Wondering how people set up their bank accounts. My lawyer & accountant said to have separate accounts for each property and not to transfer to personal accounts. I'd like to follow profit first method of banking, but seems like a lot to set up 5 accounts for each property.
I have our properties set up with a separate bank account per rental. Whenever making payments between accounts, we would do it with checks and support it like you would a business (expense reports, paperwork support, etc). The reason being, a transfer would more easily open up a larger investigation were we to get audited.
@Bill Gallagher I have read Profit First and like the concept but I have not incorporated the bank account structure into my business.
@Bill Gallagher there are different views on this. I am a subscriber to the KISS method of doing everything. Not Kiss the rock band, but "Keep It Simple Stupid". Simplicity reduces errors, improves quality and saves time. Applying this concept to bank accounts, we have two accounts for our business. One is a checking account where money flows in and out. The other is a savings account, were we hold cash beyond our working funds. Money is transferred from checking's to savings when we reach certain levels. Our personal accounts are separate. We transfer money from business savings to our personal savings when we reach certain thresholds.
Although many properties are in single accounts, we keep very detailed records of every transaction. We log them in the check book and track them in a spreadsheet, carefully logging each income or expense with source and purpose.
This works for us, because the properties we own and operate as sole proprietors. If the properties were in LLC, then each would need their own accounts for proper separation.
I am not sure why you need 5 accounts for each property. Can you elaborate on what each of the five accounts is for?
I use a separate account for each property. It makes it real easy come tax time to transfer info to Schedule E. But if you had a lot of properties, I'm sure there are programs that will do this easily as well......
@Bill Gallagher it's pretty easy with RelayFi
@Avery Carl that's why you make the big bucks! Thank you!
A separate bank account / entity for each property is overkill.
Imagine having to keep track of a different account number, check book and entity name...
Best of luck.