Do you have a bunch of checking accounts?

Question

Right now I have 5 different checking accounts for 5 different rental properties to keep everything separate. Is this common practice? Seems like when I am at 20 houses, having 20 checking accounts/20 debit cards/ can be a bit much.

The other thing is that my property managers system is set up so I need a separate account/email for each checking account so instead of having all my properties under one account I have 5 separate log ins.

Duncan Taylor · Answer

Structure matters.

If you hold those properties in your name or a single entity, then you can use one checking account and hold the security deposits in the manner mandated by your state law.

However, if they are all in separate entities, you will need to keep them all separate in every way, including your bank accounts.

Account Closed · Answer

@Adam Craig  are you keeping your security deposit in the same account as the rent and operating funds? You realize that is a no-no right?

I have tons of accounts. Is it a hassle, yes, but it is part of growing a business. You have operating accounts, rental accounts, deposit accounts. etc. Manage them using Quickbooks and have a book keeper/accountant to oversee it all. This ensures you aren't co-mingling of funds and allows you to pay your quarterlies as you should to the IRS. Ya know the people give you no services but want your money more than they have already taken? Yep.

This is a BUSINESS. Need to treat it as such. It takes work, dedication and passion.

Bill Gulley · Answer

Having separate accounts may impress the depository accounts manager at the bank, it doesn't impress the loan department. It's an indicator of poor money management. The DA manager will never be able to help you much besides waiving an overdraft charge, the loan depart is where your business relationship needs to shine.

1 operating account, 1 escrow account holding funds due others, the escrow is best practice regardless if state law requires it or not.

Understanding generally accepted accounting principles is a necessary aspect of being any business, if you don't understand it, can't or won't have time to learn, get with an accountant. When someone would come asking me for money they'd have a strike against them right off the bat if they used a "Kool-Aid Stand" cash management system. Convoluted accounts just add to auditing and accounting functions and for no good reason. :)

Account Closed · Answer

I have a business account that has checking, savings, and a money market account attached.

Checking account:  Paying bills and cashing rent checks

Savings Account:  Maintenance hold back, tax hold back

Money Market Account (higher interest rate than my savings):  Deposits

I currently only have 1 rental, so my accounting is quite simple.  At one time, I had 7 rentals, and I use the same system today as I did back then.  Excel spreadsheet set up similar to a general ledger.  Columns are labeled as

Date

Income/Expense (Drop down with both choices)

Type of Income (Drop down with: Rent, Fees, etc.)

Type of Expense (Drop down with: Maintenance, Improvements, tax, insurance, etc.)

Vendor Used

Amount of Income

Amount for Expense

Each tab was listed by the property name, and the last tab has totals

I built the formula for each tab so that it would calculate each column that needed to be calculated and provided me with a running total.  The last tab calculated the running totals of the other tabs and it would let me see what my money was doing.  I could show how much I spent on maintenance for the year, total tax payments, insurance payments, miles driven, etc.  Doing it this way helped me when it came time to get with my accountant. She would go over everything to make sure we were deducting what we could, and then would handle the Texas Franchise Tax filing for me.

Good luck to you!

Steve Babiak · Answer

Bill, these days banks aren't always doing that due to the prevalence of identity theft. Somebody steals an account number, decides they want to get some dollar amount out of that account, and calls the bank to see if they can drain that amount from the account; so banks don't always do that.

Bill Gulley · Answer

I can also ask my bank to ask for clearance. I've not had a problem, I know they ID theft issue has been around a long time, now, in addition, we have money laundering laws that add further restrictions, but clearance can be a demand, it's a demand depository account. All they can say is that it will clear or it won't and, if another draft beats yours to the proof room it still may not clear.

On another note, I have worked with tenants and borrowers, called so I'd not be messing with bounced checks, but stopped doing that. I'd still do it on other drafts, but not rents or payments.

Reason is; 1. I have a bounced draft fee, pays me to mess with it, 2. it can generate a late payment, another fee income amount. I had some that I hoped they'd pay late as a % of a payment can be a hefty amount on a large payment. Not my fault, they need to pay as agreed. 3. Lastly, I don't really have to collect bad checks, the DA collects bad checks. So, I'm not going to open another account just for inter-banking transfers......

But that's certainly okay, if that's how you want to do it, have at it, there's no penalty or demerit LOL.

Bill Gulley · Answer

@Steve Babiak

Steve, if you send me a check down here, I can call your bank and see if there are sufficient funds to clear that check, I simply ask for clearance on that amount and account number.

A check book register that you carry in your pocket is handy, but in one register you can still apply codes of your devising to identify any property. If you want to see the checks written on 4327 S Watward, run through the register for that property's identification code, you have it.

We have business license taxes here as well, gross receipts taxable are to your business entity, the gross receipt amounts aren't effected by segregating them in separate accounts. Again, if you have properties in different tax jurisdictions annotating accounts is key to pulling out selected data.

I'm sure QB has descriptions that can be creatively used. If there is a searchable field in your program that would be sweet.

There really aren't any functions in keeping your financial records that hasn't been solved in accounting practices.

@Jonathan Prewitt

I got a mention from you in my inbox, but it doesn't show in your post, looks like you have a good system and it's flexible, you can run one property through that or hundreds, account codes are very handy.

Roll over type accounts or "dash" accounts are handy too, and the MM is the way to go.

The only time you need to get creative in you DDA is when you're bumping your insurance protection on accounts, then another entity may be necessary as I used a Capital Company as an affiliate but a separate entity. :)

Edited, I can see there will be no convincing others here, LOL, use what you understand, be consistent in how you account for your funds, be able to show others the logic used and don't comingle funds with other people's money. Good luck :)

George Paiva · Answer

As most mentioned.  Separate accounts per each property.   I even open a new LLC for each property as well with its own Business Checking/Savings accounts.  I also have separate accounts at the supply houses and HD/Lowes.

Steve Babiak · Answer

Quickbooks will allow you to have separate files (or books if you prefer that term) for each business. QB will let you have multiple accounts within any individual file also. So better to get going with QB for your RE business since you already have the software.

You always have to segregate security deposit funds, so I won't be referring to those in anything that follows.

I find that there are some advantages to having a separate checking account for some properties, and for some properties I just have a bunch of properties under one checking account. Some municipalities (like the City of Phila) have some nasty taxes to be paid for things like business privilege and gross receipts, so stuff in Phila I keep in separate QB files and separate checking accounts. Another thing to consider is if you allow rent payment by check; if you have a checking account at the same bank as the tenant's check, you can have the teller at the bank check whether the tenant's checking account has sufficient funds to cover the check before actually putting the deposit through; and if the check is made out to you as a person (rather than to a business), you can even have the check from the same bank be deposited as "cash" by just requesting so.

Another advantage of separate checking accounts for each property happens to be useful if you aren't tracking things using software (whether a spreadsheet  or QB). Basically, the checkbook register becomes your record of income and expenses. That allows you to see whether your property is a winner or loser when it comes to cash flow. Also allows you to have info for tax time (but not in the most useful form for your tax accountant of course).  But it does not scale so well as you add properties, and becomes a cumbersome way to manage everything. But advantages mentioned earlier can still apply.

Ann Watkins · Answer

I struggled with this...and still do...trying to find the right formula. I went from several personal accounts to now two "property" account for all rentals, one business account for my brokerage and several personal accounts.

I have a separate account for my Galveston property as everything is direct deposit and direct payment. The particular bank I use does not have enough tools like say BoA . But I'm trying to grow my relationship with that bank so I haven't changed it.

But what having separate account gives me is separate debit cards, so spending for either rental (by city) is easily determined. I have in the past been told to set up separate accounts for each property to facilitate moving to a series LLC...which I have not done.

I recently took a QuickBooks class and I don't think I'm there yet. But since I'm quite comfortable with Excel, I can do some really nice spreadsheets.

By the way I love any thread discussing systems...thanks @Adam Craig

Do you have a bunch of checking accounts?

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