Security Deposit Account in FL

[Murali Jesudoss]

Hello BPers,

2021 has been an amazing learning year for me. Started out in Jan got my first property in Mar and end of the year, I have close to 20 properties under 4 different LLCs :-) I moved to FL recently and it allowed me to do PM for my own rentals in Ocala which are about 14+. Was able to rent them faster but hearing mixed answers on maintaining the security deposit from the tenants. 

I understand that it has to be in separate account but can this just be one business account for LLC that has SD of all the tenant for the LLC or do we need special kind of SD escrow account that has tenant as beneficiaries? Went to chase and they had no idea. BoA recommends LLC business checking account without tenant as beneficiaries.

Hopefully someone like me on the same boat and like to hear on how do you handle this and thanks in advance. 

[Greg Scott]

This is a common area of confusion. 

From an account perspective, you just need a bank account separate from your operating account.  You can still return security deposits from your operating account, if you want, but you shouldn't be paying for things like painting from this security deposit account.  The security deposit account should have no other kinds of transactions other than paying back tenants or transferring to or from the operating account.

On our apartments, we have a separate account that we only touch once per month to make the cash in that account match the security deposits on our rent roll.  Of course, you don't even need to be that fancy. No judge will fault you for having more money in an account than your actual deposits.  So, if your security deposits range from $15K to $25K over the course of a year, you could just park $26K in a bank account and forget it.

Operationally, you could create one account for all LLCs, but then you'd want to draw up a contract between the LLCs and manage all the accounting properly.  If I were in your shoes, I'd just have a checking and saving account for each and make the saving account your security deposit holding account.