Do you have separate bank accounts for each property??

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Do you have separate bank accounts for each property??

Mark Douglas
Investor · Nashville, TN · Member since 2015 · 429 posts · 143 votes

Hello all,

I'm on the cusp of closing on my first property ^^ and I want to have as much in place as I can.

I know I'm going to open up a second checking account for this first property, to keep it separate from my personal funds, but what about down the road with (hopefully) more properties?  Is it overkill to have an account to represent each building, or should I just open one account, and pool all funds into it?? 

For tax purposes, I really want to have a grasp of where all of the money is flowing.

Any thoughts?

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Brett Youngster
Land O Lakes, FL · Member since 2015 · 11 posts · 3 votes
10y

Pretty much what Russel said. If they're in your name or a single LLC, then one account would be adequate. Good record keeping is the key.

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  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    10y

    I have my personal account....then I have one business checking account. All the rents, and all my agent commission checks go into it. I think having an account for each property is overkill most likely. That is with the caveat that you own the properties in your own name.  If each property is owner by individual llc's, then each one would need their own accounts.

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  • Brett Youngster
    Land O Lakes, FL · Member since 2015 · 11 posts · 3 votes
    10y

    Pretty much what Russel said. If they're in your name or a single LLC, then one account would be adequate. Good record keeping is the key.

    1Reply
  • Mark Douglas
    OP
    Investor · Nashville, TN · Member since 2015 · 429 posts · 143 votes
    10y
    Originally posted by @Russell Brazil:

    I have my personal account....then I have one business checking account. All the rents, and all my agent commission checks go into it. I think having an account for each property is overkill most likely. That is with the caveat that you own the properties in your own name.  If each property is owner by individual llc's, then each one would need their own accounts.

     Ok,  I can do that...  Probably won't form an llc for awhile, so it'll be under my name at first.

    Thanks!

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  • Gary Ytreeide
    Residential Real Estate Broker · Rockport, TX · Member since 2015 · 19 posts · 3 votes
    10y
    It is good to keep your business account set up separately from your personal acct. however with a good software package such as quick books by intuit you do not need to have a separate bank account for each property. In fact I strongly recommend you do not have a separate account for each property. You should also be looking into doing your real estate business under a dba or setting up a LLC. If you don't have any accounting exp take a course
    1Reply
  • Mark Douglas
    OP
    Investor · Nashville, TN · Member since 2015 · 429 posts · 143 votes
    10y
    Originally posted by @Gary Ytreeide:

    It is good to keep your business account set up separately from your personal acct. however with a good software package such as quick books by intuit you do not need to have a separate bank account for each property. In fact I strongly recommend you do not have a separate account for each property. You should also be looking into doing your real estate business under a dba or setting up a LLC. If you don't have any accounting exp take a course

    Is there a rule of thumb for how many properties you should have before setting up the LLC?

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  • Mark Douglas
    OP
    Investor · Nashville, TN · Member since 2015 · 429 posts · 143 votes
    10y
    Originally posted by @Brett Youngster:

    Pretty much what Russel said. If they're in your name or a single LLC, then one account would be adequate. Good record keeping is the key.

     Definitely.  I want to keep everything clear and transparent so I know where I am at all times.  Thanks for the feedback!

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  • Max T.
    Investor · Philadelphia, PA · Member since 2015 · 3k+ posts · 3k+ votes
    10y

    You should have a separate account (or sub-account) for each tenant's security deposits.

    1Reply
  • Andy Luick
    Real Estate Investor · atlanta, GA · Member since 2013 · 456 posts · 237 votes
    10y

    It's really not the best idea to hold property in your personal name especially if you are a landlord.  The wrong "what-if" happens and the johnnie chorans of the world are redistributing your wealth.  Most landlords can just run one simple account and breakout the different properties individually.  If you're an agent or broker, depends on the rules of your state but if you are managing properties and holding security deposits, you might need a separate account for each property.  You'd have to check with the local real estate commission to see.

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  • Peter Mason
    Real Estate Agent · Largo, FL · Member since 2015 · 47 posts · 17 votes
    10y
    This may seem like common sense to most but it wasn't to me when starting out and commonly overlooked... Make sure whatever account you use to hold the deposits is a non-interest bearing account. If it isn't then you will need to return whatever of the deposit back to the tenant at the end of the lease plus whatever interest it made. Not that it'll be a lot but it is more of a pain in the butt to do.
    1Reply
  • Rick H.
    Lender · Greater LA/Orange County area, CA · Member since 2012 · 3k+ posts · 3k+ votes
    10y

    @Mark Douglas You'll need strategies for bookkeeping, rent collection, expense management, tax reporting, etc. 

    I have multiple properties held in multiple title holding trusts, primarily one Corp as trustee. For management, I one master corporate checking account for the rentals and a sub-account for rent collection purposes only. 

    Tenants have deposit-only privileges for rent deposits into their account. It's either in the account on the 1st or not. After receipt, I transfer money to main account which I use for paying expenses for all properties not managed by others. 

    For bookkeeping strategies, many people use the John Hire system. 

    For management, decide which us best for you:

    David Tilney, for higher end properties with responsible, low-maintenance tenants;

    Fixer Jay Decima, for lower end, high-maintenance tenants, especially section 8.

    Mike Cantu has the best of both blended into his system. His fleet of about 50 mid-range houses reflect 30+ years of refining what works for most investors who are neither dealing with luxury or low end rentals.

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  • Brianna H.
    Investor · Katy, TX · Member since 2015 · 112 posts · 24 votes
    10y

     I only have one rental currently, but my plan is to have a separate bank account for each house. Capital One 360 allows you to create up to 30 savings accounts...you can easily transfer money if needed, and keep better records / house of where your money is going.

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  • Mayank S.
    Investor · Herndon, VA · Member since 2015 · 185 posts · 74 votes
    10y
    I pretty much use one checking account for my properties. Have a free wave accounting software linked with that for accounting purpose. Also created savings accounts fir each property to keep expenses reserve separate from one master checking. I found capital 360 useful where I can have one checking and multiple savings. Transferring fund from one to other for any purpose with in one portal make it easy.
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  • Ethel Weaver
    Investor · Harrisburg, PA · Member since 2015 · 63 posts · 6 votes
    10y

    @Peter Mason,

    Why would you need to return the interest to the tenant at the end of the lease.  I am new and trying to understand what the correct process is.

    0Reply
  • Mark Douglas
    OP
    Investor · Nashville, TN · Member since 2015 · 429 posts · 143 votes
    10y
    Originally posted by @Mayank S.:

    I pretty much use one checking account for my properties. Have a free wave accounting software linked with that for accounting purpose. Also created savings accounts fir each property to keep expenses reserve separate from one master checking. I found capital 360 useful where I can have one checking and multiple savings. Transferring fund from one to other for any purpose with in one portal make it easy.

     Thanks everyone!!  I like the idea of one checking account splitting into multiple savings accounts ..

    0Reply
  • Mark Douglas
    OP
    Investor · Nashville, TN · Member since 2015 · 429 posts · 143 votes
    10y
    Originally posted by @Mayank S.:

    I pretty much use one checking account for my properties. Have a free wave accounting software linked with that for accounting purpose. Also created savings accounts fir each property to keep expenses reserve separate from one master checking. I found capital 360 useful where I can have one checking and multiple savings. Transferring fund from one to other for any purpose with in one portal make it easy.

     Thanks everyone!!  I like the idea of one checking account splitting into multiple savings accounts ..

    0Reply
  • Peter Mason
    Real Estate Agent · Largo, FL · Member since 2015 · 47 posts · 17 votes
    10y
    Originally posted by @Ethel Weaver:

    @Peter Mason,

    Why would you need to return the interest to the tenant at the end of the lease.  I am new and trying to understand what the correct process is.

    The deposit that you are holding for the duration of the lease is still the tenants money. That means a interest earned from that deposit is also the tenants money.

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  • Ethel Weaver
    Investor · Harrisburg, PA · Member since 2015 · 63 posts · 6 votes
    10y

    Peter thanks for responding.

    I found a website that will be helpful to everyone.

    http://rentlaw.com/statelist.htm

    I am in PA.  The law states if the security deposit is held for more than two years, you will have to pay interest.

    At the end of the third year the landlord must start giving you the yearly interest that is received from the bank, less a 1 percent fee that the landlord may keep.
    The landlord does not have to pay interest to you during the first two years of the lease. A landlord may put up a bond instead of depositing security deposits in an escrow account. This bond guarantees that you will get back your deposit with interest at the end of the tenancy.
    1Reply
  • Peter Mason
    Real Estate Agent · Largo, FL · Member since 2015 · 47 posts · 17 votes
    10y

    Thanks Ethel that's good to know.  I gues my lawyer put it that way and in the lease to simplify the whole thing. I never looked up Florida law about it, just took the lawyers word on it.  Heck that's why I paid her.

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  • Mark Douglas
    OP
    Investor · Nashville, TN · Member since 2015 · 429 posts · 143 votes
    10y

    That's an interesting point.  If I'm fortunate enough to get a stable 3+ year tenant, I don't think I'd mind giving up a few bucks of interest

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  • Carlos RoviraBusiness Member
    Investor · Miami, FL · Member since 2015 · 329 posts · 124 votes
    10y
    If property is titled under your name, you only need one account. If you title in an LLC, you'd need one account per LLC. When you get into the world of commercial loans, most banks nowadays are requiring you to open a checking account when they finance a property for you, so you'd end up opening a checking account at each financial institution that provides you with a commercial loan (i.e. Per property).
    0Reply
  • Cody Kauzlarich
    Des Moines, IA · Member since 2015 · 45 posts · 28 votes
    10y
    If you want to have systems in place with your first property then form an LLC. Also, I think it's probably more important when first starting out to hold properties in an LLC. The purpose of this is to protect your personal assets. If you only have a single property with little equity in it and are sued they will come after you for the remainder.
    0Reply
  • Chris Field
    Investor · Milford, CT · Member since 2015 · 200 posts · 69 votes
    10y

    I have a separate LLC for each multi unit site with its own check book and tax returns etc. The rest of my stuff is in operating LLC's that buy, sell, renovate, etc. They each have their own check book and CC's.

    For smaller stuff like SFH's I'd just group a bunch into an LLC, no idea what that a bunch is maybe $1m-$2m chunks.

    If you LLC each SFH and you end up with 50+ that's a book keeping nightmare.

    Your first line of defense for asset protection is good insurance, and simply making sure everything you do is in line with the law. You will get sued if your in this business long enough, even if your in an LLC. But most lawsuits are over minor stuff like tenants disagreeing over security deposits, property damage etc. Something expensive like a slip and fall should be covered by your insurance.

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  • Tim O'Chenko
    Real Estate Agent · Venice, FL · Member since 2016 · 2 posts · 0 votes
    8y

    RE: "Is there a rule of thumb for how many properties you should have before setting up the LLC?"

    It is wise to establish an LLC from the very beginning. You could wait until you have at least 3 properties and then form an LLC.

    The 'Rule-of-Thumb' used here in Florida is approximately 5-10 properties per LLC. I know some investors that hold one LLC per rental property, but that seems to be overkill to me.

    I personally hold 5 properties per LLC.

    Once you establish your LLC, you will then immediately deed your rental properties from yourself to the LLC.

    Hope this helps.

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