How To Turn Owner Held Last Month Rent and Security Deposits Into Management Held Deposits In AppFolio
Let’s say when a tenant first moved in, the owner of the property wanted to hold onto the last month's rent and security deposit in their own bank account.
Here is an example of 3 units on a property that had owner held funds.
Unit M Tenant Ledger
Unit 2 Tenant Ledger
Unit 3 Tenant Ledger
| Unit | SEC | LMR | PET | Total By Unit |
|---|---|---|---|---|
| Unit M | $400.00 | $2,998.00 | $300.00 | $3,698.00 |
| Unit 2 | $399.00 | $2,800.00 | $303.00 | $3,502.00 |
| Unit 3 | $399.04 | $3,299.14 | $303.03 | $4,001.21 |
| Total By Charge | $1,198.04 | $9,097.14 | $906.03 | $11,201.21 |
We can cross check that the owner held funds match the balance sheet. The amounts from the 3 tenant ledgers add up to the amounts on the balance sheet.
Balance Sheet
A few months down the road, the owner says, “Actually, I don’t want to hold onto the money. Can your management company hold onto the money on my behalf? I don’t want to pay into your system. Can you just calculate how much I was supposed to get paid this month, minus the last month rent and security deposits that you’ll hold onto from now on, and pay me less instead?”
According to the owner statement (enhanced), this owner has $17,543.43 in cash after rents and expenses. You want to deduct a total of $11,201.21 on last month rent and security deposits and pay the owner only $6,342.22.
Owner Statement
This is the step by step process on how to correctly do it.
Step 1
Go to the individual tenant ledger for any unit. I am using Unit #2 in this example.
Step 2
Enter one new tenant charge for each type of charge you want to switch out.
The amount is the same as what they had on file.
The GL account should be management held.
Management Held Security Deposit Charge
Management Held Last Month Rent Charge
Management Held Pet Deposit Charge
Step 3
Enter one new tenant credit for each charge you just made.
The amount is the same from Step 2.
The GL account is owner held.
Apply the credit to the respective charge. That means apply last month rent to last month rent. Apply security deposit to security deposit. Do not mix and match!!! Do not apply these credits to any unpaid rent charges by accident. This is a #1 cause of calculation errors when refunding tenants their security deposits when they move out.
Owner Held Security Deposit Credit
Owner Held Last Month Rent Credit
Owner Held Pet Deposit Credit
Step 4
The new tenant ledger should now look like this:
New Tenant Ledger With Charges and Credits
Step 5
Transfer the money from the 1150 Bank Account to the 1160 Bank Account.
To find the bank account, go to the Property Page and then scroll down to Bank Accounts.
Bank Accounts For This Property
Login to the bank’s website. We are going to transfer Unit 2’s Last Month Rent and Security Deposit, totaling $3,502.00 from Hingham Bank Account 1776 to Hingham Bank Account 4662.
Real Transfer Through Hingham Bank’s Online Website
Step 6
Record the transfer in Appfolio.
Type “Transfer Cash” into the search bar to pull up the task.
Transfer Funds Between Cash Accounts
Record the amount you just transferred in real life, the money went from 1150 to 1160 bank account, and the unit number.
Recording The Transfer for Unit 2 In AppFolio
Step 7
Repeat Steps 1-6 For All Units.
Step 8
Check Your Work.
Check the Balance Sheet. There should be no money left in owner held deposits. All money should be management held deposits.
New Balance Sheet
Check the Owner Statement (Enhanced). The outgoing transfers should have reduced the amount of money the owner gets. In this case, the running balance decreased from $17,579.43 to $6,378.22 so it is correct.
New Owner Statement (Enhanced)
If you have any other questions about AppFolio accounting, please book a free consultation with us and we would be happy to help you.
