Rentals, LLC's, and Bank Accounts.

[Brian Bonetta]

I am new to real estate investing , and I am wondering how others structure each of their rental properties.  

1) Does each rental have its own LLC?

2) Do you create separate bank accounts for each property, under the LLC?

3) Can you share any helpful resource that can explain how to organize this aspect?  

Thanks!

[Jaysen Medhurst]

@Brian Bonetta, each LLC doesn't need an LLC, but that maximizes asset protections. If they are all under 1 LLC, you probably can have fewer accounts. Check out Clint Coons on YouTube. Lots of good info there.

[Abbott Mary]

@Brian Bonetta for your second question what I do for accounting is I have a separate bank account for each property that includes a balance equal to safety fund for that property, (I've seen a lot of people suggest an arbitrary $5,000-10,000 per roof depending on the size of the property and your portfolio) then subtract the monthly expenses from this account and anything left over your arbitrary number is your cash flow. It's also important to say that you should have another separate account for all the security deposits from your tenants. 

I'd love to hear from more experienced investors though, the question of determining EXACTLY what cash flow you're getting always intrigued me when monthly expenses are so fluid.

[Account Closed]

I was going to recommend Clint Coons as well.  He has some really great youtube videos and is the co-founder of Anderson Business Advisors that works primarily out of Las Vegas, Nevada.  I really like the information provided in the first 2 responses.  

@ Abbott Mary, good information.  A couple things you mentioned that I didn't think of.

[Daniel Hyman]

@Brian Bonetta

1. An LLC can hold multiple rentals. The amount of rentals placed in each LLC should be based on your overall asset protections strategy and risk tolerance. Best to consult your attorney on that one.
2. Each LLC gets its own bank account. Opening a separate bank account for each property might be overkill. Although I have seen some investors who prefer it that way.
3. Having a document storage system is super valuable. There are lots of great ideas from BP posters on how to structure a paperless storage system. 

[Chris Martin]

The better question is what are the member makeup and asset types of your LLC? If you are the only member, then you can do whatever you want. If you are a billionaire, then the answer is 2,875 homes. That's what American Homes for Rent has in (see page 52.) There is no need to have more than one LLC for buy and holds for most people... in fact for most people it doesn't make sense to even have an LLC. Single member (just yourself) LLCs are just about worthless, IMO.

[Brian Bonetta]

Thanks for the input everyone!

[Jason D.]

The fewer the number of properties in each LLC, the the more protection you have from Liability. You should have one savings account per rental to hold the security deposit. I have a separate checking account for each rental and a common account to deposit cash flow. I use the same local bank for all of my accounts and name each after the address of the property. It makes it easier for me to track expenses in separate accounts.

[Troy H.]

@Abbott Mary Thanks for the tips.

@Jaysen Medhurst I agree Clint Coons gives great info.

[Adam Bezark]

I don't know about your state, but IL and some others offer a "series" LLC structure. IMO this always made sense when multiple properties were involved.

[Javier Fernandez]

Any reason to open a business banking account, or just leave it as a standard savings and checking?

[Hank Sacco]

An experienced attorney once said trusts were the best way to segregate and protect assets. Each property in a separate trust with your LLC as beneficiary . The trust is published legal owner but the terms of who gets what from the trust is private. For added layer have a separate LLC act as property manager for all the trusts to collect rent and pay all bills and pay you the profits.

[George Walker]

@Javier Fernandez You only need a business bank account if the property is in the name of an entity, such as an LLC. Banks will charge you a monthly fee for a business bank account, they charge me $20/month for mine. If the property isn't in the name of an entity, but in your personal name, then you can get a regular account.

[Chris Mason]

Originally posted by @Hank Sacco:

An experienced attorney once said trusts were the best way to segregate and protect assets. Each property in a separate trust with your LLC as beneficiary . The trust is published legal owner but the terms of who gets what from the trust is private. For added layer have a separate LLC act as property manager for all the trusts to collect rent and pay all bills and pay you the profits.

 Bonus points for those with fewer than 10 financed properties:

A trust can get a vanilla 30YF Fannie loan without worrying about the due on sale clause, moving title around, or any of that. Investment properties too, not just your grandma's house. And if your names is Mr. Smith, you can call it the "Spiderman Trust," you don't have to call it the "Smith Family Trust," meaning that (unlike an LLC) your personal name isn't necessarily just a quick google search away.

[Austin Fruechting]

Every property in it's own LLC is a bit overkill IMO... unless you're talking really high dollar assets.

Each LLC should have it's own bank account. If you only have 1 account for multiple LLC's and a suit happens that account could be froze and you won't have access to any of it. And everything in it could be subject to a judgement because it will be very difficult to prove what cash belongs to the LLC being sued and what cash belongs to the others.

[Dan Schwartz]

@George Walker go talk to MidFirst Bank. At least in AZ, the business accounts are free with a minimum $500 balance and online statements. Not sure what the OK market specs are, but it's worth an inquiry.

[Ted B Miskinnis]

@George Walker I'd also suggest using a free business checking account.  They're available with a little searching effort and that's $240/yr you can recapture to your bottom line.