This guide is general information, not legal, tax or investment advice. Your operating agreement, offering documents, counsel and CPA govern your deal.
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One deal, seven stages
Every deal produces the same chain of records. The rent roll you underwrite becomes the leases you manage. The capital you raise becomes the capital accounts you report. The cash the property earns becomes the distributions you pay, and all of it becomes the K-1 your CPA signs off.
Most sponsors run that chain across five to ten tools: a spreadsheet model, a CRM, an e-signature tool, a portal, property management software, an accounting package, a bank portal and more spreadsheets in between. Every hand-off is a chance to re-key a number.
| Stage | Core records | Where re-keying happens |
|---|---|---|
| Underwrite | OM, rent roll, T-12, model | Rent roll and T-12 typed into the model |
| Raise | Investors, soft commits, subscriptions | Commitments copied from CRM to cap table |
| Close | Cap table, funding, entities | Funded amounts and dates matched by hand |
| Operate | Leases, rent, expenses, general ledger | Rent roll rebuilt in property software |
| Report | Budget vs actual, updates | Actuals exported and pasted into reports |
| Distribute | Waterfall, payments, notices | Amounts typed into bank payment files |
| Tax | Capital accounts, allocations, K-1s | Ledger and cap table re-sent to the CPA |
Underwrite: OM, rent roll and T-12
Underwriting starts with three documents. The offering memorandum (OM) is the broker’s marketing package. The rent roll lists every unit or suite: tenant, lease dates, rent, deposits, concessions and status. The T-12 is the trailing twelve months of operating income and expenses.
The broker’s numbers are a starting point, not the answer. Tie the rent roll to the T-12: current rent times twelve should be close to gross potential rent, and the gap is vacancy, concessions and loss to lease. Strip one-time items from the T-12, re-underwrite taxes for the sale price and insurance at today’s quotes, and keep the version of the model your investment committee approved.
That approved model holds the budget you will report against for years. If it lives only in a spreadsheet on one person’s laptop, budget vs actual reporting starts from scratch.
Raise and close
The raise creates the investor side of the record: contacts, investing entities, soft commits, accreditation, signed subscription documents and funded amounts. The funding date matters as much as the amount, because the pref and investor IRR accrue from it.
At closing, the cap table becomes the legal record of ownership. If commitments live in a CRM, signatures in an e-sign tool and funding in a bank portal, the cap table is assembled by hand. Any mismatch carries into every distribution that follows.
Operate: leases, rent, expenses and the ledger
After closing, the rent roll becomes live leases. Leases produce rent charges, charges produce receipts, and receipts and expenses land in the general ledger. Bank accounts are reconciled to the ledger each month.
The chart of accounts should map to the categories in your underwriting. If the model has a "repairs and maintenance" line and the ledger splits it across six accounts nobody mapped, budget vs actual becomes an argument rather than a report.
Report: budget vs actual
LPs want to know whether the deal is on plan. A quarterly report compares actual income and expenses with the budget for the same period, explains the material variances, and updates occupancy, collections, debt and capital projects.
Build reports from the ledger, not from exports pasted into a slide. When the numbers in the report, the books and the portal come from one source, you answer LP questions with a link instead of a spreadsheet.
Distribute
Distributable cash comes from the ledger: cash on hand less reserves and obligations, as your agreement defines it. The waterfall turns that amount into a split by class, and ownership turns it into an amount per investing entity. Then money moves, notices go out and capital accounts update.
Each step consumes the output of the previous one. Re-key any of them and the error flows straight into an investor’s bank account.
Tax: K-1 drafts for your CPA
After year end, your CPA prepares the partnership return (Form 1065) and a Schedule K-1 for each partner. The return is due March 15 for calendar-year partnerships, and many file a six-month extension. To prepare it, the CPA needs a trial balance, every contribution and distribution with its date, ownership changes and transfers, and the details behind depreciation and other book-to-tax differences.
When the capital accounts and the ledger already agree, a draft K-1 for each partner can come straight from your records. Your CPA still reviews, adjusts and signs the return. What changes is that they start from reconciled data instead of a folder of exports.
Where re-keying breaks things
Copying data between tools introduces predictable errors:
- Transposed digits and dropped rows when a rent roll or T-12 is typed into a model.
- Version drift: the portal, the cap table and the CPA each hold a different "final" file.
- Missing dates. A contribution recorded in the wrong month changes pref accrual and IRR.
- Entity mix-ups, where an investor’s IRA and trust positions are merged or swapped.
- Stale mappings between the model’s categories and the chart of accounts.
- Payment file errors when distribution amounts are typed into a bank portal.
- K-1 allocations that do not match the capital accounts investors saw during the year.
Controls that work with any stack
Even before you change tools, these controls catch most errors:
- Give every investing entity one ID and use it in every system.
- Reconcile the bank to the ledger monthly, and the cap table to capital accounts each quarter.
- Add a tie-out check to every report: the balance sheet balances and capital totals match.
- Treat reported periods as final. Correct them with dated adjustments, not silent edits.
- Require a second reviewer for every distribution and every capital call.