Rental Property Investor · La Plata, MD · Member since 2011 · 216 posts · 117 votes
Hello,
I have 10 single family homes as rentals. I opened a checking account for each property to manage its rent collection and to pay its expenses, ie: mortgage, maintenance, etc. Each month I scrape these accounts and transfer the cash flow to a savings account for future investments. My question is with general expenses that I have that is not attached to a particular property ie: my R/E license fees, equipment maintenance, accounting, etc. Should I open a general checking account for these types of transactions and distribute the cost evenly across the properties for P&L purposes? That would make one more checking account to keep track of. Any suggestions?
Thanks,
Virtual Assistant · Anaheim, CA · Member since 2013 · 167 posts · 44 votes
13y
Any software designed to help you stay organized - I am a fan! But I also hate seeing people spend too much money on products especially fad products. I am not sure what they charge for buildium. I am one of those paranoid people who wouldn't want any of my stuff on the cloud, but if you are comfortable with it go with what is right for you. When examing buildium further (since i am not sure) I think a key principle for you having so many checking accounts would be the ease of reconciling bank accounts in the program.Make sure you ask their sales team that question!!
Quickbooks still hands down has the EASIEST bank reconciliation process of EVERY accounting software. The online application is great but once again I am paranoid about the internet.
The reason I always advocate quickbooks and quicken is the inexpensive nature of those programs.Also they are so simple! They do a lot of the work for you and have simple forms for data entry. I also am fond of Access Databases because you can make them yourself. But I have to warn you and others on Bigger pockets about me- I AM A CHEAPSKATE. Most my career I have been a financial controller so I am always looking for most low cost point a to point b.
I will spend thousands of dollars on travel and dining and las vegas gambling, but still wearing the same clothes I have been wearing for ten years because I am too cheap to pay for clothes.
Virtual Assistant · Anaheim, CA · Member since 2013 · 167 posts · 44 votes
13y
Hello Nuhan!
Are you operating as an entity or an individual?
If you have ten properties I highly recommend getting a simple accounting software for example Quickbooks. You can create a class for each property and then still record your business overhead expenses as well.
If you are the sole owner of the properties and no entity or entities involved I think having so many checking accounts could be cumbersome to deal with and reconcile at the end of the month. Is there a reason you are not using one checking account for your business? It is much easier to RECORD properly what expenses go to what home in a software without having so many checking accounts. Are they free checking accounts or is it costing you money to have so many checking accounts?
If you have separate LLC for each property yes you need separate checking accounts but if properties are all under one umbrella I wouldn't recommend 10 different checking accounts. Just get a good accounting software. Even QUICKEN can help you.
Virtual Assistant · Anaheim, CA · Member since 2013 · 167 posts · 44 votes
13y
If you want to keep your ten checking accounts and you are not an entity, just use your personal checking for overhead expenses, record in a spreadsheet and at the end of the year distribute the overhead expenses amongst the properties.
Rental Property Investor · La Plata, MD · Member since 2011 · 216 posts · 117 votes
13y
Thank you Emily. Actually this is a family partnership. My three sons, my wife and I owned these properties personally. Each of my son manages a property and I manage the rest. I looked into Quickbooks or Quicken. But recently have been considering an online application so my sons, who live a few hours away, can also access the info and input. The reason I have multiple accounts is I give my tenants my account number and they deposit the money based on their rent schedule (some are on bi-weekly). What do you think about Buildium? Have you had any experience with it?
Virtual Assistant · Anaheim, CA · Member since 2013 · 167 posts · 44 votes
13y
Any software designed to help you stay organized - I am a fan! But I also hate seeing people spend too much money on products especially fad products. I am not sure what they charge for buildium. I am one of those paranoid people who wouldn't want any of my stuff on the cloud, but if you are comfortable with it go with what is right for you. When examing buildium further (since i am not sure) I think a key principle for you having so many checking accounts would be the ease of reconciling bank accounts in the program.Make sure you ask their sales team that question!!
Quickbooks still hands down has the EASIEST bank reconciliation process of EVERY accounting software. The online application is great but once again I am paranoid about the internet.
The reason I always advocate quickbooks and quicken is the inexpensive nature of those programs.Also they are so simple! They do a lot of the work for you and have simple forms for data entry. I also am fond of Access Databases because you can make them yourself. But I have to warn you and others on Bigger pockets about me- I AM A CHEAPSKATE. Most my career I have been a financial controller so I am always looking for most low cost point a to point b.
I will spend thousands of dollars on travel and dining and las vegas gambling, but still wearing the same clothes I have been wearing for ten years because I am too cheap to pay for clothes.
Virtual Assistant · Anaheim, CA · Member since 2013 · 167 posts · 44 votes
13y
Your tenants go to the bank and deposit your rent for you? Wow you are spoiled. I still like to make my landlord do the work and mail them the rent check.
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
13y
Any accounting system should first be appropriate for the accuracy of illustrating the activity required in the easiest method that can provide the necessary information in accordance with good practices.
Accounting under generally accepted accounting principles is not a requirement for any small company or individual, but doing so is usually the most appropriate, it will save you from converting or modifying categories for taxes and save your accountant many hours.
Any program will follow GAAP I'm sure. But then comes the simplicity of entry and consolidating statements, all are not equal in that respect. If you have some accounting knowledge some simple programs like Quicken can be used. There are also RE programs for non-accountants. I suggest you look to any program with an accounting type and see what fits your needs, what works well for one may not be appropriate for you, so having someone who can see where your skill level is might help.
I used MAS 90, simple for an accountant, it can go from basic to very technical costing applications, cash flow analysis and other accounting issues that the average investor would never need, it's also pretty pricy. Just saying, the complexity of your system should be appropriate for your operation, so don't get more than you'll need.
Lastly, I think you have a mess. A simple accounting system will have property accounts, income and expenses and a general ledger for espenses that are not attributed to a particular property, as well as other income like interest income and accounts for your escrows.
If you are puttingb deposits in with rents in one checking account, you may have problems if you have some tenant crying about misapplication of thier money, even as an individual, state law governs escrow accounts.
As to title, have no idea how that was broken down as you could have all the family or certain members in title.
With 10 properties I'd say you're missing tax advanatges of have these properties in an LLC or business entity and then breaking out interests of the properties to each family member. There is nothing that you could possibly do among family members that can not be properly accounted for in manner consistant with GAAP.
I just don't see your system being the easiest, most appropriate or accurate but I do understand that it is easily understood by all concerned. Your methods may not be compliant with your legal obligations. I really suggest you get with an accountant, get rid of all the checking accounts and have one operating account and one escrow account, then have a captial account for each family member on the books, if anyone needs money to them, write a check to them. :)
Virtual Assistant · Anaheim, CA · Member since 2013 · 167 posts · 44 votes
13y
@Bill Gulley Great points!
Except:
MAS90 - OMG talk about the most manual and disgusting bank reconciliation process in town. But, I love this program for construction industry. MAS90 is GREAT for job costing in construction though!!
Quickbooks is cheap and has everything a property manager would need, using the "class" system for the properties makes it very very simple. One program, you can have all your bank accounts, reconcile easy, enter income and expenses to proper accounts then additionally class them to appropriate properties. Great reporting options and easy for the CPA to get the infor they need at the end of the year.
AND there is an online system application version of quickbooks. There is a reason it is a very succesful small business accounting software , because it is super duper easy and perfect for SMALL businesses.
I would never suggest a medium to large business use Quickbooks. At that point sorry, you need to invest in a higher end software like MAS or anything Sage puts out. I guess I am ole fashioned though, I think any of these new websites or softwares are just copying and regurgitating everything else that has already been out there. Quicken and Quickbooks are the Original Gangster when it comes to personal and small business accounting software
Rental Property Investor · Milwaukee, WI · Member since 2013 · 6k+ posts · 4k+ votes
13y
Bill Gulley and Emily Dixon -- regarding MAS 90, that is my bread and butter. Besides being a real estate investor, that's my full time day job. I know that program inside and out. So any questions on that program please let me know.
Rental Property Investor · Milwaukee, WI · Member since 2013 · 6k+ posts · 4k+ votes
13y
Also, here is something that I've heard -- if you allow a tenant access to deposit to your bank account, and they stop paying, that if the tenant deposits ANY amount to your account -- even $1, then the eviction has to be started over because then you have technically accepted partial payment.
I don't allow tenants access to my bank accounts for that reason. (Most pay with money order anyway.)
Virtual Assistant · Anaheim, CA · Member since 2013 · 167 posts · 44 votes
13y
@Dawn It was my bread and butter too for a long time! Glad a fellow accountant is on here!!
I love MAS90 for construction industry but I am a long time Quickbooks advocate for people since it is more graphical and easier to use. Although I still hate the fact you can delete transactions I think in that sense Quickbooks could learn something from MAS90 where you have to void the transactions properly.
I am an accountant historically who has just now gotten out of full time accounting the last couple years. I was in accounting full time in construction industry for 14 years.
I also taught Accounting I, Accounting II, Quickbooks, Excel, Word, Access and business math classes in evening for Southern California Institute of technology for 8 years.
Accountant, Enrolled Agent · Grayslake, IL · Member since 2011 · 5k+ posts · 2k+ votes
13y
Emily Dixon,
That is what makes BP such a useful tool. It puts all of us together.
My Experience with MAS 90 is zilch. So I can't tell you how I feel about it. I have instead used Peachtree which is what Sage directed toward smaller establishments instead of MAS 90.
SFR Investor · Buda, TX · Member since 2013 · 27 posts · 3 votes
12y
As for having a checking account to handle the real estate transactions, must it be a "business" checking account or can it be a "personal" checking account? I ask because you can easily open a free "personal" checking account, but must pay some fee for a "business" checking account.
Jersey City, NJ · Member since 2015 · 280 posts · 98 votes
11y
Nuhan, question: why would you need a different account for each property?
I have multiple properties but definitely have lumped several properties into one account. With proper bookkeeping you can still keep track the expense by property.
Investor · Seattle, WA · Member since 2015 · 39 posts · 41 votes
10y
@Michael Lleverino - in case you haven't gotten an answer yet ... business accounts vs personal accounts makes no difference to the IRS, because those are just labels the banks are using. If you open a bank account that the bank labels as personal, but you use it as a business account, so long as you follow all the rules and laws, the IRS can't tell you that you are not allowed to use that account for your business purposes. There are no rules you would be violating. The only thing they care about is that you don't co-mingle funds from two different entities. So long as you don't put use the bank account for personal use when it's for an LLC, then you should be fine.
If you do not have a separate entity (like an LLC) owning your property / rental, then it is personally owned by you and you can use the same bank account that you use for your personal use, as it's all considered one entity (you). Just keep good records for tax purposes at the end of the year. I've set up personal records accounts in quickbooks to be able to separate rental income and expenses from anything done on a personal level, and that is enough to be organized for tax purposes.
Investor · Cathedral City, CA · Member since 2014 · 481 posts · 170 votes
10y
Don't forget your schedule e requirements. Each property must be accounted for separately. We are building software for property accounting, and one of our features is schedule e output.
Cartersville, GA · Member since 2015 · 11 posts · 5 votes
10y
For sure QuickBooks has an online version. And for all intents and purposes it is very functional for setting up classes and locations (separate property locations), and classes for grouping reports.
It is really customizable and will give you all that you need.
Be sure to get the QuickBooks Online Plus version as the Simple Start and Essentials won't give you class and location and will limit your customizations and reporting.