Investor · Prairieville, LA · Member since 2015 · 311 posts · 424 votes
8y
I think that one bank account per property is a little extreme unless you have each property in a different LLC. Different checkbooks, accounts, debit cards is just a bit much.
You can separate expenses for each property by using QuickBooks or Excel spreadsheets, or whatever method you prefer. Assign each expense according to the IRS categories on the Schedule E, i.e. Property 1 Cleaning & Maintenance, Repairs, Utilities, etc.
Investor · Prairieville, LA · Member since 2015 · 311 posts · 424 votes
8y
I think that one bank account per property is a little extreme unless you have each property in a different LLC. Different checkbooks, accounts, debit cards is just a bit much.
You can separate expenses for each property by using QuickBooks or Excel spreadsheets, or whatever method you prefer. Assign each expense according to the IRS categories on the Schedule E, i.e. Property 1 Cleaning & Maintenance, Repairs, Utilities, etc.
Investor · Avilla, IN · Member since 2013 · 796 posts · 769 votes
8y
I once looked a deal where the owners did this. They had 5-6 properties and an account for each. What happens to some people is they get lazy and tired of moving the money around. So he’s standing there explaining to me that this particular property was there “cash cow” and that some of the expenses on the spreadsheet were actually repairs/improvements on other properties. This properties account had money in it so they paid it for the stuff on the other properties with this one’s checking account.
I own 63 units spread across 20 locations and I operate them all under the same LLC and one checking account. I have a second account at a different bank for tenant rent deposits but that’s only because I needed a bank branch in the town where my 12 unit was located. Otherwise I’d operate completely out of the main account.
If you’re wanting to do separate LLC’s for each deal then I would recommend forming a separate entity for a management company and operate all of the properties out of that company’s account. Check with an attorney/CPA to make sure that strategy makes sense of course.
Investor · Philadelphia, PA · Member since 2015 · 3k+ posts · 3k+ votes
8y
I have a separate account for each property. I also have an additional account where I pool all of the security deposits.
Having a separate account for each property is great! I do zero bookkeeping except at year end, when I spend about 10 mins per property.
It’s not that hard to use the right debit card when purchasing materials or writing a check from the correct account when paying someone. Far easier IMO than classifying transactions in quick books.
Investor · Verona, NJ · Member since 2014 · 1k+ posts · 832 votes
8y
I have each property under it's own llc and each one has its own checking account. i do not mix funds and i have yet to draw any money for personal use. each one builds up for a reserve and then if something needs to be repaired, the money is there and i use the money associated with that business/ property to do the repairs. If the account were to get to the point that there is more than i feel i need in there, then i will withdraw money from that account.
Denver, CO · Member since 2017 · 142 posts · 104 votes
8y
I'm trying to keep it as simple as possible. I can totally see getting lazy and mixing up funds and getting confused. I'm still not sure I'm going to register an LLC. So far, I'm leaning towards personal or trust with an umbrella.
I would just like to know how the people with 1 bank account have found the best way to track income and expenses. Is there an app you like to use?
Walnut Creek, CA · Member since 2015 · 3k+ posts · 2k+ votes
8y
This seems like a lot of work and extra expenses...
I could see something like this being efficient and effective (LLCs being the exception: Checking: Write property # on check, attach copy of check to invoice. That'd have everything you need right? Handles all money in/out for all locations.
Savings 1: Reserve account, you could have x amount auto transfer or do it something like quarterly... or whatever you want.
Savings 2: Security Deposits. Transfer the amount owed at end to checking, certified check drawn for that amount. If some was spent for repairs, separate transfer and then write check # in memo/address
Rental Property Investor · Baltimore County Maryland and Tampa Florida · Member since 2013 · 2k+ posts · 2k+ votes
8y
If you have a bank account for each property, how do you decide which account pays for incidentals related to having these properties, but not to a particular property? Examples:
Investor · Taylor Mill, KY · Member since 2016 · 2k+ posts · 964 votes
8y
@Alex Corral Whatever you're comfortable with is what is best. Everyone handles it a different way and as long as your method works for you and/or your accountant & bookkeeper.
Investor · Verona, NJ · Member since 2014 · 1k+ posts · 832 votes
8y
@Nicole A. I do not have a Mailbox for any of the properties most everything goes to my PM and if not, to my home office address or my email to be paid online. as far as travel expenses, i usually just pick a property that may be making more money so that i can expense it, to reduce the income. all of my properties are in the same town, so when i go there, it could be to any one of them and is usually to all of them, they are 3 hours away. Any maintenance, utilities,etc. to a property gets paid from that properties account. what i will also do is if i am going out there because of a specific property, i will expense everything to that property.
Investor · Manteca, CA · Member since 2017 · 1k+ posts · 2k+ votes
8y
1 account for my 3 properties. I use Quicken for my accounting...... when I enter an income or expense it has categories attached to the info..... you can sub-categorize each one.....enter notes on what it was......and tag it to each property. Its easy to run reports with the categories and tag. I can easily tell what income or expense was associated with each property and what it was. You can do that in any of the major accounting software platforms.....
Seems like a lot of unnecessary work to have a separate account for each property....... you are using the bank accounts like files sitting in a cabinet......
I can see an account to keep security deposits separate....and maybe one for your cash reserves.....but one for each property seems dumb to me....it is 2018 now....... but whatever works for you......
Investor · Nicholasville, KY · Member since 2017 · 6 posts · 5 votes
8y
If you don't have an LLC use one account...
Get Quicken Rental Property Manager. Setup a "Property" for each property and under that "Property" setup the basic expenses. Very easy reporting and it takes almost no time once you get in the habit. I've been using quicken since 1997, and when they came out with Quicken Rental Property Manager, I swear they modeled it on my setup. (grin). One of the best parts of Quicken is you can scan your receipts into it, and then throw the paper away.... Everything I've ever spent on any of our properties is in one place, and I can run reports to tell you anything you want to know about them all. Oh, they all go into one account except for two properties that we have partners on, those are in their own account. Been doing it that way for 27 years.
Another perk with Quicken is as you receive rents, it checks them off, so its easy to track who has paid and who hasn't as your portfolio grows.
Investor · Centreville, VA · Member since 2016 · 109 posts · 65 votes
8y
@Alex Corral I am starting rental strategy now and expect to have two rentals to track by the end of the year. Based on my very positive Contract For Deed experience, I intend to open up an account at whatever bank the renter uses so there is NO reason they can deposit, or transfer funds into my account on time.
Though @David S. and @Brandon Hicks might think it's overkill, I really like the point of @Max T. about ease of taxes at the end of year.
Both @Ned J. and @G.T. Smith suggest Quicken, I haven't tried that, but will. My QuickBooks experience tells me that it is nothing near "Intuit"ive.
Great experience with the CFD and expect a repeat with Rentals. It may be cumbersome after more than half-a-dozen or so, but I'll adjust if needed.
Denver, CO · Member since 2017 · 142 posts · 104 votes
8y
Thanks everyone for your replies!
I see a few people mention keeping the security deposit separate. Why shouldn't you keep in the account with the rents as long as you know who it belongs to?
I see a few people mention keeping the security deposit separate. Why shouldn't you keep in the account with the rents as long as you know who it belongs to?
That would depend on your state and local laws. Some states REQUIRE that the security deposits not be commingled with other funds. Further, some of them require you to pass along the interest.
Investor · Philadelphia, PA · Member since 2015 · 3k+ posts · 3k+ votes
8y
@Ned J. Anyone saying that having a separate account for each property is "overkill" or "extra work" is not getting it. Once the account is set up (very easy and free) you will never ever have to track or categorize an expense again. You will never have to buy or set up accounting software. Your bank statements become your P&L. And yes it's 2018, so with a good online banking platform you never need to write a physical check. Payments to vendors and contractors are all done electronically.
@Nicole A. poses some good questions about those handful of expenses that go towards your business as a whole and not one specific property. However, those expenses are generally few, far between, and $insignificant. For those items I just pay for them out of my most profitable property or my RE Agent account. It all ends up in the same place come tax time.
Rental Property Investor · Atlanta, GA · Member since 2016 · 325 posts · 253 votes
8y
I don't have separate account for each of my properties. I have one LLC where they are all held. I have labeled my accounts as OPEX where all rent gets deposited. CAPEX where my reserve stays. Profit where I transfer predefined % of funds. last one is at different bank, I have not drawn money from it so it builds up. I track all my income and expenses using excel spreadsheet per IRS categories.
@Ned J. Anyone saying that having a separate account for each property is "overkill" or "extra work" is not getting it. Once the account is set up (very easy and free) you will never ever have to track or categorize an expense again. You will never have to buy or set up accounting software. Your bank statements become your P&L. And yes it's 2018, so with a good online banking platform you never need to write a physical check. Payments to vendors and contractors are all done electronically.
@Nicole A. poses some good questions about those handful of expenses that go towards your business as a whole and not one specific property. However, those expenses are generally few, far between, and $insignificant. For those items I just pay for them out of my most profitable property or my RE Agent account. It all ends up in the same place come tax time.
@Max Tanenbaum: What do you do at tax time? I have 24 separate properties that I have to report income and break down my expenses on for the CPA. If I was to hand him a bank statement he would have know what property it was for. If I made a note on it, he would know which account went to each property, but he wouldn't know what the debit to John Doe was for, so he couldn't put it in the proper place on the tax form? As for it all ends up at the same place at tax time, again I think I'm missing something. For example I bought a new mower last year, I will use it at all of the properties, so the way I do it is enter the expense in Quicken and then divide the amount by 24 and put that amount as a tool expense on each property. if I wrote it off to 1 property, that 10k would be an issue one way or another on 1 account, and I now I don't call 10K $insignificant I know everyone has their way of doing things that works for them, and I am not trying to argue a point, even though as I re-read my post it sounds argumentative, I'm really just trying to clarify my question I asked in the first place. What do you do at tax time?
Rental Property Investor · Papillion, NE · Member since 2017 · 398 posts · 1k+ votes
8y
I use a separate bank account and seperate llc per building/loan (some properties are two buildings but one loan). This does one of two things, makes accounting much easier, allows me to easily see how well the individual properties are operating. I also have a separte account in which I collect my mgmt fees for buildings I have a partner with.
I truly like the ease of use when reconciling the books.
Robbinsdale, MN · Member since 2016 · 34 posts · 22 votes
8y
This is not legal advice, but any lawyer in my state would tell you it's absolutely safer to LLC each individual property if you're not planning use a land trust. Which would entail opening separate accounts as well.
It limits the risk of suits when a tenant or contractor goes after damages. Truth is the more assets one party has in the suit, the more the opposing party will pursue. With separate entities are only pursing that one property vs what would be a large portfolio with much more exposure.
However, as mentioned above, this creates a significantly higher accounting standard.
Lehigh Valley, PA · Member since 2016 · 144 posts · 91 votes
8y
There are a number of good programs (not apps) to manage the physical structures, tenants, and finances. Our management division uses Buildium. Might not be appropriate for under 50 units but get a good program and it will be able to keep everything separate and easily accessible.
This is not legal advice, but any lawyer in my state would tell you it's absolutely safer to LLC each individual property if you're not planning use a land trust. Which would entail opening separate accounts as well.
It limits the risk of suits when a tenant or contractor goes after damages. Truth is the more assets one party has in the suit, the more the opposing party will pursue. With separate entities are only pursing that one property vs what would be a large portfolio with much more exposure.
However, as mentioned above, this creates a significantly higher accounting standard.
This is assuming all the assets are free and clear; people always mention this method of one LLC per property but never discuss if each property is lien free. If someone owns a few properties but they all have only a little equity in them, that in itself would deter people from suing. There's a whole strategy some people use of "equity stripping".