How it is put together
A statement should reconcile in one line:
beginning balance + income - expenses - management fee - distribution = ending balance
The ending balance is the cash still held for the owner, usually the reserve, and it becomes next month's beginning balance. Around that summary, a complete statement adds a rent roll for every unit (including vacant ones), each expense with its receipt, the fee calculation and notes on anything unusual, such as late rent or a large repair.
Worked example
A single rental with a $1,000 reserve and an 8% management fee on rent collected:
| Line | Amount |
|---|---|
| Beginning balance | $1,000 |
| Rent collected | + $3,200 |
| Repair: replace bathroom fan | - $450 |
| Management fee: 8% of $3,200 | - $256 |
| Distribution to owner | - $2,494 |
| Ending balance (reserve) | $1,000 |
$1,000 + $3,200 - $450 - $256 - $2,494 = $1,000. The owner can see exactly why they received $2,494 and not $3,200.
Common mistakes
- A low distribution with no explanation. Put a one-line note at the top whenever it is lower than usual.
- Expenses without receipts or with vague descriptions such as "plumbing".
- The fee buried in expenses. Show it on its own line with how it was worked out.
- Leaving vacant units off the rent roll. A vacancy the owner finds out about later damages trust.
- A beginning balance that doesn't match last month's ending balance.
Related terms
- Owner distribution: An owner distribution is the money a property manager pays out to a property owner from the funds held for them, after expenses, fees and any reserve have been covered.
- Reserve fund: In property management, a reserve fund is cash the manager holds back from an owner's funds to pay repairs and bills that come up between statements, usually a fixed amount set in the management agreement.
- Repair approval limit: A repair approval limit is the most a property manager may spend on a single repair without asking the owner first.