May seem like a dumb question... How to organize bank accounts?

[Federico L.]

Dear BP family,

When I bought my first rental, I paid from a personal savings account. I had another idle savings account where I started depositing rents. Months later, I opened a personal checking account where I transferred the rents and payments go to and from.

I'm now closing on my second property. I guess I will be using the same checking account. But I will have many payments to go to make it rent-ready, and I anticipate those will come from my other personal checking/savings. (I can easily track expenses in Quicken, which I've used forever.)

I had created an LLC but the property(ies) have not been transferred to it yet, so I do not know if the LLC can 'operate the business' of collecting rents and paying servicemen, in which case, the LLC will need a checking account of its own.

My questions:

1. Do I stick with the existing checking account? Over time, $$ will build up (cap ex, maintenance, etc) making it difficult to understand what is what. Plus, in one of the podcast I heard the investor moving money out of the account out of fear for people accessing it and depleting it.
2. Should the LLC operate these rentals through an independent bank account, despite not owning them? I wonder what others have done
3. Second property will go with PM. Do you recommend I upgrade to Quicken Rental Property Management, and use it to track what is what there?

Thanks

[Dan Bryskin]

Where are a few questions here. There are operational, legal, insurance, financial and tax implications. You got to think your structure through to make sure you got everything covered. Please talk to the CPA / Attorney, but here is what I think

1. How do you hold your assets? The answer to it will depend on you plans to finance them. You can have up to 10 mortgages, so it makes sens to hold 10 rental individually. I been thinking about a trust once they are financed, but have not set that up yet.

2. How do you rent them? I have an LLC set up. My LLC leases properties from me, and leases them out to tenants. My LLC is a landlord. If landlord is getting sued, they will only get what's on the checking account, since LLC has no other assets

3. If you are going to do something similar, aside from acquisition we used 2 accounts. One for LLC - that deals with rentals, income and expanses. Another one for major construction projects.

Good luck.