Bank Accounts for STR’s? What do you do?

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Bank Accounts for STR’s? What do you do?

Wesley Myers
Rental Property Investor · Inlet Beach, FL · Member since 2019 · 91 posts · 32 votes

Been reading a lot of different scenarios for bank accounts with rental properties. Wanted to get your suggestion on my specific situation.

Just purchased our first STR condo here in PCB. Have $10k in reserves for repairs, unexpected expenses, etc... planning on setting up one separate account for everything. Reserves, income, expenses, all.

I haven't established an LLC yet but am considering since we own it 100% no mortgage. Would this be wise? Would like to purchase a few more on down the road and will set up separate accounts for each.

Does this route sound ok?

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Luke CarlPro Member
Rental Property Investor · Tennessee Florida · Member since 2016 · 4k+ posts · 5k+ votes
6y

@Wesley Myers

I’ve got like 40 checking accounts so it would take all night and a bigger iPhone to explain everything but you’re on the right track.

Sounds to me like you're plan is a great one! I would also do the LLC since you own it cash. Then I'd get a HELOC and use it for more properties unless you're like 100 years old.

Income in account (Airbnb/VRBO)

Cap Ex account (X%)

Invest account (X% for next property)

I use an app called Astra to make my transfers for me for free.

Read a book called Profit First and you shall find all the answers.

Great question!

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  • Luke CarlPro Member
    Rental Property Investor · Tennessee Florida · Member since 2016 · 4k+ posts · 5k+ votes
    6y

    @Wesley Myers

    I’ve got like 40 checking accounts so it would take all night and a bigger iPhone to explain everything but you’re on the right track.

    Sounds to me like you're plan is a great one! I would also do the LLC since you own it cash. Then I'd get a HELOC and use it for more properties unless you're like 100 years old.

    Income in account (Airbnb/VRBO)

    Cap Ex account (X%)

    Invest account (X% for next property)

    I use an app called Astra to make my transfers for me for free.

    Read a book called Profit First and you shall find all the answers.

    Great question!

    Podcast Guest on Show From Surviving on $30/Day to 30+ Properties Thanks to Blue-Collar Skills
    7Reply
  • Wesley Myers
    OP
    Rental Property Investor · Inlet Beach, FL · Member since 2019 · 91 posts · 32 votes
    6y

    @Luke Carl

    Thank you sir!!

    0Reply
  • Paul Sandhu
    Investor · The worst town to live in, KS · Member since 2016 · 4k+ posts · 4k+ votes
    6y

    I just use a checking account from a different bank than my personal account to pay all the bills and get credit card deposits to.  It is not rocket science maynge.

    2Reply
  • Avery CarlBusiness Member
    Real Estate Agent · USA · Member since 2016 · 909 posts · 1k+ votes
    6y

    @Luke Carl just said everything I was going to say lol

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    1Reply
  • Mike Anderson
    Rental Property Investor · Clayton, GA · Member since 2020 · 185 posts · 152 votes
    6y

    My debate is do i open the account for the rentals under an LLC, or under my personal name. I recognize there is no liability protection with that, however i'm not sure if there are tax advantages of doing it that way. Plus you start building credit for the LLC so down the road if you grow it might help you be able to get loans under the business name. I need to get with my accountant but he was out last week. Curious how others handle that part of it.

    0Reply
  • John UnderwoodPro Member
    Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
    6y

    Since you have no mortgage definately transfer this into an LLC.

    I have a trust that owns a master LLC that owns individual LLC that own seperate properties. My master LLC owns a seperate LLC that receives all income and pays all bills.

    I don't have an account for each LLC. My attorney and CPA got together and agreed how to set up all my asset protection.

    3Reply
  • David Richter
    Real Estate Consultant · Member since 2018 · 99 posts · 50 votes
    6y

    @Wesley Myers I highly recommend the book Profit First! Teaches you how to break out bank accounts to manage the finances. I am actually writing Profit First for Real Estate Investors with the author of the original to help break down the book even further. @Luke Carl gave great suggestions! I'd also make sure to set up an owner's pay account, a profit account, an owner's tax account (to save for your taxes if any), and an expense account for the business in general like you said Wesley. Love that you have a reserve account for the repairs and maintenance and such!

    1Reply
  • Greg ParkerBusiness Member
    Realtor, Contractor, Property Manager · Montgomery AL and Kowaliga, AL · Member since 2017 · 663 posts · 536 votes
    6y

    Definitely have a separate LLC for every property. And, a one million dollar liability policy. Keep all purchases separate with a debit or credit card owned by the LLC. Never buy anything for personal use with that card! If you go to Home Depot and buy supplies and also buy you a soda while standing in line, that soda may cost you all of your personal assets if the right vampire/attorney is on the case.

    When you get several properties/LLC's, then set up a trust that covers all of the LLC's.

    CYA statement:  I am not an attorney and this is not legal advice, please contact a competent attorney before making decisions.

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    0Reply
  • Nancy Bender
    Investor · SC · Member since 2020 · 43 posts · 32 votes
    6y

    @Luke Carl, I love the Profit First concept. Had been using it for my travel agency (until the pandemic hit!). Just bought my first STR in Sevierville and about to buy my second. Do you use the Profit First method for each property? That's like five accounts per property! Or, do you lump it all in five accounts and split it by property within each account somehow? And on this subject, which is the best software to keep track of all transactions? I was thinking Quickbooks but not sure if there isn't something better for STR's. Thanks!

    0Reply
  • Luke CarlPro Member
    Rental Property Investor · Tennessee Florida · Member since 2016 · 4k+ posts · 5k+ votes
    6y

    @Nancy Bender excellent questions. 

    I generally have each type of property under a set of bank accounts. Also depends on the market. So LTR in town X is one, Cabins in the mountains are one, etc. I'm in 4 different markets. I don't handle the day to day on numbers I'm too busy making it rain. 

    We use QBO and I have a bookkeeper.

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    3Reply
  • Nancy Bender
    Investor · SC · Member since 2020 · 43 posts · 32 votes
    6y

    Thanks Luke, that makes sense!

    0Reply
  • Wesley Myers
    OP
    Rental Property Investor · Inlet Beach, FL · Member since 2019 · 91 posts · 32 votes
    6y

    On the LLC establish it in just my name or myself and my wife?

    0Reply
  • Luke CarlPro Member
    Rental Property Investor · Tennessee Florida · Member since 2016 · 4k+ posts · 5k+ votes
    6y

    @Wesley Myers doesn’t matter. I would do 49 51 because there’s no chance in hell my wife has time to deal with it she’s too busy

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    0Reply
  • Melissa Wesling
    Investor · Chicago, IL · Member since 2020 · 148 posts · 97 votes
    6y

    My husband and I have 2 LLC's, one for our short-term rentals and one for our long-term rentals. The STR LLC is named after our STR brand and the LTR LLC has a separate name, again as a "brand". We use xero for our accounting software. I'm not an accountant or attorney, but just wanted to share since there were some questions about it :)

    1Reply
  • Jabbar Adesada
    Rental Property Investor · Beaufort, SC · Member since 2020 · 119 posts · 98 votes
    6y

    @Melissa Wesling

    Very Helpful Thank you!

    0Reply
  • John MorganPro Member
    Rental Property Investor · Grand Prairie, TX · Member since 2018 · 2k+ posts · 2k+ votes
    6y

    @Wesley Myers

    I would set it up with you and your wife being 50% owners. Then either one of you can sign for decisions made. That’s what I did.

    0Reply
  • Marc RiceBusiness Member
    Real Estate Agent · Columbus Cleveland Dayton, OH · Member since 2018 · 2k+ posts · 1k+ votes
    6y

    @Wesley Myers Keep all financials separate to that property. That’s always a good practice to ensure you’re ready for lending or making tax season easier

    [email protected]614-363-2787
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    0Reply
  • Julie McCoy
    Real Estate Agent · Sevierville, TN · Member since 2015 · 1k+ posts · 1k+ votes
    6y

    I like the concept of Profit First but it sure made my bookkeeping a nightmare.  I've simplified: I have one Income account that all my AirBNB/VRBO deposits go to (since they get sent to me in lump sums, not split according to property, it doesn't make sense for me to have Income accounts for each property).  I have one OpEx account for each property, I keep a float amount in there for my expenses and just top it off from time to time from the Income account. (since Avalara pays all my taxes in lump sums, not split according to property, it likewise does not make sense for me to have OpEx accounts for each property.  I bill everything possible to credit cards and have separate cards for each property, that keeps almost everything straight)  All the profit stacks up in my Income account now.  

    I 100% agree that since you own the property outright, @Wesley Myers, you will likely be well served by an LLC (consult your CPA first, though), and then get a HELOC so you can utilize the equity. Though it may be a bit tricky getting a HELOC in an LLC, especially since Covid has made banks tighten up on HELOCs. Def do it if you can.

    0Reply
  • Yitzchok Carmen
    Member since 2018 · 88 posts · 55 votes
    6y
    Originally posted by @Julie McCoy:

    I like the concept of Profit First but it sure made my bookkeeping a nightmare.  I've simplified: I have one Income account that all my AirBNB/VRBO deposits go to (since they get sent to me in lump sums, not split according to property, it doesn't make sense for me to have Income accounts for each property).  I have one OpEx account for each property, I keep a float amount in there for my expenses and just top it off from time to time from the Income account. (since Avalara pays all my taxes in lump sums, not split according to property, it likewise does not make sense for me to have OpEx accounts for each property.  I bill everything possible to credit cards and have separate cards for each property, that keeps almost everything straight)  All the profit stacks up in my Income account now.  

    I 100% agree that since you own the property outright, @Wesley Myers, you will likely be well served by an LLC (consult your CPA first, though), and then get a HELOC so you can utilize the equity. Though it may be a bit tricky getting a HELOC in an LLC, especially since Covid has made banks tighten up on HELOCs. Def do it if you can.

     I second this. All these bank accounts were a nightmare. So I have just one account for everything and I use rentalhero.io to keep track off all the activity going in and out. Its an excellent piece of software and costs only $10/mo. It is much easier for me to mentally segregate all the costs that way ten to have 10 different account to keep track of (and all those accounts needed $1500 min balance in them to not get charged a monthly fee also) Im surprised about Avalara though, bc they dont lump it for me. I get a separate $20/mo charge and separate tax withdraws for each property. Not sure whats up there...

    0Reply
  • David Richter
    Real Estate Consultant · Member since 2018 · 99 posts · 50 votes
    6y

    I love what you, @Julie McCoy have done with the Profit First system and customized it for her needs. 

    The system needs to work with you and for you NOT against you. Simplify and make sure you do what works for you. :)

    0Reply
  • Julie McCoy
    Real Estate Agent · Sevierville, TN · Member since 2015 · 1k+ posts · 1k+ votes
    6y
    Originally posted by @Yitzchok Carmen:

    Oh, Avalara does that for me too.  The monthly fee is billed separately.  But I have four properties, the taxes aren't separated out into four separate bills for me, it's all one bill.

    0Reply
  • Yitzchok Carmen
    Member since 2018 · 88 posts · 55 votes
    6y
    Originally posted by @Julie McCoy:
    Originally posted by @Yitzchok Carmen:

    Oh, Avalara does that for me too.  The monthly fee is billed separately.  But I have four properties, the taxes aren't separated out into four separate bills for me, it's all one bill.

    I get the tax portion billed separately as well. So with my 2 properties I get 4 billings. 20 x 2 and the taxes for each cabin separately

    0Reply
  • Wesley Myers
    OP
    Rental Property Investor · Inlet Beach, FL · Member since 2019 · 91 posts · 32 votes
    6y

    Another question. How are you paying yourself out of these accounts? Can I just transfer money out of the business account to my personal accounts?

    0Reply
  • Ken Kirunda
    Rental Property Investor · cambridge, MA · Member since 2016 · 14 posts · 5 votes
    5y

    @John Underwood great advice

    0Reply
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