Monthly Reports and Rent Collections
Monthly reports are very important deliverables you receive from your management company. It helps you keep track of your investments. A monthly report should include the following:
- Rent roll, billings, collections, and arrears
- List of checks issued, including check number, payee, amount, and explanation
- List of accounts payable: open bills, possible reserves or needs for future major repairs
- List of accounts receivable, including rent arrears
- The month's cash flow statement
- An explanation of arrears and tenant status plus any significant developments
- General suggestions and recommendations
As a property investor you should arrange meetings with your manager on a monthly basis to go over the reports. To ensure that you have enough time to properly review the report copies of it should be provided ahead of the meeting.
The monthly report should also include:
- A copy of the bank statement
- A copy showing reconciliation of the bank balance to the balance of the books
- Copies of bill paid
- A memo detailing the month’s operating results and anticipated future events, such as lease expirations, status of lease negotiations, proposed capital improvements and reasons for them, budgets and any miscellaneous manager’s comments.
Unless otherwise agreed, it is the responsibility of the management company to collect the rent and issue the bills for their client. These rent bills should be sent to the tenants at least one week in advance.
Management companies usually use bank lockbox systems for account receivable as well as rent collections. These are the required steps to operate a bank lockbox
- You should open a separate bank account for each property.
- You mail each tenant a two-part perforated coupon bill stating his or her rent due, including arrears. This is prepared prior to the beginning of the month being billed as rent is usually due the first of every month, unless the lease states otherwise.
- You should include a preaddressed envelope with the lockbox number and bank address on it. The tenants can directly mail their checks to the bank with the attached coupon.
- Upon receipt of the bill, the tenant mails a rent check, along with the stub of the bill in the preaddressed envelope and keeps the main part of the bill for his or her records.
- The envelope is delivered to the bank box number to which it is addressed; a bank employee opens the envelope, records the stub number on the deposit slip delineating what the check is for, and deposits the check in the proper account. Each day, the bank faxes or e-mails to the owner or management company a list of checks it has received and deposited in the property's account.
Lockboxes, in addition to enabling faster availability of rental income by directing checks to the bank, also offer high level of security. You don’t have to deal with numerous checks getting delivered at the property management office and reduce the risk of losing them.