Rent Money, where does it go?

[Antonio McGuire]

Hi all, 

   I am just starting out.  I bought a rental in NC and someone told me that the rent money has to go into a separate account that just is for rental income.... is this true?  

[Marcia Maynard]

We like banking at a Credit Union and set up three accounts for our rental property business designated as: Checking- for Operational Expenses; Savings- for Capital Expenses/Reserve Account; Money Market- for Tenant Security Deposits. We have one Credit Card for the business. 

We set up auto-pay on everything we can. If possible, we charge as much as possible to the credit card (for frequent flyer miles and for the benefit of improving our credit score) and the credit card is on auto pay from the checking account. We track everything in Quicken. We work with a tax professional (Enrolled Agent) who is knowledgeable about rental property businesses and he keeps track of our depreciation. We deposit all rents and fees in the Checking account. We move money in chunks to the Savings account as needed. We take an automatic draw monthly from the business Checking account to our personal Checking account. Simple and very effective! Good paper trail. By the way, we did it this way when we had fewer properties and no LLC. We still do it this way now that we have more properties and two LLCs. LLC One has a set of accounts and LLC Two has a separate set of accounts.

Hope this helps!