Best way to accept rent payments & separate finances?

Question

Hello good folks of BP,My wife and I will be closing on our first owner-occupied rental property (duplex) in May 2019 and I'm trying to do as much up front leg work as possible to prepare for us being new landlords. We have some questions around the best way to accept rental payments and how investors are separating/storing funds for future repairs, vacancy, capex, cash flow, etc.After doing some research on accepting rental payments, it looks like there are a few popular options: cozy.co, buildium, google payments, paypal, certified funds (money order & cashiers check), cash, personal check, etc. As an IT Pro, I'm much more inclined to automate/digitize rental payments. Cozy.co looks to be quite attractive and I've gone through their initial account setup, linked my bank account and all seems smooth so far - but I'm curious as to how the service functions in practice and if there are any "hidden" fees that the tenant or the landlord would potentially run into and be cause of shock/disappointment. Least favorable would be cash, due to the hassles of accounting & writing receipts. We're open to accepting personal checks or certified funds, but would having those sent to a PO Box be the best bet, as opposed to having that stuff sent directly to our primary residence? Initially our tenant will be living above us, so this won't necessarily be an issue at first, but we'd like to setup a system now that scales as we purchase future properties.After doing some research on where to keep funds, it looks like the common response is to either keep them in either an interest-bearing savings account, checking account, CD, etc. and largely to keep the funds liquid, so you can access them on demand. That makes sense for the most part and we have a Business/LLC-based Checking & Savings account that we plan on housing the funds & transferring any deposits into (e.g. cozy.co), but I suppose our question goes a bit beyond this and into the accounting side of things. How do you separate out & account for the monthly funds going into the future repairs, capex, vacancy, etc. categories? Do you use separate accounts for each category? Do you separate the funds going into these categories from your "monthly cash flow", or do you keep them all in the same account? I suppose I'm a bit confused with seeing the different categories listed on our numbers listed on the Rental Property calculator for the property, and trying to visualize those numbers being separated & accounted for over the long term.Admittedly, my wife and I don't plan on touching any of the rent money and letting it build up in the business account being deposited into. I feel like this is the safest and probably the laziest approach to it, but I feel like there's probably a more realistic/practical approach to organizing funds into various different categories. While I'm sure the likes of quickbooks or other accounting software apps would be helpful, I'm curious as to whether the cost would justify the benefit for our first investment property and only renting out 1 unit @ ~$600 per month.Apologies in advance for the newbie questions - any insight, advice or reading materials covering this would be much appreciated folks.Thanks for reading and have an awesome day!

David de Luna · Answer

Cozy.co is awesome. Fat fee to them when they pay by debit/credit, FREE if they link their bank acct. I have a separate account at Fidelity that captures the rents, complete with checkbook and debit card I use at Home Depot for repair materials. Simple spreadsheet I just sent my accountant. With a rental, no more TurboTax. Taxes are now over my head.

Oleg Shalumov · Answer

@Jim Peckey Cozy is one of the best out there. For the account you would need at least 3: o Operating accounto Capital improvements accounto Security deposits

David de Luna · Answer

I have two accounts - a cash mgmt acct for operating, and brokerage that I is only in a govt money market investment. I only have checkbook for the op acct. the brokerage is reserve acct where deposits, and all reserves are held. If there's spending to do I transfer from reserves to op. When I have a lot of units I will see a need for a 3rd acct to hold deposits.

Oleg Shalumov · Answer

I use Chase as I have Private Client privileges and they do not charge me any monthly fees. But you could use any bank that would not charge you any fees. Specially you would have one account with deposit only (which is probably under $1K). I would recommend any small local bank. Talking about security deposit ... many landlords nowadays do not take security deposits and charge un-refundable moving fee - It is less hassle.

Jim Peckey · Answer

@Adam Gollatz - I definitely agree with the KISS philosophy and seems like a great approach here as well. I currently use Navy Federal for my primary banking and have been depositing checks via their mobile app for years - it works very well. I'll explore different options with them for sure just for an ease of processing check-based payments. I'm also a huge fan of spreadsheets and have been working on creating one for property expenses/rents, etc.@David De Luna - This is excellent feedback and like what I'm seeing with cozy.co so far. I'll definitely keep looking into that option - I see that they also support Fidelity as well. As far as using Fidelity, what type of account(s) do you have with them? I've been looking at the Cash Management Account & Standard Brokerage Account options, where it looks like the Brokerage Account can also be used to store money in a Money Market account as a form of high yield savings, so to speak. Also, do you have multiple accounts to separate out funds, or do you use a single account for rents, repairs/capex, security deposits, etc. and separate out via your spreadsheet?@Oleg Shalumov - The more I read about cozy.co the better it looks and there seems to be no shortage of good feedback/recommendations on using them - we're heavily leaning towards using them at this point. Would you recommend any particular organization to open 3 accounts? (Fidelity, Ally, Navy Federal, etc.) I take it you have monthly rents deposited into the Operating account and then future repairs, capex, vacancy, etc. moved into the Capital Improvements account?Many thanks for the responses folks, we really appreciate it! It's always great to see how the pros are doing things and making their lives easier through REI - we couldn't be happier to be a part of this community!

Adam Gollatz · Answer

1 unit at 600/mo? KISS. Open a separate checking account, get a debit card for it, put a chunk of money in for reserves and do all transactions from there. As for payments, if you have a bigger bank they usually do some sort of check capture on a smart phone for deposits, so you can take rent payments as check/money order, link your phone number to zelle and they can deposit it straight into there. If you end up with a less tech saavy tenant, do you really want to be training them on how to set up to pay you every month?As for record keeping, save receipts and put them into a spreadsheet/google sheets. The sheets app on your phone keeps it convenient. Talk to your accountant about how he wants it all broken out. but you can put a note on there cap ex, repair, lawn care, advertising, utilities, etc.