New Out of State Rental Property in Philadelphia - How to Handle

[Christina R.]

I own a 2 family home in NYC- created and bought the house in an LLC. I live on one side and rent the other side. I am now about to close on a single family rental property in Philadelphia. Buying it all cash and hope to take equity out later on to buy another property.

I'm a little confused as to how I should handle the accounting. Right now for my NYC place, I have a business checking account for the LLC. All rental income stays in that account. I use any rental income to pay for utilities, business expenses pertaining to the house, etc.

I plan to open a new bank account for the Philly house for expenses/income but can it be the bank I use here, or has to have a Philly location? The Philly house will also be in my name and my father's (we went 50/50) so do we create a joint account? Initially, we were planning to split the rental income each month: 50% of profits to me and 50% to him each month. Or should we leave it all in a separate savings account for emergencies? I like high interest online savings accounts better than the measly interest offered in local branches, but the online savings accounts I like don't offer checking accounts. Also, open a personal bank account since not in an LLC? Do we need a separate credit card for expenses too?

Finally, is it worth it or even possible to later put this Philly house into an LLC, especially if we plan to take equity out for another property? I've looked into umbrella policies but because our primary residences are in NYC and not PA, some companies can't offer it to us.

Thanks for any insight!

[David Cruice]

Use the same LLC for both properties. Open another bank (operating) account for the Philly property at the same bank you're with now. Unless you absolutely need to, don't take out the rents from either property until you have some working capital to cover unforeseen expenses such as a plumbing or AC emergency. If you want to, take a distribution at the end of the year for yourself and your father, but, again, make sure you leave some working capital in the account.