Investor · Jacksonville, FL · Member since 2020 · 29 posts · 7 votes
I have not purchased my condo yet for my first rental property, but I have a question about setting up a business account both checking and saving. I am planning to start a business account with my credit union and later decide if I want to move my money to an online account.
From my current knowledge, I know that your suppose to save the security deposit in a savings account and hold it until the tenant moves out and also to keep the cash flow in the savings account. I was wondering if the reserves should be kept in a business checking account and that should you spend money on the housing expenses with the business checking account?
Not many investors talk about setting up business accounts and I was wondering to get more information about setting up bank accounts before I buy my property.
Rental Property Investor · St. Louis, MO · Member since 2014 · 741 posts · 424 votes
6y
I have a separate checking account for my real estate activities @John Akhlaghi, as my accountant has a thing about co-mingling funds. It is a business account and has a business name. This is not necessary since my property expenses are listed on a Schedule E for filing my tax returns. Each property reports a Schedule E. Rent and expenses come and go from the checking account. I keep tenant deposits in a savings account. It is in my name. The rules vary by state whether this is mandatory or not. I do it because the money isn't mine. I save for capital expenses in the same savings account. When the funds are transferred into the business account, the deposit is coded as an owner investment in the business record.
Rental Property Investor · Member since 2020 · 215 posts · 137 votes
6y
@John Akhlaghi
LLC are great to reduce your exposure. Depending on state it can be very expensive. So you need to check the cost to have one. I know some investors like to hold 1 house per LLC, personally i have 4/LLC. I also have umbrella, so risk is mitigated.
Having LLC, i have an account per vehicle. All payments are done using their accounts.
If you will buy a property and leverage, getting a finance, you will need to buy under your name and then, move to your LLC. Check with your lender this.
I move as soon as it is possible my properties to my LLCs. This way i reduce my risk, and can save some in insurance.
I am planning on housing hacking my first property and partner with my dad. This property will be a buy and hold and I am planning to move out and rent it out to buy my next property two years from now. I am thinking of getting insurance with Policygenius.
If you follow @Alexandre Marques dos Santos advice to move your property into the LLC, be sure to check with some qualified professionals to make sure the rest of your operation is squared away and your corporate veil is protected. Make sure you update your insurance policies as well. Its no good to "think" you have the asset protection only to find out that you've pierced your corporate veil and you really don't.
Rental Property Investor · Member since 2020 · 215 posts · 137 votes
6y
@David M.
True. When i say move, do it in the right way. Do t expect house be in a LLC and insurance under your name, for example. Title and all needs to be addressed as well.