I'm new to BiggerPockets and I'm working on my first deal. I have been involved off and on in the rental business with my dad and grandpa. I also did a flip with my dad several years ago. Anyway, I am buying a duplex and single family simultaneously. They are right next to each other. We are going to live in one side of the duplex. I have a few beginner questions.
- Should I set up a separate bank account and run all income/expenses completely separate from my personal finances?
- Should I set up some sort of LLC to protect my personal assets? Obviously, I will be personally guaranteeing these loans, but my long term plan includes building up to some larger multi-family properties with commercial financing. Is this something I need to worry about starting out?
- Is there a good option for tenants to pay online without me setting up my own website? I don't want to incur fees, but it may be worth it to encourage prompt payment.
Thanks for your help!
- Yes, set up a separate business account and run everything through that. It will make your taxes much easier. You also are going to want to keep the money separate and learn to think of it as a business. That is the businesses money not yours. One of the first steps in being a good land lord and making money is to run it as a business.
- Yes. You should separate the lease from the home. You want one of them in an LLC. I put all the houses in my name and the lease is between the tenant and my LLC. The homes are then licensed to the LLC for property management. Most owners I know of seem to put the properties in an LLC and lease in there name.
- The is a fee to use a credit card. Either you or the tenant will have to pay this. I am a developer and wrote my own application. Im actually thinking about marketing it anyway... There are several online solution for this. For now I would not worry about it. Talk to the bank financing the properties and see if the tenants can pay the rent there. Most of my tenants take the rent directly to the bank. Out of 11 tenants I only have one who pays online. Worry about this process a little later in the game. You have more important issues to focus on.
Thank you, Gordon! That helps a lot. I hadn't thought about the LLC from a property management perspective. I will be managing my own property, at least in the beginning.
The company account also separates your personal assets if you were sued or audited. My bank insisted that I not mix funds for legal reasons. I guess when sued a shared account ties the assets putting your personal funds and assets at risk.
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