Some property management companies provide a fixed "guaranteed" rent amount to owners of properties, regardless of the rent actually received. This may be the full market rent, less an amount to cover management fees. Although Palace does provide a special Guaranteed Rent Statement format, this statement assumes a fixed monthly figure is always payable and does not cater for the possibility of other deductions from the guaranteed amount.
This procedure will outline our recommendation in how to set up Palace to handle Guaranteed Rent Payments.
- Setting up for Guaranteed Rental Payments
- Doing the payments - Fees charged to owner
- Doing the payments - No fees charged to owner
Guaranteed Rental Payments for Owners:
First you will need to do some set up so that it will work for you. You need to set up two sets of Owners, One under your company name and one under the actual Owner. The tenant is connected to the Company Owner and the actual owner is only used for the payout.
Setting up for Guaranteed Rental Payments:
- Set up the property management company as an Owner
- Set up all properties under this owner
- Set up all tenants under these properties
- Set up the Investor/Owner as an owner with their own bank details.
- Under each Investor/Owner, set up a property - and set up the Management Fee% as a negative number under the Maintenance Fee%. e.g -8%
- Note: That this method means that the Palace Property List screen will have two entries for all guaranteed rent properties - and this can have some disadvantages)
- Do NOT set up tenants under the Investor/Owner properties
- Set up the Property Management company as a Creditor.
Guaranteed Rental Payments for Owners:
During the month the rents should be processed as normal under the correct tenant. The money will then sit under the Property Management Company's owner record.
Rent receipts should be processed as normal under the correct tenant – this money gets receipted into the property management’s owner account. Same with any tenant charges or tenant debits. Handle the tenant completely as normal.
Creditor Invoices/ Work Orders - If the Owner/Investor is paying for the invoice then process through their property, however if the Property Management Company is paying the invoice you will need to use the Property Management property.
Payments to the Owner (Management Fees Charged):
If you are still charging fees to the Owner as part of the guaranteed payment, follow these instructions or follow the instructions below if not charging fees.
Before Month End - Process a CREDIT NOTE (negative Creditor Invoice) against each of the Investors/Owner's properties for the amount of the guaranteed rent. The negative maintenance fee % will mean that fees will be deducted from the amount.
To clear the Property Management Company's creditor account. Go to Transactions - Click on Receipt Creditor - Bring up the company, you will see the transaction sitting there. Tick the transaction and process.
This can be offset against a Payment Owner transaction out of the property management's owner account if required. The difference between the two accounts could also be entered as a Receipt Ledger or Payment Ledger, showing the profit/loss for the month.
Payments to the Owner (If NO management fees are charged to the Owner/Investor)
Go to transactions - Click on Payment Owner (Lefthand side), select Property Management Company. Enter in the full amount of the guaranteed rent, then do a receipt owner for that amount into the Investor/Owner account.
e.g Payment Owner – Out of the Owner (Company – the one with the tenant). Then Receipt Owner – (into the actual Tenant).
Process Month End as normal, paying the Owner/Investor's total amount, less any fees and invoices that they are responsible for.
If there is any money left in the Company Owner, You can pay out the Property Management Company Owner the remainder of the money as part of the month end or you can do a payment Owner and then a Receipt - Ledger i.e Management Fees to that your income is correct.