Overview
If a tenant sends their payment directly to the property owner instead of to you, you wouldn't record it in your operating account, since those funds never touched your bank account. Instead, treat this similarly to an owner distribution: enter the payment as a credit to the Equity > Owner Distribution account on the lease. This shows that the balance has been paid, while also reflecting that the money is already with the owner.
The Steps
Record Tenant Payments Sent Directly to the Owner
The lease is set up as normal — a rent charge posts each month to the default rent account category, just like any other lease.
What's different is how the tenant's payment is recorded. Since this payment never touches your operating account, you would not use the Receive Payment function on the lease. Instead, enter the payment as a credit, specifically to the Equity > Owner Distribution account.
To record rent payments that are received directly by the owner, click the Transaction tab on the lease. Then click the Issue Credit button.
On the Issue Credit window, enter the following:
Category: Choose Equity > Owner Distribution.
Description: Enter what the payment is for.
Amount: Enter the amount of the payment.
Click Save to finish.
The credit will be applied to the rent charge, and once the tenant pays, the balance will be $0.
This works because issuing a regular credit to the Revenue > Rent account would not show up as income on your balance sheet, since that kind of credit isn't actual income. Issuing the credit to the Equity > Owner Distribution account instead shows the amount as income that was already received by the owner. This distinction matters when calculating your management fees.
You can see this reflected on the Owner Statement report for the property, which will show a Total Income amount for the payment even though you never physically received it into your operating account.
Create a Recurring Credit for Payments Sent to the Owner Each Month
If the same payment is sent to the owner every month, you can automate this with a recurring credit. See Issue a Recurring Credit on a Lease for the full steps.
Note: When setting up the recurring credit for this purpose, you must choose Equity > Owner Distribution as the category — not Revenue > Rent or an expense account. This is what makes the credit show up as income received on the Owner Statement report, reflecting that the payment already reached the owner, even though it never touched your operating account.
Disclaimer
The information provided is not offered by a licensed accountant, should not be considered accounting, financial, or legal advice, and is provided (and intended) for general informational purposes only. Do not rely on the information provided; rather, please verify applicable accounting laws and regulations independently. This information should not be considered a substitute for professional advice and does not offer Generally Accepted Accounting Principles (GAAP). The author and publisher are not liable for any damages or losses resulting from reliance on this information.