Can you explain 50% accounnt setup

Question

Can someone explain maintenance account and the tax implications.

should i have different accounts for each house?

if i sell a house with a large M.Account what happens?

I'm not asking for specific legal advice just an overview.

Renae Charles Atkins 504trading@gmail.com 504-235-6979

Travis Lloyd · Answer

If you sell a house, they are buying the house. Any money you have in any bank account associated with the house is yours, and not included in the sale - with the exception of security deposits of course.

Different accounts for each house: for security deposits? I say not for each house, but open an account for all security deposits separate from operating expenses. For maintenance? That's completely up to you - more of a personal thing, but I would say its nothing more than an additional headache. You should be tracking the amount of maintenance reserve allocated to each house, but as long as you keep that straight in quickbooks/excel/ledger, there is no reason they cannot all be in one bank account.

For tax implications (FD - I'm not an accountant), its all about the ownership structure. In most cases, money that you set aside for maintenance reserve would still be taxed in the year it is earned.

My theory: first year you set aside a significant amount to establish a par value for maintenance reserve (we call it management reserve). That money is unfortunately taxed as income. The following year, we only add as much as necessary to replenish the maintenance reserve back to par value which allows for greater disbursements. 2 months before the end of each tax year, take stock of all major cap-x items in each property and decide what to replace - as we're going to get taxed on anything unspent and what good is it to pay taxes on money that may then get spent in January! And yes I'm the crazy one that replaces A/C condensers in November (when they're getting old) to avoid the expense in spring at the same time as taxes are due. But that's just me.

Renae Charles Atkins · Answer

Thanks

Travis Lloyd

Great info