Should I set up a Checking/Savings Account for my rental?

Question

I have been thinking about setting up a new account specific for my duplex. A checking account for rental income/paying the mortgage, and then a savings account to cover any maintenance or repairs. Does anyone have any tips on if I should do this or how I should go about it? I currently bank with Wells Fargo but where I'm at in Ohio there isn't many of them. I was thinking of opening something up at a new bank specific to my real estate and keeping my wells Fargo personal. Would love to get some experienced investor thoughts! Thank you.

Nathan Gesner · Answer

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.

James Dainard · Answer

You'll want to talk with a CPA about this but you can set it up as a business account and track some of your expenses as business writeoffs!

Drew Sygit · Answer

Checking account for Operating Expenses

Savings account for security deposits

You can create an LLC for your business, don't have to transfer the property deed into it. Then use LLC to setup the accounts.

Check with CPA and attorney.

Remington Lyman · Answer

I like JPMorgan Chase

Bruce Woodruff · Answer

No you do not need an LLC at all. Certainly not to get write-offs. If you had expenses prior to being a business (from your personal account), just have the receipts in order and you'll be fine. I like to have a separate account (checking & saving) for each property. It makes record keeping and tax time really easy.

Peter Mckernan · Answer

@Thomas O'Donnell yes I would get a new account for your properties to track those expenses, track the income and make sure it is lined out a lot easier than coming out of the person account. The CPA can direct you this way, I use Chase for my properties, but you can really use anything from a smaller local credit union to Wells.

Mo Karim · Answer

I use business checking from Kabbage (from American Express, online only). They give me 1.1% interest on cash sitting in account. It also allows you to create separate categories under one account and set aside money in them. For example, I have reserve, insurance, property tax, etc categories under one account. I have my property management direct deposit money in it every month. You can link your Wells Fargo account to it and take money out or put money in for free. They give you a debit card as well. I think they limit it to one LLC/account at the moment.

Thomas O'Donnell · Answer

If I have already paid for maintenance/repairs before renting it out with my personal account, would I still be able to write these off? And do you think I would need to create an LLC to have a business account? I currently purchased this duplex under my personal name and have not created an LLC.

Kevin Sobilo · Answer

@Thomas O'Donnell, I recommend quite a few accounts. I use the "profit first" system of cash management. It is so simple that it actually sounds a little silly, BUT after struggling with only a couple accounts I found it to be HIGHLY useful.

When you only have a couple accounts, its hard to know where you stand with budgeting for different kinds of items and also how much you can pay yourself without doing a bunch of math. With profit first you can look at your account balances and know immediately without thinking where things stand.

https://www.amazon.com/Profit-...

Thomas O'Donnell · Answer

Do I need to have an LLC for a business account?

Should I set up a Checking/Savings Account for my rental?

Most Popular Reply