Rental Account Set Up, How do you do it (Efficiently)?

5 Replies

Hello BP.

I would like to know how do you set up your bank account for rental, specifically for efficiency.

Here is how mine is set up, and any feed back or tip is welcome:

Three accounts

1. Trust account for security deposit - as name says it all, this account is exclusively for tenant security deposit only and independent from other accounts. The money flow in this account should be minimum.

2. An account for acquisition fee and rental collection - this account contains down payment for properties and monthly rental collection from tenants. # of transactions on this account should be highest among three accounts. In future, I may consider separate this account into two: acquisition account and rental collection account. 

3. An account for operation and maintenance - this account contains day-to-day operation and maintenance cost such as repair, insurance, property tax, income tax if any, and CapEx. Certain % of account (2) will be allocated to here monthly. Adequate amount of # transaction is expected.

This is all just theory. Now my question is to you is following:

How do you efficiently allocate O&M and CapEx cost? Do you manually allocate certain % every month? Is there software that helps allocation process?

  

@Roy C. I could be wrong here, but couldn’t you simplify things by opening just ONE bank account and using a good bookkeeping software like QuickBooks? That’s what I do at my “day job” and have it set up to track all sorts of categories.

Just a thought...

@David Rosenberg , Interesting. I am actually in the process of learning QuickBooks right now. I am still brainstorming how to implement it correctly. I am currently planning to use Desktop pro version. With your method, do you think Desktop pro is adequate to handle one bank account with different categories of transaction? Or are you using online one?

@Roy C. I just this month switched to QB online at the behest of my accountant and financial planner.  So far, I miss QB Desktop Pro which I used for 13 years. It absolutely can handle one bank account with many different categories of transactions. Can produce great reports giving you an overall picture as well as  broken down by category. 

@Roy C.

Just be wary that some states require you to have the security deposit in a separate bank account. You would have to research your state laws if this is the case in North Carolina(or the state that the property is located in).

Basit Siddiqi, CPA
917-280-8544
@David Rosenberg - I would suggest rent monies not go directly into your main operating account, but rather go into an account which is 'swept' after rents received. This helps to limit exposure to reversals and fraudulent transactions.

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