How to set up accounting and banking for reserve funds.

[Andrew Z.]

Hello, everyone. 

I have a newbie question about reserve funds. Let's say I have a number of rental properties, each with income, actual expenses, and reserve funds for capex or vacancy.

1) Do you have separate bank accounts for each property?

2) Do you funnel all of the cash flow through that one bank account, even reserve funds...letting the balance increase over the years, or are you moving reserve funds to another account? If so, do you have a reserve account for each property, or one reserve account for all your properties?

3) I plan to use quickbooks, should I create sub-accounts for each bank account to indicate that some of the money is operating and some of the money is for reserve? 

Maybe I should have a single bank account for everything and just handle "reserving" funds through quickbooks sub accounts...

Thanks in advance for your thoughts.

-Andrew

[Scott M.]

No right or wrong way to do it.  It really comes down to personal preference.  Some like to keep capex/vacancy etc in a sperate account, like a savings account and some will keep it all in one account and let the software keep track of what is what.  You might also start one way and as your portfolio grows decide to change.  Generally investors start off with keeping things like maintenance and vacancy per house but once you hit a certain number a lot move to portfolio.  So instead of having say 5K per home set aside you may decide on 30K for the whole portfolio.

What works for me personally is fewer bank accounts and rely on software to keep it straight.