Security deposit account

[Amir K.]

Hi,

Soon to be first time landlord here

I’m asking for a 1 month security deposit but I’m not sure where exactly do I need to put this money.
I searched the forums, some answers said “savings account”, some said I can’t deposit that money in any account under my name and it has to be an escrow account.

Which is it? How exactly does one open an escrow account? I didn’t see this option on the chase website.

i should point out I’m in Chicago, and browsing online I was able to find info stating “federally insured interest-bearing account in a bank”

(a)(1)

https://www.illinois-attorney....

Thanks 

[Nathan Gesner]

You need two accounts: checking and savings. If the properties are split into more than one LLC, then each LLC will need its own accounts.

Checking: collect all income here, then use it to pay bills. Pay the mortgage. Pay for maintenance. If you are setting aside funds for capex, taxes, insurance, or other expenses that don't occur monthly, transfer those funds to Savings each month and hold them there until it's time to spend them. You will receive the security deposit in Checking but then transfer it to Savings.

Savings: Hold the deposit here so it's separate from operating funds. You can also hold money for maintenance, capex, taxes, insurance, or other projected expenses. When a tenant moves out, transfer the deposit back to Checking so it's ready to apply towards expenses or to refund to the Tenant.

If you end up with excess funds in the Checking account, I recommend you transfer it to a third account that is specifically designated for future investments. That ensures you don't spend it on other things and that you know exactly how much you have available to spend on the next purchase. If it's mixed in with your deposits and reserve funds, you may accidentally spend money you shouldn't have.