First Time House Hacker - Separate bank account for rent collection?

[Priti Gupta]

Hi,

I am new to real estate and I bought a house recently and planning to house hack by renting the basement out while I live in the house for a year or 2 and then move out and rent the whole house. My question is should I already plan to collect the basement rent in a separate bank account or is that not necessary? I have heard that if you have a property under an LLC, you should definitely have a separate business bank account and credit card for each property but not sure if I should already do that when the property is personally owned. I do plan to put it in a LLC eventually at some point after I move out so I was just thinking if I should just make it separate from the get go?

Thanks in advance.

[Account Closed]

It's definitely recommended to have separate accounts.

[Brian Sardinskas]

@Priti Gupta,

I own my house hack in my personal name and still have separate bank accounts and credit cards for it. In my opinion, I believe it’s best to separate your rental income, even if it’s owned in your personal name.

[Adam Martin]

What do you plan to do with your rental income?  If you are house hacking to have someone else pay your mortgage what would be the point of a separate account if you are just going to switch it over to your checking or directly into your mortgage.  If you however are keeping this extra money on the side to fund future investments and don't plan to touch it a separate account would make sense.  For me personally I have 3 accounts for my 5 rentals but all the money is pooled together.  I have my basic checking where my money goes when rent is collected and where the mortgages and bills are drawn from.  I have 2 separate brokerage accounts, one basic money market account that I use as my emergency fund since the interest is higher than the bank so I keep very little in the bank, just enough to pay the mortgages.  The other brokerage is where I invest some of the money in stocks to help it grow faster.  

[Bill Hampton]

@Priti Gupta

Yes, from an accounting and tax return preparation standpoint it is better to have a business bank account and a business credit card from the beginning if you plan on collecting rent. 

[Basit Siddiqi]

It is better to create a separate bank account just for your rental activities.

The reason is that it will be easier for you to recognize what is income / expenses more easily.

[Anthony Swain]

Hey @Priti Gupta,

Great question! I'm a fellow house hacker here and we are keeping separate accounts for our duplex income/expenses. This is helpful for a few reasons:

1) It will be easier to track performance of your rental.

2) Your CPA will thank you come tax time.

3) You' will thank yourself for not having to dig through old receipts, bank statements, etc. to find expenses and income for tax time. Haha

4) Once you do move out, then you already have the accounts set up, so you can make the transition easily. 

Let the good house hacking times roll!

-Ant

[Jeremy Jareckyj]

separate  bank account is best and easiest to track. maybe even had the mortgage go through this account as well.

[Conner Olsen]

Quote from @Priti Gupta:

Hi,

I am new to real estate and I bought a house recently and planning to house hack by renting the basement out while I live in the house for a year or 2 and then move out and rent the whole house. My question is should I already plan to collect the basement rent in a separate bank account or is that not necessary? I have heard that if you have a property under an LLC, you should definitely have a separate business bank account and credit card for each property but not sure if I should already do that when the property is personally owned. I do plan to put it in a LLC eventually at some point after I move out so I was just thinking if I should just make it separate from the get go?

Thanks in advance.

Separate bank account makes it easier. If you are living there I wouldn't worry about getting all that setup because it's difficult to separate everything out while you're still living there. Just keep receipts and bank statements for income. I would at least get a new credit card and put all home expenses on that. When you move out definitely set up a new bank account and credit card.

[Priti Gupta]

Can I have a business bank account without an LLC already?

[Priti Gupta]

Quote from @Bill Hampton:

@Priti Gupta

Yes, from an accounting and tax return preparation standpoint it is better to have a business bank account and a business credit card from the beginning if you plan on collecting rent. 

Can I have a business bank account without an LLC already?

[Bill Hampton]

Quote from @Priti Gupta:

Quote from @Bill Hampton:

@Priti Gupta

Yes, from an accounting and tax return preparation standpoint it is better to have a business bank account and a business credit card from the beginning if you plan on collecting rent. 

Can I have a business bank account without an LLC already?

 @Priti Gupta

That depends on the bank. Most banks may require an LLC to open a business bank account.

[Wale Lawal]

@Priti Gupta

Setting up separate accounts for rental income and expenses helps keep track of your property's money flow. This makes for clear records, easy tax filing, and a better look at profits. Using an LLC can offer more legal and safety cover. Separate accounts make tax time easier, showing you as a skilled investor. They help with money control, lead to wiser choices, and track cash flow better. The work needed is worth it, especially as your real estate grows. Talk to a real estate attorney or financial advisor to find the best way to do this.

Good luck!

[Twannisha Jackson]

I keep my rental money in a completely different bank than my personal accounts. never mix them both. 

[Max Emory]

@Priti Gupta, definitely separate accounts for the "business" side of your househack. It makes your bookkeeping and tax filing a breeze at year-end. Your tax pro will thank you and you'll keep your sanity.

For considering entity structure, consult with an attorney and let them know your plans for the property. And, make sure this is good with your tax pro and doesn't present any negative consequences on the tax side (throughout your investing journey).

I'm on my 2nd househack now. Great job!

[Bonnie Low]

Although you live in one of the units, you are treating the other like a business presumably and will be reporting income and expenses for tax purposes so you really should have a separate bank account. And especially if you're going to create an LLC. In order for the LLC to protect your assets as intended, you'll absolutely need to keep business and personal expenses separate.

[Griffin Malcolm]

Definitely a good move. I did this with mine and collect rent automatically through apartments.com. I funnel the wifi, utilities, insurance and taxes through this account too. It's nice keeping it all separate