How to set up bank accounts

[Samantha Kincaid]

We are closing on our first duplex any day. Should I create a new checking and savings account strictly for rents/expenses? What are the advantages, as opposed to using our personal account which in this first year will fund some large repairs.

I have accounting software in place to keep track of all expenses and rent but I am curious if creating a separate account matters?

Note, the property is currently not in an LLC. This property will be owner occupy- further complicating the expenses.

In addition we are renting out our single family home.

Any help is much appreciated!

[Kase Knochenhauer]

@Samantha Kincaid - great question! 

Get a second bank account started right away. There are two methods that I'd look at depending on your intentions to scale your real estate business:

1. Create a sub-account inside your personal account. Run all your home expenses through this account. Your accountant can assist on how deductions for expenses can be recorded properly.

2. Open a business account. This is the best method but will cost $10/month or so depending on your bank. In my mind, this is a small price to pay in order to not have to change banks and payment methods in the future.

Organizing your financing is SUPER important. It will ensure that your current investments are profitable and assist in financing future purchases. Additionally, if you decide to grow your business substantially, you'll want to get organized now. It's much easier to learn proper accounting methods with one or two properties than 30 separate investment. :)

Nice work with your duplex! House hacking is just plain wonderful.