Separate accounts for each rental

17 Replies

@Lance Neighbors

There's many factors to consider. Are they legally in your name? Or in separate LLCs? Insurance and type of legal entity would probably come into play. For two separate SFRs I think it would be simplistic to have everything segregated.

@Lance Neighbors definitely separate your business from personal however I see no reason to split per property. I split by llc which owns the properties. and I use 2 accounts, a checking and a savings.

keep in mind most banks expect a minimum daily balance to avoid monthly charges. multiply that by many properties and you have a bunch of stranded capital the bank gets to use.

Why on earth would you need that? One business account for all rentals is all anyone needs. Your bookkeeping should be based on Quickbooks or similar. Banks just facilitate movement of money.

I have a separate account for each property, not each unit. My duplex has one account. My Dad is a CPA and suggested I do it that way. Now that I'm learning a little bit about proper bookkeeping, I see how you could do it with just a business checking and savings, but I'll be consulting an attorney about how to structure my business going forward.

I recommend separate accounts. You want to make sure the right expenses go against the correct property. It becomes more difficult when they are combined. It also makes it tough to have a good balance sheet for each property when they are combined, which will make it tough to get some good ratios and look at performance metrics for each property.

@Lance Neighbors I have separate accounts for each building I own. I have one residential building and it has its own account for operations and one for security deposits. I also have larger apartment buildings here in Berwyn and Cicero  and they all have separate business accounts. It costs you nothing to have multiple accounts, but it helps SO MUCH when it comes time to do your book keeping or to get ready for taxes. 

My wife has always maintained separate accounts for each & every property & we have a lot of them. Her C-CORP was audited once & she learned of the unrelenting detail they will go to.

Then when we did have that IRS Audit they wanted to see the flow of money to/from each property to justify expenses, capital improvements, & repair time-lines to further justify the high mileages claimed regardless of mileage logs. I just gave them the respective ledgers of each account by property. Our ledgers document money in, expenses out, complete with matching scans of cancelled checks &/or scans of CC receipts. It probably saved me a week of time sitting with the auditor as she went through two tax years in what seemed to be intricate detail to resolve their questions. After 3 weeks of several meetings we came out unscathed !!!


@Lance Neighbors

Do bank accounts by businesses. If all properties are separate LLCs, the yes. This makes the auditors happy. If the same entity owns them, that is why accounting software has tags, categories, classes, etc. so that you can determine winners and dogs.

@Lance Neighbors

I have one account for all my rentals but use quicken to split the categories into subcategories for each property. Eg The taxes category has these subcategories:

taxes Property 1

taxes property 2

I agree with what @David Lee Hall, III stated: separate bank accounts by businesses. Each property should have its own LLC to limit your liability and protect each property from litigation around another property, so that would mean a bank account per property. Remember an LLC offers no protection if you're not operating it as a separate business, and separation of funds is a key part of that!

@Lance Neighbors we operate a bank account for each LLC not per property. Everyone sets their LLC's up differently, but we usually keep portfolios in our separate LLC's. For example, multiple buildings on a single street might be one LLC. Several SFH's in same area may have their own LLC. We use series LLC's as our state allows it, but not all states do. Also remember that security deposits have to be handled differently and held in a different account typically not mixed with operating funds.

Good luck

@Lance Neighbors My realestate lawyer recommended separating by LLC. She said if she has to go into litigation for tenant she looks for all the properties that are associated with the account from the owner. If she can prove multiple properties under the owner she goes for everything. If the different LLC's have different accounts it makes it that much harder to prove everything that belongs to the owner.

@Lance Neighbors

Opening a bank account for each rental would be over-kill.

Assuming no separate entities
You should have one bank account for personal related activities.
One bank account for rental related activities. You still need to keep track of the separate rentals which you would do in some type of accounting related software(or even excel if you are savvy in excel).

If you are creating an entity - you technically need a separate account for each entity.

@Lance Neighbors Thank you all for your replies! I definitely think I'll simplify things by creating two accounts (savings and checking) for each LLC rather than each property! You guys are awesome!

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