Self Managing property Tax implications

[Viktor Singh]

Hi all,

I want to manage my investment property myself and wanted to know how to handle taxes. In the past, I have the used a property manager, and gotten a W9, but how should i do it myself ? Do i need to use some software ? Deposit rental checks in a separate checking account ? I am newbie. Thanks !

Best,

[Nathan Gesner]

Quote from @Viktor Singh:

If you own the property in your personal name, there's nothing you need to do different. You could keep the money in your primary checking account, mixed in with personal money. I don't recommend it, but you could.

I recommend two accounts: checking and savings. 

Checking: collect all income here, then use it to pay bills. Pay the mortgage. Pay for maintenance. If you are setting aside funds for capex, taxes, insurance, or other expenses that don't occur monthly, transfer those funds to Savings each month and hold them there until it's time to spend them. You will receive the security deposit in Checking but then transfer it to Savings.

Savings: Hold the deposit here so it's separate from operating funds. You can also hold money for maintenance, capex, taxes, insurance, or other projected expenses. When a tenant moves out, transfer the deposit back to Checking so it's ready to apply towards expenses or to refund to the Tenant.

If you end up with excess funds in the Checking account, I recommend you transfer it to a third account that is specifically designated for future investments. That ensures you don't spend it on other things and that you know exactly how much you have available to spend on the next purchase. If it's mixed in with your deposits and reserve funds, you may accidentally spend money you shouldn't have.