Bookkeeping and Bank Account Question

[Amanda Scully]

Hi everyone, 

Just a quick question about bank accounts and bookkeeping...so, with rents coming in and having to account for regular expenses as well as cap ex on each property, etc. do you end up having multiple bank accounts? One for each property? This part is getting me all mixed up when I think about how to manage that aspect of owning multiple properties. 

Right now I only have one property and I live in one unit, so I already feel like I'm doing this wrong because I don't have a separate account for the property itself. I guess because I live here I just pay for major repairs, etc. right from my own personal bank account. But I feel like this is wrong and I should make it more professional in order to prepare to keep it going the right way as I purchase more property. Any insight would be much appreciated, thank you! 

[Mike McCarthy]

@Amanda Scully there are different schools of thought on this, but this is how I do it.

I have two ‘business’ accounts:

1) checking account for operations. All rent payments go into it and any expenses come out of it. Mortgages, etc are auto-paid out of this account. I keep some ‘slush’ in it, but if the balance starts getting higher than a mid-sized-repair, I pull the extra out and transfer to my personal accounts.

2) a separate account for security deposits. The only thing ever in or out of this account is deposits. Check your state laws as some states have specific requirements for this account.

That’s it. I use Quickbooks (formerly a spreadsheet) to track income and expenses per property and reconcile monthly against the checking account. It makes end of year taxes a breeze because I already have all the data.

I also do make sure that I have reserved in my personal accounts for a rainy day or a significant repair. But I don’t see a need to segregate that, as I’m not worried about using it.

House hacking does make accounting a bit harder, but if it were me, I’d just consider yourself a renter (at $0), so I’d put any repair or maintenance anywhere in the house against the operational expenses. But just make your own rules and follow them.