A mark up is the additional money that you charge for services rendered. Usually, the mark up comes from negotiating a favorable rate with a vendor. The vendor charges you at a wholesale rate, while you charge your client a retail price. This topic explains how to add a mark up and uses the following example to do so:
One of your properties, 39 Franklin Street, has a broken window. You hire a subcontractor to repair a window. The subcontractor charges you $75. You charge 39 Franklin Street $100 for the repair.
Once the client has paid you the "retail" rate of $100, you pay the vendor's "wholesale" rate to you $75. The mark up (and your net profit) is $25.
When you add a mark up, there are two sets of books involved: your client's and your property management company's.
Step 1: Bill the property you are collecting a markup from for the full cost
Create a bill from the property being charged for the full amount of the money you are collecting - the repair cost including the markup. Your property management company will be listed as the vendor for the total expense.
Why $100? And why is the property management company the vendor? Because as far as the rental owner is concerned, the cost of the repair was $100 and your company did the work.
Step 2: Deposit the check
Only use this step if you're keeping the books for your property management company in Buildium.
When the check is written, record $100 of income on the books for your property management company.
Step 3: Pay your subcontractor
Only use this step if you're keeping the books for your property management company in Buildium.
On the books for your property management company, record a check to pay your subcontractor $75.
Step 4: confirm that everything was done correctly
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On the property's books (in our case, 39 Franklin Street), there should be a $100 expense.
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On your company's books, there should be $100 in income and $75 in expenses, for a net income amount of $25 to your company.
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