Is business bank account needed for rental income

[Sweta Jain]

Hi, I am starting to self manage my rental property and have below Qs. Please help?

1. I understand its good idea to have a separate bank acc for rental income. Can it be a personal acc? I called WF and they said for business account I need a registered business like LLC etc which I do not have.

2. We will add a addendum to the lease to remove my rental property manager and add owner. Is there any other thing i need to do?

3. Do people just wait for tenants to give them checks/transfer rent or do we need to send a invoice every month to tenant for rent payment?

4. Should I use some SW for all this accounting? Please recommend a free one, as I have only one rental property so not sure i need too many features.

Thanks!

[Nathan Gesner]

I recommend two accounts: checking and savings. If you have an LLC, the accounts should be business accounts in the LLC's name. If you have more than one LLC, each LLC should have its own set of accounts.

Checking: Collect all income here, then use it to pay bills, pay the mortgage, or do maintenance. If you set 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 refund the Tenant.

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