Keeping your money organized

20 Replies

Using the 50% rule as an example, on a house that rents for $850.

So $425 goes to expenses/vacancy. Is it best to deposit this portion in a separate bank account? 

So for those that have multiple properties, are you using a different bank account for each property? 

Are you paying the mortgage out of a separate bank account? 

Can someone please offer a strategy this? I currently have seven units but only 2 bank accounts. I acquired the 7 units over many years but now I would like to be more agressive. It is time to clean up my accounting, and property management. Any advice or templates are appreciated. 

I personally would not keep my investment money in the same account as my personal money or money used for bills. As for separating them out between each property is up to you. And the mortgage is up to you as well.

I personally like having several bank accounts with one bank. That way I can go online and see how much is in each account and I can name each account individually to be able to keep track of the money.

Definitely agree on separate investing/personal accounts.  Some banks let you have multiple virtual accounts in one actual account - or you can do this with something like Mint.  This could be a good idea for your reserves - one account, but different buckets within that account.

Thanks for the advice guys. Right now I have a business account and personal account. 

So maybe my business account can have different buckets in one account? I will look into that. 

So rent money deposited into business account, and also mortgage payments for rental properties can come out of that account. But should I be keeping details on how much money each property has for reserves? Or is that money ok to be comingled? 

Originally posted by @Devin Scott

I do not have any experience with this; however I do know that, down the line if you would like to dispose of one of your properties you will need to know your adjusted basis in the property to calculate your tax obligations.
Therefore, you will be able to go to that property's account, basically run down the line items, and calculate as you go. If you have everything coming out of one account, and there are multiple properties, it is going to be a search process to calculate. In the end, keeping everything separated will save you time, money, and possible shield you from liability (obviously depending on your setup).

Great Point Bradley. I could get separate accounts now, but what about when I own 100 properties? I wonder if the Grant Cardones out there have a bank account for each property?  Or maybe just a great assistant/accountant. 

Originally posted by @Devin Scott :

Great Point Bradley. I could get separate accounts now, but what about when I own 100 properties? I wonder if the Grant Cardones out there have a bank account for each property?  Or maybe just a great assistant/accountant. 

Again no experience, in my opinion I would say keep them separated with their own accounts. That way you can look at the account's bottom line and know how much you have in a given property. Remember time is money, I personally do not have time to sit down and go through lines and lines of transactions. If you have them separated you can easily see when you were paid, when your mortgage went out, etc. I am sure he has one of the best accountants money can buy...

What if you mortgage is through the same lender and you have multiple properties on one account, do you know what one was paid? Maybe by the amount yes, but what if you paid a little extra towards the principal? Im sure you can see how much of a headache this could potentially be. In the end you can keep it simple in the beginning, or you can spend time doing it yourself or hiring an accountant to do it.

I know when we purchased our home they gave us $500 if we opened a checking account with them and put $50 into it. If they did that every time you were extended a loan, you stand to make $450...kinda of...but not really after you are gouged with interest. 

Yea, good thoughts Sir. I appreciate the input. 

You don't need a separate account for each of your properties, just based on the ownership. I have multiple properties in separate LLC's, and each LLC has its own bank account. (so 10 properties in 1 LLC, one bank account). Each LLC is treated as an individual business.

I also have a separate management company as an LLC. This one I have two accounts. One for collecting rent and one to house security deposits. This way, no matter which company owns properties, the tenants all pay to the same LLC, (management LLC).

Once a month I do a distribution to the ownership LLCs for rent, minus the management fee of course. Keep in mind, I own all the LLCs.

Hope I explained this correctly. Quickbooks makes it extremely easy to do this.

Thanks Alan. So do the mortgage payments come out of the management LLC?

Or do you own these free and clear? If you have a mortgage, is the mortgage in the LLCs name, or do you just mean the property is titled in LLC name?

My situation is this @Devin Scott

4 multis (24 units) - one checking account for both rent deposits and paying all expenses including mortgages. I have a connected savings account for reserves and where I keep money for quarterly property tax payments. I make transfers between accounts as needed. 

2 SFRs - one checking account for both the rent deposits and paying all expenses including mortgages connected to the same savings account above for reserves.

The only reason I have the separate checking account for the SFRs is because my wife doesn't think the SFRs make money and doesn't really want me buying SFRs so its sort of a test to see/show her how well they cash flow. She doesn't want the multis to support the SFRs.

I dont collect security deposits but that would require a completely separate account. Its also a certain type of bank account so the money in the account is not mistaken to be your asset in case the IRS or some other entity were ever to come in and sieze your assets. The security deposit money would be safe. 

Thanks for sharing Rob. Great info as well. I appreciate it. 

@Devin Scott ,

I have 3 properties, they all have their own bank accounts, it makes the accounting much easier for me.  I try to make sure all transactions for a specific property run through that account, then it's easy to track. 

Hi Devon- I have 3 SFR's- one bank acct for all of the ins and outs (taxes and insurance are included in the mort.payments), and one bank acct for the security deposits. I have 3 MFR's in an LLC- one main chkng acct for all of the ins and outs, one acct for the security deposits, one acct where I self escrow taxes and insurance monthly for all of the properties, and one linked personal acct where I sweep excess cash so as to get it out of the LLC where it is more vulnerable to lawsuits from my business activities.

When you use QuickBooks it allows you to have one bank account and link that bank account to Income received from each individual properties, as well as subtracting the expenses per property as well.  ( you will want to have a bank account for your Security Deposits as well, but that's it)

Then at the end of the month, or whenever you want, just print out a Profit and Loss Report by Class. 

Think of your Business Bank Account being the trunk of a tree. 

The branches from that tree represents your rental homes.  

All branches are connected to the trunk of the tree, but each limb represents a rental property. 

When you want to know how much money each limb or house makes you in money, step back and take a picture of that tree.  Zoom in and see how many buds have grown on that limb.   In other words, Print out a Profit and Loss Report by Class, zoom in on one property an see how much income you made, less expenses and view your bottom line.

My goodness, all of you are creating such a tedious scenario in handling your money.  

Keep your business account separate from your Personal Account.

Put at least $100 a month in an Escrow account for repairs for each house you own.  

If you think you need more than that for repairs, then set aside $200.00 a month for repairs for each house.  But each house will never use $200 a month, because your homes should already be up to code before you rent them out.

You are making way too much work for yourselves.

Nancy Neville

I have multiple mortgages and most are blankets. I write several mortgage checks each month from the llc that owns those particular properties. Quickbooks makes it easy for me to break down each payment for a specific property as well as allocating towards principal and interest.
I have multiple mortgages and most are blankets. I write several mortgage checks each month from the llc that owns those particular properties. Quickbooks makes it easy for me to break down each payment for a specific property as well as allocating towards principal and interest. Nancy, that was a great reply. I love using Quickbooks. Doing p/l per property by class is just so simple.

Hi,

I was contemplating this same issue...

We just purchased our third rental property (all are multi units) and here is what I have done so far:  Savings account for security deposits, checking account that rent gets paid into.  Then I have one checking account per property, most of the rent gets transferred to each account which then pays the mortgage and any other expense for that property, the rest stays in the PM account which pays for common expenses such as supplies used on all properties.  I liked this because I know at a glance how each property is doing.  The accounts are linked so transferring money between them is immediate.

We are purchasing 2 more this year and I might just keep them separate within Quickbooks as Nancy describes above.  It will keep track of how each property is doing without having so many accounts at the bank.  I might open just one more to use for Cap Ex savings or I might just keep them separate within Quickbooks only.

Kelly

On the same note --- with Nancy - You are making way too much work for yourselves.

Set up an auto withdrawal with your utility, phone, mortgage and for those recurring expenses. Many time the vendors offer a discount or a rebate for setting up auto payments.

I remember on one of our property we received one time $$$ to set it up. Keep in mind you always have funds because a NSF fee from the vendor may be very high. One vendor charged $250.00 . Read the fine print.

Keep the questions coming - that is the only way we all learn on how to SAVE TIME AND MONEY. :)

Gita Faust

Great information everyone. This is the best place for info. I will go get Quickbooks. 

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