Dedicated bank account for individual entities?

[Cason Acor]

My question is primarily directed to buy and hold investors who purchase each new property with its own entity (I imagine most will be LLC’s). Do you also open a dedicated bank account for each entity for the purposes of collecting rents and other necessary money management? I understand why doing so would be advantages for record keeping purposes. But I don’t know if this is standard practice, or if regulations require it. It just seems like a lot of hassle to keep everything straight. I would love to hear other input and strategies from more experienced investors. Thank you!

[Michael Plaks]

@Cason Acor

First, it is not automatic to create a separate LLC for each property. The debate about the benefits and drawback of this approach is like Ford v Chevy. Or more like Ford v Chevy v Dodge v Toyota v ... Even attorneys will never agree on this, much less the investors. Search this forum, we had numerous debates about this issue in the recent months.

Second, consider an alternative: Utah Series LLC, which is kind of multiple LLCs combined into one. You will need an attorney's input, and I'm not one.

Assuming you do have multiple LLCs or a Series LLC, most attorneys will recommend separate bank accounts, as you have already seen above.

The way to maintain your sanity is to create a management company and channel everything thru the management company, with your LLCs hiring this company. The only money exchange between the management company and the LLCs would be one or two transactions a month: owner's distributions, basically. Everything else - rent, mortgages, insurance, repairs etc will be routed thru the management company.