Separate Bank Accounts per Property?

Question

Hi Everyone,

Quick question. I heard it is a good idea to have separate bank accounts per property. Is this recommended? Are bank accommodating?

Thanks!

Scott M. · Answer

Oh my my head hurts from the thought of doing this.  But as they say to each their own.  As for us we manage many hundreds of properties with 2 accounts.  Then we use software to keep track of what is what.  We have the checking/operating account and a savings/trust/escrow account.  That is all that is needed in this biz but again, to each their own.

Nathan Gesner · Answer

Could you imagine juggling 16 bank accounts for 16 properties? Anybody that recommends that is crazy.

You need one checking account and one savings account. If you have properties under an LLC, then the bank accounts should match that LLC. I have properties split among three LLCs, so each of them has separate bank accounts.

CHECKING:

• All income goes here
• If you're doing it right, a portion of the income should be immediately removed and set aside for capex, taxes, insurance, repairs, etc.
• Pay bills from here

SAVINGS:

• Security deposits
• Money set aside for future expenses (taxes, insurance, capex, etc.)
• Savings for your next investment

If you have more than one property, then you can still put all the money in the same accounts but you should have a system that tracks the income/expenses for each property. This is what Property Management software is for. I manage 350 rentals for other owners and all their income/expenses are in one checking/savings account.

Grant Thompson · Answer

Matthew,

I recommend separate bank accounts per LLC (or other legal entity), but if everything is in your personal name or 1 legal entity then it is overkill. Separate accounts are beneficial is taxes will be filed per property which is only the case if you have them in different entities. Disclaimer: Not a CPA

Todd Lennig · Answer

If you are following the Profit First model, then you would be doing a minimum of 7 accounts.  Relay bank is a great bank that you can have a ton of accounts all under the same ll

Basit Siddiqi · Answer

@Matthew AlbrittonHaving a separate bank account per property is overkill.Imagine having 20 properties and 20 different account number to remember, 20 different checkbooks, 20 different debit cards, etcJust have one bank account for all your rentals(assumed no entities are involved) and have a proper accounting software to keep track of the income/expenses by property.

Aigo Pyles · Answer

If you have a lot of properties that's a lot of bank accounts to handle. Why not different bank accounts per LLC instead of per property.

Adam Martin · Answer

Keep in mind different states have different rules.  I have 3 separate accounts however 2 is the absolute minimum in Ky.  Here you have to have deposits in their own separate account and not comingled with personal funds or you forfeit your right to hold from it.  You are able to aggregate all deposits in 1 account so I have 4 rentals and all deposits are in the same savings.  That is fine however deposits need to go directly there and the tenant has to know the account number and bank which is on my lease.  I also have a checking account where rents come in and mortgages come out as well as a reserve fund.  The third is a brokerage where the majority of the money is sitting invested until I need it.

John T. · Answer

There is no need to have more than one or two bank accounts - Operating Account and Savings Account.  See the @Nathan G. and @Scott M. posts above.

Accounting software can easily keep tract of multiple Properties and Tenants.  This is done by assigning each Property to a unique Class (e.g., 123 Main Street) and by linking the Tenant to that particular class.  If your accounting is setup in this manner, you can create financial reports for the Company as a whole or as to each Class.  For instance, in QuickBooks, I can create a Profit & Loss Report for the Company over any period of time that I choose.  Also, I can create a Profit & Loss Report by Class and the report will display Profit and Loss as to each particular Class.  The Profit & Loss Report by Class will display each Property side-by-side in the report with all of the income and expenses relative to each Property.  If you have a question about any income or expenses for a particular property, you can simply double click on the income or expense item to get more detailed information.

I suggest that you use a robust accounting program like QuickBooks.

Alecia Loveless · Answer

@Matthew Albritton I’m fairly small but I do have separate bank accounts for each property. It makes it easier for me and quick to do bills and keep everything apart and individual and see quickly what each property is doing. I’m about to have 6 buildings so it’s not a big issue but I could see it getting more cumbersome if I had 25 properties or something.

Drew Sygit · Answer

You can also create a Holding Company and have bank account for that.

All the LLC's hire the Holding Company, allowing all income/expenses to flow through Holding Company to each LLC as needed.

Separate Bank Accounts per Property?

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