Bank Account per Property?

Question

Should we set up one checking account per property?

My husband and I purchased our small single family a few years ago. We are in the process of purchasing a duplex with additional rented storage space where we will move into half of it and rent the other half out.  Our single family home will also be rented. We know that is important to keep separate accounts for separate businesses.

Is it necessary to have separate accounts relative to each property?

We keep bookkeeping records outside of bank accounts to manage profit/loss.

Matt Lord · Answer

I’ll be following this.

Seems to me if you want one account for the business, having an online rental app would alleviate the issues mentioned above.

The service I use allows for online payments. Tenant can set up auto payments and I can elect to not accept any partial payments. It also keeps a record of each transaction for each property.

Aside from that, I keep a separate P&I spreadsheet on each property that automatically dumps everything into the master business profit and loss spreadsheet. Took a while to set up but it’s very simple and so far very effective for me.

Tyler Jahnke · Answer

Hey @Samantha Kincaid - I personally have separate accounts for each property (although my single family/small multifamily portfolio is pretty small). But, I'm also pretty meticulous when it comes to organization, accounting, and keeping proper reserves for each unit.

I'd say if you don't have any monthly service fees on the account and can sacrifice an hour at the bank setting up multiple accounts, why not?

On top of that, obviously keep track of all income/expenses separately through software or online platform (I use Tenant Cloud which is free).

Best of luck! Happy New Year! Make 2020 amazing.

-Tyler

Account Closed · Answer

Hey @Samantha Kincaid - Happy New Year! Whether you want to keep your accounts separate is really a matter of personal preference, but it also may be a helpful way to stay organized for tax time and in case of litigation. As much of a disappointment as it is when it occurs, there are some bad tenants out there who will force you into court over things like eviction or property damage. When that day comes, it's helpful for each property to have as simplified of a paper trail as possible. If you think it would be easier for you personally to aggregate everything into a single account and then separate out income and expenses by property, by all means go for it. But in the same vein, if you think it would be simpler to have everything separated out in the event you'll have to present all of your dealings before a judge, it might be a better idea to go with separate accounts.

Terry Ingram · Answer

Advice I received from a Lawyer that does evictions (in Illinois), there is a benefit IF you have funds direct deposited into an account.

When/if it comes time to take someone to court for eviction the last think you want to do is accept any dollar amount that is not 100% what is due including late fees.  If you receive a check you just don't cash it, however if the rent is being direct deposited into a single account you have just accepted money, however if you a separate account for each rental he says to close the account so you dont receive any money.

By receiving money (depends on the Judge) the judge may side on behalf of the tenant as they were trying to make good on the rent and give a month or two for them to pay up (professional renters are good at this) and then you wont see another dime. If you are able to close the account you have not accepted money and that changes things.

I am sure there is a little more to it but this really only applies if you are accepting direct deposit for rent.

Simon W. · Answer

it isn't necessary for separate bank accounts per property, but having LLC per property would be recommended for separate bank accounts.

Mike McCarthy · Answer

As long as you're half-decent at keeping records of incoming rent and expenses, I don't see any reason for a separate account for each house.

At the end of the year, you'll need to provide your accountant (or yourself) the income/expense details - and that's easier if you have bank statements to refer to and/or the bookkeeping details.

(Assuming you don't have each property in it's own LLC, which is a different story)

Alina Trigub · Answer

@Samantha Kincaid

At the end of the day, the answer is: it depends how much work do you want to do at the end of the year. If you're meticulous with your records/transactions in your single bank account and can easily split it between multiple properties, then no need to have separate accounts from the get go. However if you'd like to eliminate this extra step all together, then having separate bank accounts from the beginning will do the trick.

David Flores · Answer

I keep everything in one bank account. Separating LLCs should be a consideration though. Just owning 2 properties you may not want to separate LLCs but at a certain point you should to stay risk adverse. I would say after your third property you should form another LLC.

Chris Coleman · Answer

@Samantha Kincaid

Having a separate bank account per property is not necessary.  However, having a separate record for each property is needed, so that you can account for Income and Expenses of each.

Bank Account per Property?

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