What do you recommend on bank accounts?

Question

I currently have one rental property so obviously it's been easy to manage the financials. I only have one account. However I came across some money and I'm about to really grow my portfolio. My lender doesn't escrow taxes or insurance. I want to keep this lender bc they have a good term. I was thinking about setting up accounts for:

Bank acct for mortgages

Bank acct for insurance

Bank acct for taxes

Bank acct for expense budget

Anyone got any better ideas?

Bank acct for mortgages

Bank acct for insurance

Bank acct for taxes

Bank acct for expense budget

Anyone got any better ideas?

Johann Jells · Answer

Seems nuts to me too. I've seen these posts before, and of different accounts for different expenses. Jeez, you just need to use a decent ledger software like Quicken and keep it all straight. I've got 1 checking account for the LLC that owns my properties.

Buddy Holmes · Answer

@Ryan Miller, I was once told and I still believe that the IRS would like(if you are ever audited) a separate back account for each property rather than separate by your functional use like you are thinking. I am currently being audited for the first time ever (60+years of returns) I am able to show one bank account that has all payments, repairs and rents for each of my rental properties.

They seem to like that. It actually help you as well keep track of how each rental property is performing.

Cheers, Buddy

They seem to like that.   It actually help you as well keep track of how each rental property is performing.

Cheers, Buddy

Buddy Holmes · Answer

@Ryan Miller, Yes I don't have any LLC's so each rental is a separate Schedule E and thus a separate bank account.  Some states require you hold security deposits in a separate back account as well.  One for all deposits I think answers the requirement.  I have recently started another account to contain my Rent Reserve, Repair Reserve and Cap Ex reserves; all rentals into one account.  As required, I draw from this account when needed.  I also set up a separate account for collecting cash flow from all the rentals.

I have the property managers make deposits directly into the correct account. I set up auto pay to pay mortgage, HOA fees, insurance, and one non escrowed tax bill directly and on time.

I set up auto transfer of funds for the reserves to the joint reserve account and transfer of cash flow to the joint collected cash flow account.

We do a lot a travel in our retirement so I try to automate as much as possible.

Yes I am new to Mint and it does consolidate all these as well as your personal ones into one place.

I guess you could set up to Mint accounts if you wanted to separate business and personal.

The AI features allow you to train the transactions Mint brings in to be: "Rental Income", "Rental Mortgage" "Retirement Income"in my case , Rental Tax , Rental HOA, and any other Schedule E items that you have each month. and other tax return categories like Health Ins, Dr's, Rx etc.

You can "tag" each transaction for multiple search returns such as "tax item", "rental #1"

I have found that with a mortgage from Wells Fargo, they don't charge or have minimum deposits for each back account.   Check you bank fees for your situation,

I bought Quick Books, QB, to try to help sort out rental tranasactions for tax time and transfer to a CPA,

But the complexity has stopped me for now.  I may take a class on using quick books later, but I realy think the Mint.s capabilities my allow me to sort all transactions, (bank and credit cards) by rental property, export via CSV and into Excel and to a CPA perhaps as easily as QB.

Hope this helps with some ideas. Cheers, Buddy

Ryan Miller · Answer

I don't have 40 rentals right now i was just using that as an example. I also saw a video as a suggestion to have

One main business account

An account for each property and have them set up to transfer to the main account. Pay each properties out of those accounts that is assigned to. However if it's a withdrawal or something to do with the company as a whole use the main account.

So in reality I can have a lot of bank accounts when you have a large amount of properties. Then mint app the accounts for consolidating purpose. Is that what you do Buddy?

Buddy Holmes · Answer

@Ryan Miller,  I'd say that when you have 40 properties you need a CPA and you need to follow their advice.

Buddy Holmes · Answer

I use Excel with tabs for each of 7 rentals. My excel ledgers balance the bank accounts from online viewing.  I am learning that Mint consolidates all the bank accounts and mortgage and expenses.  It has some AI features so that you train it to categorize each transaction into the correct category, rental, etc.  You can set up a Budget with say one line for Rental Income to view payment progress each month.  another line to monitor rental mortgage payments each month, Rental expenses and so one.

A quick signin to Mint then gives you a quick accounting on how your rentals are doing to budget as well as how your personal finances are going to budget.

You can set up "pay me first" goals and rental "cash flow" goals to give you quick checks on your progress.

You need personal and rental money separate bank accounts for sure.

You need the tenant deposits in a separate back account.

If you have all rentals in one LLC, (I do not) then you need all expenses in the LLC  bank account.

rather than by rental property.

Cheers, Buddy

Jeff B. · Answer

You must separate your personal and rental business finances.  In some states, deposits must be in an interest bearing account.

All of your categories are BUDGETING and there is more than one way to create and control a budget.  I deposit all tenant deposits into the business.savings account.  Rents go to the business.checking.  This covers ONE or MANY rentals.

Jeff Gates · Answer

Seems like you use many bank accounts to segregate financial data for your rental business. Why not use an accounting system designed for rental properties?

Ryan Miller · Answer

so if I have 40 rentals, I should have 40 bank accounts??

What do you recommend on bank accounts?

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