What's the best way to keep finances separate for different units

[Anthony Spallone]

Hi, I own three properties with eight units (we live in one). The first property has three units, the second property has three units, and the third property is our primary residence with a unit. We have decided to not put them in an LLC right now and we have been collecting rent and paying bills in a personal banking account. We record all our expenses and whenever we have repairs/improvements we save the receipts for everything for our taxes for legal deductions. We need a better system for keeping receipts and we need a better system for doing our monthly budgets. We would like to have a different bank account for each property. We are open to ideas and would just like to hear if there are people in our situation who have figured out a manageable way to do this. We have gotten to the point to where we need to make this more manageable, especially with all the repairs for tax purposes. That is a bit of our situation so here are our specific questions.

1) How would you do your budget for three separate properties with eight units where you live in one of the units?

2) How do you have your tenants pay you rent? We are currently using Zelle but that goes into our personal bank account and we would like to give the tenants the option to pay online with a credit card or send money to an account that is only for that property but not sure how to set that up with something like Zelle. 

3) How you record repair/improvement receipts and do you have a system that syncs with your budget? We are currently doing it manually on google sheets. 

4) Any other advice for us? 

Thank you for taking the time to read about our situation! We are currently located in Central New Jersey and would love to connect with others who are in our general area.

Anthony 


 

[Frank Chin]

@Anthony Spallone

I used Quickbooks for bookkeeping my rental business also. I use the "class" function to separate my expenses, revenues, and asets as well. I've been using it since 2002, and the big advantage is it's more widely used by CPA's and bookkeepers in my area, so if I want to get someone to take over my books, they're easily available. Even my CPA, an early doubter finally got involved with Quickbooks. I used their desktop version.

The class function as I recall goes up to five levels, though I currently only used two. As I had properties in more than one state at one time, the top class is state, then the property. I was considering "unit" under property but I didn't see the need to go down to that level. For ease of data entry and readability, I kept the codes short, the two character state code, and a three character property code, so the code for one property as an example would be "NY:BAY", and if I go down to the unit level would be "NY:BAY:01". 

So I can output  my P&L reports by state, property, and if I go down to the unit level, by the apartment unit.

As to collection of rent, I have a separate personal checking account just for my rental business where I deposit all my rent checks and pay my real estate related expenses. I use "ClearNow" for electronic collection of rent. I don't use an LLC though I have one for an active business. They have a $16.85 monthly fee, and $2.00 per rental, so if they collect 2 rents the monthly fee would be $20.85. I do not use Zelle for business purposes with the exception of one landscaper for security purposes. Tenants deal directly with ClearNow, not at all with my bank. With rentals running $2,000/unit and up, the fees are more than reasonable.

The advantage for tenants of using ClearNow is they have the option of having their payment records reported to the credit bureaus which they don't get with Zelle. I had ClearNow for many years now and they have expanded their service to include getting  credit reports. It takes them 4 business days to take the rent from the tenants bank and deposit to mine which is fine by me. I use another service, ATS, for my credit reports where I was vetted some years back, where they visited my home office to confirm I actually do rentals, and can order a report at any time with name, address, and SS#.

As to budgeting, I don't do it. I often start off with a large down payment for my properties and is totally mortgage free after many years in the business. I have business credit lines at one point in conjunction with a large HELOC line, so funding for rehabs, major repairs is never an issue. Putting it differently, I got good cash flow.