Checking/Savings Separate Accounts per property???

Question

Adrien C. · Answer

I have a separate business checking and savings. Savings gets all security deposits. Checking gets rents and pays for junk. I use quickbooks to track each expense for each property. Makes doing taxes at the end of the year super easy.

Gerardo Dominguez · Answer

@Justin Smith  I've been slacking it in this regard so far.  For the majority of 2016 I've used my personal checking account and CC for everything.  However, for 2017 I'm going to change this.  The past month or so I've already started using separate CC's and my business LLC checking account.  When I do my 2017 taxes, I will be able to just look at my CC/ bank statements and know exactly what money went in and out that year for my rental property.  In the future, I'm going to make my entity into a Serial-LLC and have a separate LLC/ checking account / CC for each property.  I've never been a big fan of savings accounts.  I honestly don't see the point.  You get less than 1% here in Chicago.  I'd rather save up my cashflow for a year before I actually take a draw from there; then I'll figure out how I can buy another rental.

Steven Foster Wilson · Answer

I have a business checking and savings account apart from my personal. I put aside a portion of the rental income for potential fixes, PM fees, and just a cushion incase there is vacancy. I like having it all in one account. I also have a separate credit card I use just for my business to help keep all of those expenses in one place.

Andrew Postell · Answer

@Justin Smith I think the above responses are good and I want to give you an view point from a lender.  Let's say you need to borrow money in the future for a mortgage on a home.  It would be very nice if you had a bank account that had NO ACTIVITY in it (or very little activity).  If someone has "large deposits" in their bank account the bank is required to source those deposits normally.  The more boring the statement the less paperwork you will have to do.  If you know a good mortgage person then he/she can actually tell you what your threshold is for a "large deposit" and you can make sure to have a bank statement that don't have deposits over that amount.  If you have the ability to have your LLC accounts and a seperate, borring account you will appreciate it if you ever need to borrow money.  Just a different perspective.

Dale Stevens · Answer

Some of this answer has to do with financing. Many lenders will require operating accounts at their institution and will want to have a reserve account, etc. But I never put more than 3 properties in a LLC at any one time and I keep a savings account for deposits and another checking account for operations.

Dan Perrott · Answer

@Justin Smith  You do not need to physically separate your accounts unless your state requires separation of security deposits.  In Indiana, it is not required.

However - I would think it is best practice to:

• Have a savings account that is used for just security deposits.  This money is touched only on a change in tenants.  Having multiple property deposits in a single account is usually not an issue as long as you can list where the money is allocated (security deposit) to.
• Checking account for each business.  I have multiple LLCs to separate properties into groupings for asset protection.  I also have a separate company for property management.  The financial accounts need to be separated.
• Each legal entity has its own checking, savings, MM and CD accounts.

Note that you do not need to be operating under an LLC to use these practices.  It's best to have the separation in case for accounting and tax purposes.

Note that I am not an accountant or a lawyer.  I am not giving legal advice.  You should talk to your lawyer and accountant for what is required where you live.

Hope this helps.

Checking/Savings Separate Accounts per property???

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