Separate account for each property?

7 Replies

I have a short-term rental property and a long-term rental property. Right now, income and expenses are coming out of one account for both properties. From an accounting perspective it seems to be working ok, but is there any reason to have one bank account per property?

Steve, 

are the properties under your name or do you have separate LLC's for each property ? if they are both under your name, then you can use just the one account, just make sure you have a way of separating the expenses for taxes and for your own tracking. If you have separate llc's then i would have separate accounts, the reason you have separate llc's is for protection and you would need to have separate accounts to keep up with that protection of different llc's.

@Steve Fitzgerald

Software such as QBs make it easy to track income and expenses per property via classes. 

Some investors open seperate accounts to track income and expenses per property which I did decades ago. However multiple passwords, statements, checkbooks, etc make it very cumbersome especially as you own more properties. Also accountant would rather QBs. 

Steve,

 Then it is OK to have the one account, just have a way to separate the expenses for each property in your accounting software, as @Carl Fischer mentioned, if you use Quickbooks assign each property as a class or if you use quicken rental property each one will have it's own TAG and just assign a tag to the expense.

@Steve Fitzgerald

@Patrick Liska  is correct. The only reason you would have separate accounts is to treat LLCs as separate entities to avoid piercing the corporate veil.  Other than that, sometimes, its easier bookkeeping with two separate accounts. But, if you dont mind, you are ok right now.  

I've found that not only is it less cumbersome to have one account using QB classes, but when you would have a negative balance in one of the two accounts because of temporary cashflow causing you to move money from one account to the other, you don't have to move money when using one account.  Assuming both properties are under one tax ID, as was mentioned.

It can be one way to automate your bookkeeping. The most popular accounting software programs have conditional logic built in now.  If the software knows everything in a certain account is for a specific property then that's more than half the battle.  Use rules to establish the rest for categorization; you can put the books on a high degree of auto-pilot.