Bank account type for real estate

[Jonathan Leblond]

Hi, I looked at many different banks for the managing of our rentals. Is it worth it to have different accounts for each building? Northone offers the option to create unlimited sub-accounts for free with the 10$/month option for the main account. It seems like an interesting option to simplify everything. Anyone here is using them?

Thanks

[Tim Bartel]

I recently switched from 2 bank accounts (General, Tenant Deposits) to 6 accounts, after listening to the BP Podcast interviewing Mike Michalowicz, author of Profit First. Then I read the book. Following Michalowicz's advice, I opened accounts covering, not different properties, but different aspects of the business: Revenue, Profit, CapEx, Operating, Insurance and Taxes, and Tenant Deposits. My banking app lets me see the balances in all of these accounts any time. The accounts are used just like the very basic envelope system of money management, with revenues being disbursed to the different accounts monthly, at pre-determined percentages. You gradually adjust the percentages towards something that makes sense for your business, perhaps quite different than the places you've put the money to-date.

The point is to keep a careful watch on where your money's going, and most important, to plan to make a profit, and to make spending decisions carefully. Michalowicz points out that many small businesses miss the point on making a profit, and ultimately fail. 

I started with rental property in 2014, and haven't made a profit in any of those years prior to 2020. My financial decisions were based more on emotional ties to the properties, and not so much on financial performance. In 2020, following Profit First principles, I am seeing a profit for the first time. 

The downside is some additional busy work managing and reconciling statements for the extra accounts. So far, given the better focus, I'm really liking the Profit First system. I encourage you to give it a try.