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Updated over 8 years ago, 06/20/2016
Separate Bank Accounts for Each Rental or nah?
Hello BP World,
I am buying my second property which actually is a duplex. (Congrats). Thank you. I have a separate bank account for my first rental because I am taking the advice from Brandon's book on growing your landlord business. It seemed like a great idea but now that I will have another two doors, with two tenants, I will have to get two new bank accounts? I guess I could just do one bank account for the entire duplex. Regardless, as I grow my rental portfolio, it seems very daunting to keep opening up bank accounts for each property address. Well, not for me so much, but my wife. She handles all financials.
What are you thoughts? Should I continue to make bank accounts for each rental or just keep it all in one bank account? Am I over thinking it? Should I get a debit card for each bank account? I get the idea and I like it to keep everything separate i.e. deposits, rent checks, paying for maintenance etc. I am torn and need yalls help. Thanks in advance
I have one duplex and just closed on my second. I was considering opening a second set of accounts, but have decided to keep my one rental checking and one rental savings (for deposits) for the time being. We'll see how it goes.
I've been using truerent.com to track everything. It's free and pretty straight forward. It generated reports that I used at tax time. I use QuickBooks for a small business and it's way too much work (for me) to set up to use for the rentals. And it's expensive.
Good Luck!
I personally find it best to setup each property with it's own individual checking register (these are mock checking accounts), as well as use the class tracking system. At the end of every month after expenses against the rent are collected, I zero out the profits by transferring it to the company checking account and match the transfers to the deposit.
As a real estate accountant I personally advise anyone new to bookkeeping to do this as it is a great way to become acquainted with the bookkeeping end in a controlled setting. However once you have accrued 5 or more properties or feel more confident in your scope of bookkeeping, then I would advise structuring this in a much more efficient way with less accounts.
Just use one checking account for everything (unless you're required to segregate security deposits) and use an accounting program like QuickBooks to keep track of where each dollar comes from and where it goes. If you're already doing a great job with your accounting, then having multiple physical accounts just makes more work for yourself.
Somewhat related; do any of you use a business credit card tied to the checking account for paying operating expenses? Or do you operate on "cash" only (i.e. checks and debit)?
Originally posted by @Neil Henderson:
Somewhat related; do any of you use a business credit card tied to the checking account for paying operating expenses? Or do you operate on "cash" only (i.e. checks and debit)?
Such cards are useful if you can get a cash-back feature (e.g., 1% off all purchases). Otherwise, a credit card isn't needed unless you need credit for some reason.
That sounds really organized and I'm the worst accountant on the planet.... what's the class tracking system? if its too long to explain you have a resource to read up on this? I'm assuming when you "zero" out the acct it's a good way to review the month of expenses and see your profit at the end....
So your ops/checking acct is always the biggest acct? the savings is just a minimal reserves acct that's roughly 15% of the checking?
Right now, I keep all the profits from properties in the LLC, but when do you guys pay yourselves? and how do you do it?
I'm old school too. I actually have a piece of paper, marked June 2016 with addresses and unit numbers and write "paid" when the rent comes in. I totally KISS. I keep one bank account for security, as required by law. Another bank account for everything else. I have looked into software but don't want the learning curve. And the time to input. The accordion file by unit, works.
My accounts fluctuate, but usually my checking has the largest balance. Below is my breakdown from this month so you can see actual dollars.
Gross Rents: $7765
Rents after PM (what I receive after PM, Lawncare, and cleaning):$6947
Property Savings account (Capex, Taxes/Insurance on free and clear properties): $1870
PITI (Placed in Checking; I round all my payments up to the nearest $25 increment): $3,150
Operations expenses (placed into checking; utilities, licensing, advertising): $420
Cashflow (Transferred into my personal account): $1,557
Typically my property savings account will balloon up to a large number, and then empty when taxes, or a major repair comes due. As this is a part time job for me, I try to keep my books as simple as possible. I would rather spend my time finding new properties (I have bought 3-4 properties per year for the last 4 years) than on an elaborate book keeping system. The same can be said for using PM. They take $800 per month, but the peace of mind when I am out of town for work is well worth it.
I handle the bookkeeping end for properties with Quickbooks, which is not recommended for property management. QB gives you the ability to create your own class tracking categories and assign every transaction to one.
However I always urge my clients to keep their management company, since they are taking care of the property's needs.
Originally posted by @Tim Ball:
Hello BP World,
I am buying my second property which actually is a duplex. (Congrats). Thank you. I have a separate bank account for my first rental because I am taking the advice from Brandon's book on growing your landlord business. It seemed like a great idea but now that I will have another two doors, with two tenants, I will have to get two new bank accounts? I guess I could just do one bank account for the entire duplex. Regardless, as I grow my rental portfolio, it seems very daunting to keep opening up bank accounts for each property address. Well, not for me so much, but my wife. She handles all financials.
What are you thoughts? Should I continue to make bank accounts for each rental or just keep it all in one bank account? Am I over thinking it? Should I get a debit card for each bank account? I get the idea and I like it to keep everything separate i.e. deposits, rent checks, paying for maintenance etc. I am torn and need yalls help. Thanks in advance
I used to have a separate account for each, then it got way too hard to manage. Now I have ONE checking account for all of my properties. I have a JV that has a separate account though. I keep my E Fund in that checking account and then overflow money each month I transfer in to a general savings account. It makes management WAY easier as you get more units! I set everything up to auto pay in and out of that account and do a monthly balance sheet to keep track of everything. It makes my life SO much easier!
We have one checking account for our 6 properties. Everything goes in and out of it. Deposits, pet fees, rent, mortgage payments, taxes, insurance, repairs. We occasionally take out some profits for fun money. I don't see any need to make it any more complicated than that.
Is it acceptable to have mortgage paid via a separate account from another source of income? No one says you have to pay the mortgage on the property with rent money. At tax time you know from the tax slip how much interest was paid exactly so accounting is not too challenging.
Or is it just better to use the rent money to pay the mortgage so it shows net income? (that's only if rent generate positive cash flow)
