HOW TO ORGANIZE PAYMENTS TO MY MORTGAGES/EXPENSES

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HOW TO ORGANIZE PAYMENTS TO MY MORTGAGES/EXPENSES

David B.Pro Member
Member since 2022 · 77 posts · 56 votes

Hi guys, 

As a new real estate investor, I have a very basic question that I could use your help with.

I'm starting to rack up properties (5 units currently) and my intent is to keep BRRRR investing into more and more.

However, I'm starting to realize the more rentals I get, the more responsibilities I'm going to have in terms of paying my mortgages and such. 

I should point out that organization is NOT my strong suit. I'm much more of a vision/ execution guy. That said, I know I'm going to need systems in place to make sure my properties are running fluidly. 

So I wanted to ask what steps you get when you get a rental property? Do you open a bank account for that property and set up an auto pay? Do you pay each at the top of the month? What about reserves?

Please guide me towards an easy, effective system I can implement as I build my portfolio. Talk to me like I'm a baby haha I can use all the help I can get. 

Thanks Kindly everyone. 





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  • Theresa HarrisPro Member
    Member since 2019 · 15k+ posts · 11k+ votes
    3y

    My mortgage payments come out either once a month or every two weeks (most are the latter).  They come out at different times as I closed on the properties at different times of the month.  I have a single account and they automatically come out.  Less for me to remember.

    For property taxes, I pay some directly, another is combined with the mortgage.

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  • David B.Pro Member
    OP
    Member since 2022 · 77 posts · 56 votes
    3y
    Quote from @Theresa Harris:

    My mortgage payments come out either once a month or every two weeks (most are the latter).  They come out at different times as I closed on the properties at different times of the month.  I have a single account and they automatically come out.  Less for me to remember.

    For property taxes, I pay some directly, another is combined with the mortgage.

    Thanks so much Theresa!

    So you have one business checking account that all your rentals run through? And they’re all set on auto pay? 

    that’s obviously ideal. The only question I have (and it may be a for an attorney) is if the co-mingling of funds would be a liability if a tenant ever sued for some reason? 

    it’s part of the reason Iv been debating having one account for all my rentals or multiple accounts for each rental.  

    yes - for property taxes I would probably pay those individually as they came in. 

      
    thx! 

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  • Polo VazquezPro Member
    Real Estate Agent · McAllen, TX · Member since 2017 · 382 posts · 281 votes
    3y

    Seriously....what's VG's problem? This is a very legit question to ask on a forum. 

    I do autodraft for EVERYTHING! and still I sometimes miss an insurance renewal or so. I use to do everythign separate but as my portfolio grows I have turned more and more to escrowing payments since it takes some of the work off me. It is a bit more expensive (Insurance companies charge a few bucks a month) but it' is worth it in my opinion. However, it does become a hassle when changing insurance companies. As far as property taxes I ALWAYS escrow those.

    On your mortgage payments, do autodraft on all and I run all my real estate properties from the same business bank account to make it easier. All the mortgage payments come out of there.

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  • Theresa HarrisPro Member
    Member since 2019 · 15k+ posts · 11k+ votes
    3y
    Quote from @David B.:
    Quote from @Theresa Harris:

    My mortgage payments come out either once a month or every two weeks (most are the latter).  They come out at different times as I closed on the properties at different times of the month.  I have a single account and they automatically come out.  Less for me to remember.

    For property taxes, I pay some directly, another is combined with the mortgage.

    Thanks so much Theresa!

    So you have one business checking account that all your rentals run through? And they’re all set on auto pay? 

    that’s obviously ideal. The only question I have (and it may be a for an attorney) is if the co-mingling of funds would be a liability if a tenant ever sued for some reason? 

    it’s part of the reason Iv been debating having one account for all my rentals or multiple accounts for each rental.  

    yes - for property taxes I would probably pay those individually as they came in. 

      
    thx! 


     Everyone is different and rules may differ as well.  Some people say you need an account for each rental for the deposit, but you don't where I am.  I just have the one account and have as much as possible on autopay and autorenewal.

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  • Nathan GesnerBusiness Member
    Moderator
    Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
    3y

    I have one account for all rental income. Mortgage payments are sent automatically, along with any other payment that can be automated. I also pull funds for any other expenses like maintenance, insurance, etc. I keep a certain balance in the account to prevent over-draft. Anything above that defined balance is shifted to the savings account where I keep my reserves or money for future investments.

    You need two accounts: checking and savings. If the properties are split into more than one LLC, then each LLC will need its own accounts.

    Checking: collect all income here, then use it to pay bills. Pay the mortgage. Pay for maintenance. If you are setting aside funds for capex, taxes, insurance, or other expenses that don't occur monthly, transfer those funds to Savings each month and hold them there until it's time to spend them. You will receive the security deposit in Checking but then transfer it to Savings.

    Savings: Hold the deposit here so it's separate from operating funds. You can also hold money for maintenance, capex, taxes, insurance, or other projected expenses. When a tenant moves out, transfer the deposit back to Checking so it's ready to apply towards expenses or to refund to the Tenant.

    If you end up with excess funds in the Checking account, I recommend you transfer it to a third account that is specifically designated for future investments. That ensures you don't spend it on other things and that you know exactly how much you have available to spend on the next purchase. If it's mixed in with your deposits and reserve funds, you may accidentally spend money you shouldn't have.

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  • Polo VazquezPro Member
    Real Estate Agent · McAllen, TX · Member since 2017 · 382 posts · 281 votes
    3y

    I pretty much do exactly whan Nathan does but I could had never explained it as well as he did. I keep $5000 in funds at all times in my account for the first property then $2000 for each additional property I have.

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