If you're buying turnkey rental property in your own name (which will be managed by the TK property management arm), how do you structure your bank accounts?
In other words, since I'm assuming the TK property management company that places the tenant holds their security deposit, etc., and simply sends you the monthly rent, do you use a personal checking account? Do you set up a separate account for each property? Do you create a savings account for each property's reserves that you build up as the rent comes in? What's your approach?
I have a separate business account for my rental properties, but I self manage all of my local ones and use pm's for my out of state properties. If I wasn't managing any of my own properties and just collecting checks then I would probably not bother with a separate account, at most I would just add an additional savings account to my personal account. And then I would keep a comfortable reserve in their for the unknowns. Normally your pm company requires you to keep a minimum reserve with them per property for emergencies. This plus a reserve you keep in your own account should do the trick.
Please feel free to contact me with any other specific questions you have.
Hope this helps.
@Chris Ramos , so let's say I'm only doing turnkey and to start I'm doing them in my personal name. Would I simply use a separate personal checking/savings? For example, I have one online bank where you can create multiple online savings accounts with a few clicks. I'm wondering if I might have/name a separate savings account for reserves for each property up to a certain amount.
@Mark S. For my turnkey properties that in my own name, I don't have a separate account. I simply track the expenses (such as mortgage) and income in my accounting software.
Sorry for the slow response, I just noticed your response from earlier.
I would just set up a sub savings account and have the funds go into that account for all of your properties, title that account as rentals or whatever you want. The only reason to do this is to help with self discipline, meaning you look at those funds differently and as separate from your personal funds with the thought that you'll be less likely to touch them, at least until you hit a minimum comfortable reserve.
@Larry Fried said you can simply track the income and expenses no matter where you keep the funds. A simple excel spreadsheet can help you with that.
Hope this helps.
My LLC has its own checking account with its own EIN (set up originally for syndication cash deals). Would I be able to switch from paying rental mortgage from personal checking to LLC checking without that being viewed as commingling? I'm probably making this way more complicated than it has to be, but just want to make sure I don't make a rookie mistake.
My other thought is to just use the LLC for syndication cash deals (for more asset protection, where there would be more to go after in terms of equity in the properties) and keep the turnkey rentals (which I will finance with 30-year fixed mortgage with 20% down and keep minimum equity) in my personal name (and just get umbrella policy for extra coverage). That way, I'm still spreading my risk from both potential lawsuits and from bank in the event they ever had to foreclose on a leveraged property so that they can't come after other properties where I have an equity interest that are owned free and clear.
@Mark S. It sounds like you answered your own question in your last paragraph, which sounds like a very reasonable plan.
@Mark S. Most property management companies (including mine) keep reserves on a property by property basis. There's just a number (floor) and if the income minus expenses is more than that, I get a check for the difference. For the most part that's going to easily cover standard maintenance and repairs. Capex reserves can be a little more complicated. If you have a portfolio of 10 properties what are the odds all 10 will need roofs this year? Kitchens replaced? HVAC systems replaced? The odds are low. So while I always have enough reserves to cover a huge capex expense I don't keep reserves for 100% of the properties because it's just impractical. But I've also established timelines when I think I'm going to incur those expenses and I'll grow the reserves leading up to that.
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