Expense Tracking for New Investor

[Connor Lewis]

Hello BP community!

I just closed on my first house hack yesterday! I'm super excited to officially begin my real estate investing journey! 

I will soon establish an LLC and open a business account to track income and expenses through that, but in the meantime I'm unsure of how to properly track expenses for the rehab. I know not to comingle funds with my personal checking account, so in the meantime should I just open another checking account and utilize that for the property? I appreciate all advice from those who have done this before! I want to make sure it's not a headache for my CPA. Thank you for your responses!

[David M.]

@Connor Lewis

If you've closed on your first "house hack," don't worry about the LLC. Read this: https://www.biggerpockets.com/...

Since you are living in the property, you don't need it. You don't want to be holding your residence in a legal entity, and legal entities don't provide any tax advantage unless you are investing with a nonspousal partner. Since you've already purchased it, the mortgage must be in your name unless you used cash. Don't go for moving the Title back and forth and leaving the mortgage in your name. You want everything to be in the LLC if you are really going to use the LLC. Also, LLC's are NOT eligible for conforming residential loans which means you would have to use more expensive commercial financing.

That being said, just use a spreadsheet.  If you had a legal entity, you would at least need a separate bank account.  However, don't confuse bookkeeping with accounting/tax preparation.  You can track everything in a spreadsheet, or use whatever software package you want.  But, since you should have your own personal bookkeeping, this shouldn't be that bad.  Good luck.