Rent Trust bank, increasing the bank balance and allowing that rent revenue to be paid out to the owner
The last rent invoice is paid when the credit is applied
Again, no new money was received from the tenant. The accounting should reflect the actual movement of funds.
If the owner is holding the Last Month's Rent funds then there is no money movement but the entries to show that the owner held money isn't being held in trust still need to happen.
The Last Month's Rent liability account is reduced, representing those funds should no longer held in trust for the tenant's final rent payment by the owner
A credit is created for the tenant's final rent invoice
The last rent invoice is paid when the credit is applied
Why Is This Important?
Recording transactions based on what actually happened helps:
Keep trust accounts accurate
Match bank balances during reconciliations
Produce accurate owner statements
Produce accurate tenant ledgers
Pass audits and trust reviews
Ensure financial reports are correct
When accounting records do not match the actual movement of money, it becomes difficult to understand where funds came from and where they were used.
The Three Main Accounts
In property management, money is usually held in three different places.
Rent Trust Account
The Rent Trust Account is where most property income is deposited. Money that commonly goes into the Rent Trust Account includes:
Monthly rent
Utility payments from tenants
Parking fees
Late fees
Other tenant charges
This account is used to pay expenses related to the property.
Security Deposit Trust Account
The Security Deposit Trust Account holds money that belongs to tenants until it is needed. Money that may be held here includes:
Security deposits
Damage deposits
Last Month's Rent deposits (where applicable)
This money is held separately from regular rent funds until it is applied or returned.
Property Management Company Account
The Property Management Company Account belongs to the management company. This account receives:
Management fees
Administration fees
Other fees earned by the management company
Money in this account belongs to the management company, not the property.
How Money Flows Through the System
Step 1: Tenant Pays Rent
A tenant pays their monthly rent. The money is deposited into the Rent Trust Account.
Example
Tenant pays $2,000.00 rent
$2,000.00 is deposited into Rent Trust.
Step 2: Property Expenses Are Paid
The property has expenses that need to be paid. Examples include:
Maintenance invoices
Landscaping
Plumbing repairs
Utility bills
Property taxes
Insurance
These bills are paid from the Rent Trust Account.
Example
Plumber invoice = $200.00
Snow removal invoice = $150.00
The Rent Trust Account balance decreases when these bills are paid.
Step 3: Management Fees Are Collected
The management company earns a fee for managing the property. The fee is charged to the property and transferred from the Rent Trust Account to the Property Management Company Account.
Example
Monthly management fee = $180.00
The property pays the fee from Rent Trust.
The management company receives the fee in its own account.
Step 4: Owner Receives a Payout
After expenses have been paid, any remaining funds may be sent to the owner.
Example
Rent collected = $2,000
Property expenses = $350
Management fee = $180
A bill for the funds remaining of $1,470.00 can is created to pay out the owner from the property. Owner payouts come from the Rent Trust account
What Happens with Security Deposits?
Security deposits are handled differently because they are not considered income when they are collected or being held. Instead, they are held in the Security Deposit Trust Account until they are needed and are considered a liability.
Example: Tenant Moves In
A tenant provides:
$2,000.00 rent
$2,000.00 security deposit
The money is deposited into separate accounts.
Payment | Account |
Rent | Rent Trust Account |
Security Deposit | Security Deposit Trust Account |
What Happens When a Security Deposit Is Used?
Sometimes security deposits are used to pay for damages to a unit or it and Last Month's Rent need to be applied to rent invoices that haven't been paid.
Before the funds can be used, they are transferred from the Security Deposit Trust Account into the Rent Trust Account. Once transferred, the funds can be used for:
Damage charges
Last Month's Rent
Tenant refunds
Other approved payouts
Example
A tenant owes $300.00 for damages.
Funds are transferred from Security Deposit Trust
Funds move into Rent Trust
The damage charge is paid from Rent Trust
This ensures all money follows the proper accounting process and can be tracked correctly.
Understanding Corporate (Admin) Accounting
If your company uses Propra for Admin Accounting, there is one more important concept to understand. Just like each property is treated as its own business, your property management company is also a business. This means you need to track the money coming into and out of your company separately from the money belonging to your properties.
The main difference is that your company's financial statements is opposite from a property's financial statement.
Transaction Types | Property | Company |
Rent | Revenue | Liability |
Tenant Charges | Revenue | Liability |
Management Fees | Expense | Revenue |
Property Bills (paid directly by the property) | Expense | Liability (reduces) |
Property Bills (paid by the company and charged to the property) | Expense | Revenue and an Expense (billable revenue that offset's the expense and the expense paid) |
Inspection Charges | Expense | Revenue |
Placement Fees | Expense | Revenue |
Security Deposit's held | Liability and Asset | Liability and Asset |
Security Deposit Damages kept | Revenue (increases) and Liability (reduces) | Liability (reduces) |
Returned Security Deposits | Liability and Asset (reduces) | Liability and Asset (reduces) |
Owner Payouts | Asset (reduces) | Liability (reduces) |
Office Expenses | n/a | Expense |
In Propra's administrative accounting we do not track the administrative liability entries for the property accounting. Those are represented by the property's bank balances in Propra.
Think of Your Company as Another Property
Earlier in this article, we learned that a property should be treated like its own business. The same idea applies to your property management company. Ask yourself:
"Would this transaction affect the property or my company?"
The answer will determine where the transaction belongs.
Corporate (Admin) Accounting Examples
These transactions belong to the management company:
Employee wages
Office rent
Office supplies
Company internet and phone bills
Marketing expenses
Software subscriptions
Insurance for your company
Bank fees on your company account
These transactions affect your business, not the property. They should be recorded in your Admin Accounting records.
The Golden Rule Still Applies
The same accounting rule applies to corporate accounting:
Always record where the money actually came from and where it actually went.
If your company paid for something from its business bank account, the expense belongs to the company. It does not belong to a property just because the company paid it.
Example: Office Internet Bill
Your company receives an internet bill for $120.00. The money is paid from the company bank account.
What Happened?
The management company received a bill and records the internet expense
The management company paid the bill out of the corporate bank account
No property was involved
This should be recorded in Admin Accounting.
✅ Record the expense under your company records.
Example: Management Fee Income
A property pays a management fee of $200.00
From the property's perspective:
The property has an expense of $200.00
From the management company's perspective:
The company has revenue of $200.00
The same transaction affects both businesses and so if you are tracking both the property's and the company's financials 2 transactions will need to be created.
One transaction records an expense for the property
The other transaction records income for the company
Example: Buying Office Supplies
Your company purchases printer paper and pens for $50.00. The money comes from the company bank account.
This is not a property expense. It should be recorded as a corporate expense because it supports the management company.
Why Separate Property and Corporate Accounting?
Keeping property accounting and corporate accounting separate helps:
Produce accurate owner statements
Produce accurate company financial statements
Simplify tax preparation
Improve reporting
Make audits easier
Prevent charging owners for company expenses
When transactions are recorded in the correct place, everyone can clearly see what belongs to the property and what belongs to the management company.
Property Accounting vs Corporate Accounting Transaction Types
Property Accounting | Corporate (Admin) Accounting |
Rent collected | Management fees earned |
Maintenance expenses | Employee wages |
Utility expenses | Office rent |
Property taxes | Office supplies |
Owner payouts | Marketing expenses |
Security deposits | Software subscriptions |
Quick Summary
Think of Propra as tracking multiple businesses. Each property and or company has it's own complete financial records and statements.
The Property
The property records:
Rent
Property expenses
Security deposits
Owner payouts
The Management Company
The management company records:
Management fee income
Employee wages
Office expenses
Marketing costs
Business expenses
Remember
Every transaction should answer two questions:
1. Which business does this belong to?
2. Where did the money actually come from and where did it actually go?
If you can answer those two questions, you can usually determine how the transaction should be recorded in Propra.
Quick Summary
Think of the property as a business.
Money Coming In
Rent → Rent Trust account
Tenant charges → Rent Trust account
Security deposits → Security Deposit Trust account
Management fees → Corporate Bank account
Money Going Out
Maintenance bills → Rent Trust account
Utility bills → Rent Trust account
Owner payouts → Rent Trust account
Management fees → Rent Trust account
Security Deposit Transfers
Security Deposit Trust → Rent Trust
Used for damage charges, refunds, and Last Month's Rent
Remember the Golden Rule
Always record where the money actually came from and where it actually went.
If the money came from Security Deposit Trust, record it as coming from Security Deposit Trust.
If the money came from Rent Trust, record it as coming from Rent Trust.
Following the actual flow of money keeps your accounting accurate, your trust accounts balanced, and your financial reports reliable.