Bank Account Suggestions

[Rickie Mincy]

Hi BP!

I will be closing on my first rental property next week and Im looking for suggestions on how to manage the bank accounts. Based on my research, Im going to open a checking account for rental income and savings account for the security deposit. What is recommended when it comes to the funds I will be using to fix up the property? Do I transfer that money to the new checking account and make all withdrawals from there, or is it ok to keep it in my personal? Side note- only 1 rental property and no LLC.

Thanks in advance!

[Aaron Smith]

Hi @Rickie Mincy. Congrats on your first property! 

The BEST way to avoid any issue, is to never commingle your personal funds with your business funds. Even though, your not setting the property up in an LLC, it makes life much easier for your CPA to plan your taxes when you can hand them a bank statement for the property instead of having to sort it out as you go. Hope that makes sense.

If you're going to be using your funds to fix the property, just put XYZ in the business account, and make sure you note it for your CPA so they can deduct it accordingly. 

I'm assuming this is a SFH and not a MFH, so putting it into an LLC can be problematic with banks anyways. But, consider trying to do so in the future. If something were to happen at the rental, and you're sued, you're personal assets, along with the rental, can be at risk. Sadly, we live in such a litigious society anymore, it's better to be safe than sorry.

Congrats again and I hope you have many more rentals in your future!

All the best, 

Aaron