How Should I Set Up My Accounts...

Question

Hello,

I am currently in the process of buying my first investment property - scheduled to close next month! The property I am buying is a duplex, one side is currently rented and I will be honoring the tenants lease. The other side was on a month-month lease and the tenants will be moved out before closing and I will live in that side. I am purchasing the property as an owner occupant as part of my initial investment strategy. My question is in regards to collecting the rent from the other side. Where do you guys deposit the rent collected? Into a personal checking account? A business account? I've heard it's best not to put it in a personal account, but I'm not completely sure why or if this is even true. I have an LLC that I set up some time ago (it's still current), could I open an account for the LLC and have the tenants make the rent checks out to the LLC and keep the moneys separated that way? Could I do this even though the loan and home will be in my personal name, not the name of the LLC? Just trying to understand what is the best thing to do in my current situation and am eager to hear how others have and are handling this?

Any advice would be greatly appreciated!

Regards,

Jonah Champagne

Rob Beland · Answer

As an owner occupant I would advise against using your LLC. You do need to be aware of the fact that you can only defuct half of all expenses unless it relates solely to the other unit. In that case you can deduct 100%. If it relates solely to your unit it cant be deducted unless the IRS allows such as property taxes and mortgage interest. Set up a separate personal checking account and use the second checking account to run all of your income and expenses for the property that are tax deductible. Dont try and deduct any rent you pay yourself. You cant do it @Jonah Champagne. Good luck.