How to manage rental income, expenses etc bank accounts

[Jayson Hinkson]

I am seeking advice on how to manage my cash flow with my 2 rental properties.  My wife and I currently have full time jobs and I manage both the properties myself.  So far I have been collecting rents in one account and paying the mortgage out of the same account.  My question is how should I handle the expense.  I have been paying all expenses from our joint accounts and leaving the rental income in the account untouched.  So when I have to fix a plumbing issue say $300.  I pay it out of our checking account and never reimburse myself from the rental account.  Is this a bad way to manage it?  Obviously the account grows to a large number this way and right now we can handle the expenses from our salaries.  But if we get more properties I may have to change my strategy?  Any advice would be greatly appreciated.

Thanks, Jayson

[Korey Rademacher]

Jayson,

I have a handful of rental properties with a full time job as well. I just wanted to point out one major risk you're opening yourself up to.

When you intermingle your personal funds with your investment property funds you open up all your money to potential law suites. In other words, if something happens to your tenant and they decide to sue you, they can go after all your personal assets since there was never a distinction between the two in the first place. 

You may also consider forming an LLC if you haven't already done so for protection, but even then, you still want to make sure your rental properties income and expenses are completely separate from your personal finances.

Plus, doing this helps you to better analyze how your rentals are really performing. Lastly, as someone mentioned above, doing your taxes will be much easier if you keep it all separate. You don't want to cut yourself short on any of those tax deductions. Hope that helps!