What is Trust Accounting?

Learn about holding deposits in trust if your state law requires it.

Matt avatar
Written by Matt
Updated over a week ago


One of the most important features of the advanced accounting within DoorLoop is Trust Accounting. DoorLoop allows you to keep ‘in trust’ monies belonging to your owners and tenants within a single bank account.

In order to properly (and legally) handle owner and tenant funds, it is important as a property manager to understand the basic principles of trust accounting.

Trust accounting regulations for property managers are country and state specific, so it is very important you consult your local and national requirements in order to be compliant.

What are Trust Accounts?

When it comes to handling business funds and transactions, there are specific rules which must be followed by a property management company. Property managers typically use trust accounts to keep tenant rent payments and deposits separate from the operating capital.

Depending on what state or country you are located, you may be required to keep all owner funds maintained in a separate federally insured checking account. This account and the funds stored within, are known as a trust account and must be kept separate from any other business bank accounts.

These funds are understood to be your rental property owner funds, not the funds of the property management company.

DoorLoop is capable of handling multiple trust accounts, for example you may decide to set up two accounts - one account created as a security deposit trust account for tenants and a second as an operating trust account. This is good practice to make sure that the security deposit funds are kept well away from any funds used to operate the property.

Confirm with your local and national requirements to determine if you are able to hold trust funds in an interest bearing trust account.

Setting up Trust Accounting in DoorLoop

Making sure you are aware which of the owners the cash belongs to as you create your opening balances in DoorLoop is key. As you create your opening balances, DoorLoop will allow you to split the money between properties.

With DoorLoop, you will not only be able to keep track of who the cash belongs to, you will also be able to track money collected from multiple properties. As is the case with many property management softwares, unlike DoorLoop, your previous accounting system may not have allowed you to track cash by property. If this is the case, then we recommend that the money is either divided equally across all properties or associated with just one of the properties.

DoorLoop will automatically move money across a property owner's portfolio if there is a cash shortfall associated with one of the properties.

Always reconcile your DoorLoop accounts on a timely basis to avoid inconsistencies.

One of the most problematic requirements of trust accounts is how quickly the funds must be deposited. If you are required to deposit funds by the close of the next business day, consider using DoorLoop’s online payment processing (RapidRent) which is integrated directly with your DoorLoop property management system, meaning you can avoid handling checks and missing any deposit date deadlines.

Security Deposits

Security Deposits are considered to be tenant funds until or if the landlord/property owner becomes entitled to receive all or part of the security deposit under the terms of the lease. When a property manager collects security deposit funds from a tenant, the money must be held in a trust account.

It is a good standard practice to have your tenant’s security deposits in a separate account from your rents collected, even if this is not a legal requirement as it will help in tracking/reporting the amount of security deposits you should have deposited and that you are not accidentally using these funds.

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