I have my first rental property already rented and I am looking for the next one, but I'm wondering how everyone manages money? Like day to day income/payments, and what systems are good to get set up? I have always been paycheck to paycheck, so it was kind of easy - set all my bills up to auto pay on payday, the rest is gas and groceries. Now, I have a lot (comparatively) of extra capital in my account, but multiple mortgages to manage. I also cashed out a small investment so I have cash available for the next property down payment, and it's hard to go through and math out each dollar now that there are thousands of them to account for. I am an IT guy so I like things scripted - scheduled bill pay and transfers are great, but I feel like I need a large buffer - in case of late tenant payments or something.
I do not have an LLC yet, and I have been thinking about getting a second bank account for future rentals (current rental is where we were living previously, and the mortgage is tied to a local bank otherwise I would already have another account).
What do you guys recommend for money management systems or processes? I want to get something set up now before I get lost in a banking nightmare.
@Jason Dale I personally use mint.com to track my rental and flip financials. I have a separate bank account and credit card for the rental LLC and flips that I do and I opened a separate mint account that links to just those accounts. I just create a separate budget for each property and then create different "tags" for what type of expense it is. This way takes me about 1 hour a week during a flip and 1 hour a month to deal with the rentals. I made sure I sat down with my tax guy for an hour and pulled up the way that I was doing things and made sure he could easily work with what I would give him at the end of the year and he was fine with it. I have 7 units and have done 2 flips. I have used mint for all of it and it has worked great for me. I can see it being an issue if my portfolio grows significantly. At that point I will probably switch over and pay for quickbooks online. I think I can handle up to about 10-12 units using mint so I have a little way to go.
Having a central set of books is critical. For some, that may be as simple as an excel spreadsheet. Being an IT guy, it may make more sense to look into Quickbooks Online, where you can consolidate bank and cc statements, PM statements, & Mortgage statements. Once the data from the statements are reconciled, you can then generate financial statements. Being able to generate a P & L and Balance Sheet on demand is very empowering.
Do get a separate bank account for each property and then Mint can automatically pull all the transactions and payments (if your local bank has online banking and bill pay).
Have your tenant make direct deposits into that rental account.
I do like Ryan's idea of a separate mint account for each rental though; I had not thought about that! With that set up you might even get separate Credit cards for each rental and tie CC, Bank and Rent Deposit, Mortgage, HOA etc together by a rental X mint account.
This would reduce any weekly account tagging in mint and produce a separate Mint produced Spread Sheet for Tax CPA or Turbo Tax. Mint looks up Zillow estimated home value for the property so this gives you some idea of Appreciation as well as principal pay down from the Mortgage company. BTW mint is free and easy to set up. I have Quick Books and will have to pay someone to set it up because it is anything but simple to do so!
Thanks for the info! I used Mint a few years ago for personal stuff, I didn't realize it could be this helpful for rental properties. And I had not thought of individual accounts for each property. I'll also look into Quickbooks Online.
Oh and BTW, I use eRentPayments.com to manage rent payments. This allows the tenant to contribute to their credit report as well as set up automatic payments, etc.
Right now as I only have a couple rentals most of it’s just as simple as watching my bank account (for rentals) and tracking it that way.
Once I get to about 5(per CPA suggestion) I’ll probably open another bank account and just do the same thing.
As I scale beyond that, I’ll probably use my cpa for bookkeeper services, which they offer as an added service.
Wow...never considered using Mint.com for managing my rentals. Nice advice. Glad I read this thread. Thanks!
As I have thought about your idea of using separate MINT accounts for each rental...
I don't think that will work, unless you totally separate each rental into a totally different bank, different credit card as so forth. Mint pulls all back accounts in any given bank so the more practical solution of different bank accounts in one bank muddies the water. Mint can be trained to tag a specific account to a specific rental so with a little double checking on tags each week or so I think MINT can still separate out rental accounts fairly easy with a small amount of double checking.
@Buddy Holmes I think there is some confusion here. I don't have a separate Mint account for each rental. I have one mint user name for my personal budget and I have one other mint user name for my rentals and flips. I have my business mint account link to my business bank account (I have one account for all my rentals) and the bank account I use for flipping properties (this is separate from my rental bank account). I then use different budgets and tags within my business mint account to keep track of all of the spending for each rental and flip independently. That way come tax time I can just filter by each properties budget and export to excel.
Also, I wanted to comment regarding your statement "mint pulls all bank accounts in any given bank". While this is true when you first set up mint, you can go to account settings and change it so that only the accounts you want get data pulled when you log in. For example if I have 4 wellsfargo accounts but 2 of them are business, I can go into mint, and change the account settings to "closed" for the 2 non business accounts and when I log in, mint will not pull that data. I just wanted to make sure you were aware of that as having it pull all the info would be very very confusing.
I did not know about the closed account ability of Mint.
Thanks, that is a nice feature.
I've used AppFolio before as I helped manage a larger set of properties for a local group of investors. But as I've scaled back I've switched to cozy.co for rent collections personally. They don't take out any fees, have a dashboard / notification system, and still able to apply manual payments if required. This goes into a separate checking account in my business name.
I have Mint setup for my business also now. I used to track in Quickbooks but my subscription ran out that my previous accountant setup for me (10 years that went!). I'm hoping it helps from a tax perspective but haven't dug into Mint a huge amount yet (I have used personally for years however).
But keeping things separate, and writing notes so you can remember weeks/months later is very helpful.
I've also used Expensify to collect the receipts and you can put into different reports so you can tally for each property. Cozy now allows you to tackle expenses too I've seen.
I agree with the 'systems' approach but don't get bogged down on it yet. And I'll repeat again having somewhere to record notes of some kind so you can remember the past is very helpful, especially during tax time.
I LOVE quickbooks. You can handle all your rental income, expenses, etc as well as your mortgages.
I set up an acct for each property. Those are fixed assets. If I put on a roof, water heater, etc I have a sub acct under that particular property for each depreciable item.
I also have an expense acct for each property. I can attach expenses such as property taxes, insurance, etc to each one.
Last but no least I have mortgages...both as mortgagee and mortgagor. I set up the mortgagor properties as liabilities. I have each one separate. I have a folder with each mortgage and amortization schedule. When I make a payment, I rely on the schedule to break down the P%I. I have an expense account listing for each one, so I attach that interest part to each one. At the end of the year, this makes it easy to 1099 the lenders.
Quickbooks is quite versatile and easy to use.