How do you manage your bank accounts / set up accounts for rental

[Mike M.]

Hey guys

I'm wondering if there is a way I can increase my efficiency or improve my money management system the way it is. For those of you that have full-time jobs (non-real estate) and do this on the side - how are you managing your accounts? And for those of you that do this full-time - how are you doing it?

Right now I have my direct deposit going into a Bills account, from which I pay off my credit card every month and pay my primary mortgage and all fixed expenses like utilities. I do all my spending on my credit card. I also have a rental account in which I have my roommate deposit via check into every month. I have 5% of my paycheck going into an investment account at fidelity and every time I have XXX amount of surplus dollars after bills are paid I send this money to my Fidelity investment account.

I am looking at acquiring another property and feel like I can improve my system. I appreciate all of your suggestions or if anyone has a map of what they do that would help as well. Below is the map and illustration of how i manage my money now.

[P.J. Bremner]

@Mike M.

I own several properties that I personally manage, so I have a separate account for each as well as a savings account.  The CPA recommended this so that expenses are easily tracked (tied to the individual homes) and Wells Fargo has pretty easy minimum requirements to keep them for free (without monthly fees).  I will generally keep a set amount in each account for reserves and put the balance into my main investing account.  Once the deposit exceed the reserve amount, I skim the rest off the top.

I also have an Amazon store that pulls in a ton of revenue, which is kept that in a separate account and I transfer profits to my main investing account on a monthly basis with a set reserve for inventory needs.

Currently, I am purchasing out of state rentals that will all be tied to a single checking account.  I close on 2 duplexes this coming week and the CPA has already advised me a single account will be fine since the property manager will be itemizing everything for me.  I will keep a set amount per unit in that checking and transfer everything above that into my main investing account.

I do not personally invest in any stock markets, bonds, mutual funds, etc. because for me, it would be a waste of time and money.  I'm not knocking anyone who does, everyone has different needs and experience levels.  Just for me, I know I can get a return that will far exceed anything an "advisor" could get me.  Even when I was a W-2 employee, I stashed everything I had and saved up so that I could build my businesses and get out from under my employer's thumb : )

I don't exactly have a process map/tree like you posted, but I had some general guidelines that I followed:

- Keep personal expenses under $1,500 per month ALL IN.  I was generally around $1,000 or less.

- Earn at least $8,333.33 per month on average (I worked in the car business, not hard to do if you put the time and effort in).

- Buy as many properties as I could without regard for my bank account balance.  I remember on more than one occasion, i dropped down below $3k at the tail end of my first ever purchase and rehab.  On my 3rd, I underestimated my rehab by about $60k LOL so I had to go into debt to cover it.  Paid that off in a year and was still able to buy another property in that same time span.

It all comes down to what you want and how bad you want it.  Most people kind-of want it, but definitely don't want to give up certain things along the way.  As a recent college grad (2011) I was making 6-figures my first year out and still drove a 15 year old Toyota Camry.  Hell, I even had a 1996 Toyota Pickup with no radio and no AC after my Camry died because I needed a truck to haul furniture around for my business.  I went to work in a $1,000 suit and $500 shoes (was pretty much a requirement, was in senior management) and still pulled up in a truck I bought for less than $1,000.  I showed up to a date once in my little "gardener truck" which was a hoot lol.

Anyhow, I guess to sum it all up, my general strategy is to set your personal reserves for yourself (I keep about $10,000 separate for myself that I don't touch), reserves for any business or rental (Don't ever touch them for anything other than that business or rental, no matter what), and then save save save.  The key is to be VERY conservative with your reserve money (don't ever bend the rules on those) and be VERY VERY aggressive with all of your other money.  If you lose all the risky investments, but keep sufficient reserves, you'll be fine.  If you're smart about your investing and have persistence, you'll always come out ahead in the long run.

*Edit* I totally forgot to mention the lending side of things. I always try to max out my credit any chance I get. I have a business line of $90k at 6%, I have a HELOC of $110k at 4.25%, personal line of credit at $25k at some stupid rate above 10%, etc. etc. etc. Get as much as you can. I almost never use them, but the one time you DO need them, you will be SO thankful that you got them ahead of time. A very famous quote, "Only borrow money when you don't need it". I will follow that advice to the grave : )