Separate bank account/ credit card??

Question

Hi all,

I am under contract to buy a two-family for my first house hack! I will be living in unit #1 that needs TLC and will be renting out unit #2 that is already fully renovated.
I have spoken to my CPA and decided I will not be putting this property in an LLC since it is also my primary residence (so I can qualify for STAR tax credit).

My question is how to best separate my expenses/income. I am planning to open a separate checking account so I can have the rental income go into there but my question is what do I use for my expenses when they are a larger than my rental income when I start out (I will be renovating the deck for unit #2 prior to getting a tenant).

Do I open a separate credit card for renovations that is paid for by my personal checking account?

Do I use an LLC to open a business checking for rental income and a business credit card for renovations if I’m not putting the property in an LLC (not as liability protection but for separating finances)?

Thank you BP community for any help ahead of time.

Bjorn Ahlblad · Answer

@Lauren Baiata welcome to BP! You don't need an LLC to have your banking and finances be separate. Yes open a separate bank account and CC and get LL insurance with some liability coverage to protect yourself. Congrats and all the best!

Basit Siddiqi · Answer

You want to make it as clean as possible for when you do your recordkeeping for the rental.I would create a separate bank account as you suggested where income will be collected and expenses are paid for.if your expenses are more than your income in the start, just make a transfer from your personal account.

Chris B. · Answer

I have a separate personal checking account for rentals.  All rental income and expenses go through it.  Expenses that are beyond current funds of this account are paid out of my personal non-rental account.  I also have a separate personal credit card for rental expenses.  Separate accounts and cards just make organizing things so much easier.  I agree, an LLC is usually not a best fit in your scenario for many reasons beyond the STAR tax credits.  As your personal wealth goes up, consider an umbrella insurance policy.

Mohammed Rahman · Answer

Hey @Lauren Baiata - as you mentioned separate accounts can't hurt and you can fund the rental account from your personal while your expenses > revenue.

You don't necessarily need a separate card, as long as you keep track of your expenses.

I use QuickBooks self employed, as it allows me to link my accounts/cards and then individually mark out which are used for my business and etc.

Separate bank account/ credit card??

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