Banking for first property

[Mitchell Witkes]

Hi everyone,

I'm closing on my first multi-family property in a couple weeks (Christmas present to myself!). I'm looking for some advice from some of the real estate vets on here. Let me go into some of the details of my situation. Any advice is welcome and appreciated!

I need to set up a checking and savings account for the property. I want a checking account to handle the inflow of rent and outflow of PITI/maintenance. I want the savings account to hold capital for improvements to the property. The property needs significant repairs, but I have money in an investment account that I will be liquidating for this purpose. I think that setting up the banking for the property in this way will make it easier for a tax professional to save me money come tax season. Anyone in MA use a specific bank for these accounts? Do you recommend setting up banking this way? If not, how do you do it?

As I said, any advice is welcome and appreciated. Thank you all in advance!

[Eric Carr]

As far as taxes go, you can go with a software solution to keep track of rents and expenses, or you can use a simple excel spread sheet. Your tax accountant isn't going through your bank statements to add up rents and expenses! A bookkeeper might keep track of everything but that's an expense and if you're just starting, you wont need that. 

Get free software or use a spreadsheet, record every repair and capital improvement - know the difference taxwise for each of those. You'll get better at that and how to find ways to make some cap improvements work as a deduction the year made rather than depreciated

As far as having a separate account, you can do so for organization if that's what you want. But think ahead, are you buying more property in the future? Will you want to open another account for that one? And so on?

Some banks allow you to create sub levels inside your account, Savings and Checking accounts 1,2,3,etc

You could set these up for rental income, reserves, deposits - most states require the deposits to be in a separate account or its own sub level