Where to Bank?

[Carl Rowles]

I'm *almost* under contract for my first rental!  

Hubs' and my finances are through Ally Bank. Love it being online and our savings acct rate is 4.2%.  I've read that I should open a business savings and checking at a local institution - particularly for the security deposits.  

Is it terrible to just open another savings account in our Ally Portfolio explicitly for rental income and leave the security deposit at a local institution? I have a hard time giving up that interest rate on rental income that would be hours, but I see the validity of having a local institution.

[Charles Carillo]

@Carl Rowles

I would keep the property's finances separate from your personal finances, as you have suggested. I typically use a local bank as the operating account for a property, and then if I own the property 100%, I will have a savings account that I will use for my reserve account for all of my properties. Handling security deposits can vary from state to state. However, having a separate account for security deposits is usually the best action.

Another point to make here is that it is not all about the interest rate you are receiving. Setting up a bank account at a local bank or credit union could help grow your business in the future. I would find a local bank that works with real estate investors and open an account there. At some point, as your portfolio grows, you will need financing, and small banks and credit unions really strive in this area (especially with small commercial properties).