What do you use for security deposit set ups?

Question

I am starting to grow my rental portfolio and am looking for online alternatives to hold security deposits. I currently use Wells Fargo and it’s a pain in the butt to keep going there in person and setting up a security deposit account. I wanted to see what other people were using to set up their security deposit accounts? hopefully something that can be set up online! I am in New Jersey.

Conor Brennan · Answer

There are online platforms like Rentable.com that will handle opening the correct accounts / all compliance tasks related to managing deposits

Account Closed · Answer

I keep all security deposits in one account. Are you not allowed to do that where you are?

Shawn Mcenteer · Answer

In New Jersey you must keep separate security accounts for each tenant, you cannot combine funds.  Do NOT set up 1 account for multiple units.  On top of this they all must be in interest bearing accounts.

@Cade Antonucci it frustrating but I am yet to find a legal on line way of doing this.  Banks so far have required me to come in person to open account.

Nathan Gesner · Answer

Why do you keep setting up accounts? The law allows you to put all the deposits in one account. Move the money in and out as tenants move in and out.

You need two accounts: checking and savings. If the properties are split into more than one LLC, then each LLC will need its own accounts.

Checking: collect all income here, then use it to pay bills. Pay the mortgage. Pay for maintenance. If you are setting aside funds for capex, taxes, insurance, or other expenses that don't occur monthly, transfer those funds to Savings each month and hold them there until it's time to spend them. You will receive the security deposit in Checking but then transfer it to Savings.

Savings: Hold the deposit here so it's separate from operating funds. You can also hold money for maintenance, capex, taxes, insurance, or other projected expenses. When a tenant moves out, transfer the deposit back to Checking so it's ready to apply towards expenses or refund the Tenant.

If you end up with excess funds in the Checking account, I recommend you transfer it to a third account designated explicitly for future investments. That ensures you don't spend it on other things and know exactly how much you have to spend on the next purchase. If mixed in with your deposits and reserve funds, you may accidentally spend money you shouldn't have.

Michael Smythe · Answer

@Cade Antonucci how many units do you have?

https://www.nj.gov/dca/divisions/codes/publications/pdf_lti/...

David Bennett · Answer

I use Enterprise Bank and Trust out of KS and everything I do with them is online.  They have a group that specializes in Property Management.  I can't post phone number/emails in the forum, but you could look him up easily enough if you wanted to. Jermee is very responsive.

Jermee Jones SVP, Specialty Banking Relationship Manager / Enterprise Bank & Trust12695 Metcalf Avenue / Overland Park, KS 66213