Checking/Savings Account for Rental Property

[Luke Ostergaard]

I have seen several different opinions on this matter but I wanted to get some up to date recommendations. I am working on acquiring and moving into my first househack (2-4 unit property) sometime within the next 3 months. At that time, I will also rent out my current primary residence (SFH). I am looking for advice on the most efficient way to set up my financial accounts as a new investor.

My plan was to open up a separate checking and savings account to manage income and expenses for the SFH with the following breakdown:
- Checking: income and expenses 
- Savings: to hold security deposit and reserves

Should I also manage the income/expenses of the 2-4 unit property through this new account? Or would it be best to manage the househack through my personal account as I will still be living in one of the units? Thanks in advance for the advice!

[Garrett Christensen]

I like to have a separate checking account for each property, it makes things so much more simple from a bookkeeping standpoint. With that said, don't have too much cash just sitting in there. I keep about 2 months' reserves in the checking/savings accounts and then put the rest of the cash as it grows in a high-yield savings account such as Wealthfront. The APYs are so high right now, I've made hundreds of dollars in interest.

[Jim Victor]

Once you go above one rental property you definitely need to break your rentals out into a separate bank account from the bank account you use to manage your life.  It makes things much easier.  How you should break things out most efficiently from there will become more apparent as you build out your portfolio.  I use one bank account and an Excel workbook to manage rentals, but I live in spreadsheets every day, and that might not be comfortable for most people.  

[Luke Ostergaard]

Quote from @Garrett Christensen:

I like to have a separate checking account for each property, it makes things so much more simple from a bookkeeping standpoint. With that said, don't have too much cash just sitting in there. I keep about 2 months' reserves in the checking/savings accounts and then put the rest of the cash as it grows in a high-yield savings account such as Wealthfront. The APYs are so high right now, I've made hundreds of dollars in interest.

 That makes sense! Just to confirm, you like to have a separate checking account for each property and one savings account for several properties to hold deposits and reserves?

[Josh Bowser]

Personally, I like to have my finances/accounts as consolidated as possible. This comes from experience trying to reconcile accounts for tax purposes.

With only managing a few properties, I'm not sure if I wouldn't stress out about it too much until you get an idea of how each property behaves. If they are management/expense intensive you'll probably want to have separate accounts.

My two cents: One checking account for each property that ALL income and expenses get paid into and out. This will make your P/L pretty straight forward to calculate for filing purposes. One savings account is fine, but I would just move that money from savings to the respective checking account when property related expenses come up.

[Simon W.]

Quote from @Luke Ostergaard:

I have seen several different opinions on this matter but I wanted to get some up to date recommendations. I am working on acquiring and moving into my first househack (2-4 unit property) sometime within the next 3 months. At that time, I will also rent out my current primary residence (SFH). I am looking for advice on the most efficient way to set up my financial accounts as a new investor.

My plan was to open up a separate checking and savings account to manage income and expenses for the SFH with the following breakdown:
- Checking: income and expenses 
- Savings: to hold security deposit and reserves

Should I also manage the income/expenses of the 2-4 unit property through this new account? Or would it be best to manage the househack through my personal account as I will still be living in one of the units? Thanks in advance for the advice!

The best way to go about it is 2 bank accounts per LLC - 1 for operating/expense and the other for security deposits. You don't need the reserve account. Accounting system should help you allocate that.

There's different wants to go about it. I have clients that have from 1operating account for 1000+ units and some have multiple accounts for just a few properties.

It depends what you are trying to accomplish. Feel free to message me

[Garrett Christensen]

Quote from @Luke Ostergaard:

Quote from @Garrett Christensen:

I like to have a separate checking account for each property, it makes things so much more simple from a bookkeeping standpoint. With that said, don't have too much cash just sitting in there. I keep about 2 months' reserves in the checking/savings accounts and then put the rest of the cash as it grows in a high-yield savings account such as Wealthfront. The APYs are so high right now, I've made hundreds of dollars in interest.

 That makes sense! Just to confirm, you like to have a separate checking account for each property and one savings account for several properties to hold deposits and reserves?

Sorry, separate savings and checkings account for each property. Most banks will make you have a savings account in order to have a checking account. I almost never use that savings account. The savings accounts I use are the high-yield ones. It's important to keep all funds separate, especially when required by law. AL doesn't require that to my knowledge, but it's still best practice.

[Luke Ostergaard]

Quote from @Garrett Christensen:

Quote from @Luke Ostergaard:

Quote from @Garrett Christensen:

I like to have a separate checking account for each property, it makes things so much more simple from a bookkeeping standpoint. With that said, don't have too much cash just sitting in there. I keep about 2 months' reserves in the checking/savings accounts and then put the rest of the cash as it grows in a high-yield savings account such as Wealthfront. The APYs are so high right now, I've made hundreds of dollars in interest.

 That makes sense! Just to confirm, you like to have a separate checking account for each property and one savings account for several properties to hold deposits and reserves?

Sorry, separate savings and checkings account for each property. Most banks will make you have a savings account in order to have a checking account. I almost never use that savings account. The savings accounts I use are the high-yield ones. It's important to keep all funds separate, especially when required by law. AL doesn't require that to my knowledge, but it's still best practice.

 Gotcha, that makes sense to me, Those HYSA have been sweet lately. I've seen to rate increases in my account in the last three months.

[Antonette El Baz]

It's generally recommended to have separate bank accounts for each LLC you own to keep your finances organized and separate from personal finances. I would have one bank account for operating expenses and another for deposits for each LLC.

[Jamie Banks]

I highly recommend using Baselane. I use it to manage my properties, including a house hack which I also run through my business account on Baselane. I have a main operating account that pays all of my bills and mortgages on the properties. However in Baselane you can create a tag for expense type and which property it is for. I have separate accounts for security deposits on my units, reserve accounts, etc. that are all virtual accounts but are directly linked to my main operating account. 

[Steve Vaughan]

@Luke Ostergaard. I think you'd be fine with 1 checking and 1 savings acct for your rentals.  

Ask about a DBA at your current bank/CU. Then renters could make rent and deposits payable to something besides your personal name. I have never been paid personally by a renter.

I self managed 35 rentals for 20 years.  No way each little house gets it's own acct.  

I do hold my commercial multis in separate LLCs which each had their own accts of course.   Different banks, different colored checkbooks. Not too difficult to manage at all. 

[Luke Ostergaard]

Quote from @Jamie Banks:

I highly recommend using Baselane. I use it to manage my properties, including a house hack which I also run through my business account on Baselane. I have a main operating account that pays all of my bills and mortgages on the properties. However in Baselane you can create a tag for expense type and which property it is for. I have separate accounts for security deposits on my units, reserve accounts, etc. that are all virtual accounts but are directly linked to my main operating account. 

 Thank you for the recommendation I will have to check the software out. That is one of my next big decisions (choosing PM software) as I plan on self managing in the beginning! 

[Luke Ostergaard]

Quote from @Steve Vaughan:

@Luke Ostergaard. I think you'd be fine with 1 checking and 1 savings acct for your rentals.  

Ask about a DBA at your current bank/CU. Then renters could make rent and deposits payable to something besides your personal name. I have never been paid personally by a renter.

I self managed 35 rentals for 20 years.  No way each little house gets it's own acct.  

I do hold my commercial multis in separate LLCs which each had their own accts of course.   Different banks, different colored checkbooks. Not too difficult to manage at all. 

This is why this community is so powerful. I have never heard of a DBA but I just did some initial research. I assume this helps organize bookkeeping come tax time? Thanks for the recommendation!

[Steve Vaughan]

Quote from @Luke Ostergaard:

Quote from @Steve Vaughan:

@Luke Ostergaard. I think you'd be fine with 1 checking and 1 savings acct for your rentals.  

Ask about a DBA at your current bank/CU. Then renters could make rent and deposits payable to something besides your personal name. I have never been paid personally by a renter.

I self managed 35 rentals for 20 years.  No way each little house gets it's own acct.  

I do hold my commercial multis in separate LLCs which each had their own accts of course.   Different banks, different colored checkbooks. Not too difficult to manage at all. 

This is why this community is so powerful. I have never heard of a DBA but I just did some initial research. I assume this helps organize bookkeeping come tax time? Thanks for the recommendation!

The bookkeeping is easy. 
A DBA or entity should be able to sign leases and keep tenants from paying you by name.   Potential liability protection and anonymity.