Do you have a separate bank account for each property?

Question

Closing on my second rental next week! And in setting up all the paperwork, I'm wondering what are the pros and cons of having one bank account for all properties vs. having separate bank accounts for each.  The main reason I can think of is just for bookkeeping purposes, it will be easier to break them out, but are there any other things I should consider before deciding whether to open up another account or just combining? Thanks BP!

Kim Meredith Hampton · Answer

@Amanda Young I agree with @Scott M. Make it easier on yourself and get quickbooks or a small pm software like TenantCloud or RentRedi etc... some of these are free or small expense. Most property management companies do all your accounting for you and send you reports and direct deposits into any account that you prefer if you go that route when you add in more doors.

On a side note, It depends on your state as to how your rents and security deposits are kept, so good to check the statutes out an dmake sure you adhere to their guidance. Some people keep a separate account for the security deposits.

Brian Falkowski · Answer

Hi Amanda, Long time banker here. The suggestion with QuickBooks is great. Make sure if you decide to do different accounts that you find a bank that gives free checking. The fees can add up quickly and are not worth the hassle if they are not free. I would see separate accounts usually on larger commercial buildings.

Scott M. · Answer

Depends on your end goals.  If you are looking to get to say 10 properties or you are going to hold at 2.  Separate accounts for each property is not really sustainable as you add a lot more properties.  Better to use QuickBooks or excel or similar to manage your finances.  While it can work for a very small number of properties it will soon get out of hand for most.  But again, you know yourself and maybe you are a checkbook person and are better keeping that straight VS entering it all into software.  No rules, you can chose the best path for yourself and for most that would be software VS a ton of different accounts.

Dave Poeppelmeier · Answer

Amanda, the first words out of my mouth are "consult your tax professional". If you haven't found someone now, why ACTUALLY knows Real Estate, do it now while you're small. We went through 3 CPAs that "knew" RE before we found a tax professional (not a CPA) that owns 100 doors of his own and truly straightened us out. That was very painful. I have a few different LLCs to spread my risk around, and one key to that is that each LLC has to have it's own bank account. I have a checking account and savings account (security deposits) for each LLC. You can get into tax and liability trouble if different bank accounts are comingling funds with each other (if you get audited) as you get bigger. But, for now, if you have just 1 and soon to be 2 (congrats!), just have a separate Business Checking and Savings and I suspect you should be fine. Good luck!

Octavio Aguirre · Answer

@Amanda Young

I use Stessa for my record keeping. (Free from bigger pockets). I have multiple rentals and have a savings account for deposits and checking account for transactions. Free checking as long as there is money in savings. (Which there is due to to rental deposits).

Todd Pultz · Answer

@Amanda Young I use Buildium to my manage my properties and others. In there each property has its own “account” and accounting for it by itself. However, they all funnel to the actual bank account you want to use. Normally there is no need for multiple accounts other than an operating account and a trust account for deposits to remain segregated.

If your looking for protection, you can use a series LLC if your state allows. This has a master llc and then branches for each additional llc, but all are captured by master, but each are insulated from the other if that makes sense. Not all states all series llc.

We only hold 1million in assets per llc before we open another.

John Underwood · Answer

I have an LLC that pays all the bills and receives all the income. I set it up this way at the advice of my attorney and CPA. I track all my income and expenses in excel. Makes tax season simple for me. I use Quicken for my personal finances.

JD Martin · Answer

No way on multiple accounts for multiple properties. I have:

1. Segregated deposit account - state law.

2. Tenant payment account - this is the account that I have at a bank with many branches where they can make in-person payments. I transfer this money out after each rent period.

3. Business account - this is where I hold my business funds.

Everything else you should be doing with software. I use basic Excel spreadsheets, but I've been using Excel for 25+ years. Here at my office we use Quickbooks, which is a good program but overkill for just a few rentals. There are some online software that you can use as well, including some that accept rent payments.

Amanda Young · Answer

You guys are all fantastic! Thank you for these suggestions.  I definitely prefer to have a single account, so it sounds like I just need some good software manage the in/out transactions with the account.  Thanks again!

Amanda Young · Answer

@JD Martin thank you for this! Very helpful.

Do you have a separate bank account for each property?

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