Flipper/Rehabber · Carrollton, TX · Member since 2013 · 165 posts · 71 votes
Hello BP World,
I am buying my second property which actually is a duplex. (Congrats). Thank you. I have a separate bank account for my first rental because I am taking the advice from Brandon's book on growing your landlord business. It seemed like a great idea but now that I will have another two doors, with two tenants, I will have to get two new bank accounts? I guess I could just do one bank account for the entire duplex. Regardless, as I grow my rental portfolio, it seems very daunting to keep opening up bank accounts for each property address. Well, not for me so much, but my wife. She handles all financials.
What are you thoughts? Should I continue to make bank accounts for each rental or just keep it all in one bank account? Am I over thinking it? Should I get a debit card for each bank account? I get the idea and I like it to keep everything separate i.e. deposits, rent checks, paying for maintenance etc. I am torn and need yalls help. Thanks in advance
Investor · Douglasville, GA · Member since 2014 · 313 posts · 181 votes
10y
No matter how many properties you end up owning, you only need 3 accounts. Like @Tyler Hodgson was saying. one checking account to write all your business rlated checks from. A savings acoount to stora all that money you're going to make, and a seperate savings account for secuity deposits. You don't want to commingle the security deposits with your working capital.
Quickbooks is great for keeping track of all your properties. you can have a million dollars in your account, and quickbooks will tell you which properties generated which portion of that cash, and which properties are a drain on your money.
Investor · Flower Mound, TX · Member since 2016 · 245 posts · 192 votes
10y
Three accounts. Same bank. One checking (for operations) and two savings (one for security deposits and one for leftover savings)
Use quickbooks (or another accounting/bookkeeping software) to track all of your inflows and outflows by property. I like quickbooks because you can classify transactions based on the property and run reports that show each property and totals too.
Flipper/Rehabber · Carrollton, TX · Member since 2013 · 165 posts · 71 votes
10y
Three accounts meaning one for my 1st rental, one for my one side of duplex and one for the other side? Or are you just saying one checking for ALL MY RENTALS and 2 savings accounts for ALL MY RENTALS? Thanks for the input and I will check out quickbooks.
Investor · Coral Springs, FL · Member since 2012 · 54 posts · 26 votes
10y
The answer depends on how you are setting up the ownership interests. There are benefits to keeping things separate although combining accounts is a greater convenience. Also check with your accountant and attorney as their are tax and legal liability implications here.
Investor · Douglasville, GA · Member since 2014 · 313 posts · 181 votes
10y
No matter how many properties you end up owning, you only need 3 accounts. Like @Tyler Hodgson was saying. one checking account to write all your business rlated checks from. A savings acoount to stora all that money you're going to make, and a seperate savings account for secuity deposits. You don't want to commingle the security deposits with your working capital.
Quickbooks is great for keeping track of all your properties. you can have a million dollars in your account, and quickbooks will tell you which properties generated which portion of that cash, and which properties are a drain on your money.
Rental Property Investor · Olympia, WA · Member since 2014 · 777 posts · 744 votes
10y
@Tim Ball I separate each entity into its own checking and savings accounts (mostly in separate banks). I have 10 units in 1 bank, 11 in another, 24 in another, and 42 in yet another! Each entity has a checking and savings account.
If they are all in your name put them in 1 bank. If you open an LLC for a partnership create separate accounts and never comingle.
San Jose, CA · Member since 2015 · 4k+ posts · 3k+ votes
10y
Some states require you to keep tenant deposits in separate accounts and pay them interest, etc.
But, there's really no need to separate the properties into different bank accounts. You just need to do separate accounting for your purposes. Spreadsheets, filing receipts, etc.
If your spreadsheets have the receipt dates or check numbers, etc., you can always go find the receipt or check or deposit that you need later. I think it would be more cumbersome to have separate accounts, and they'd probably be more expensive, too, if there are fees.
San Jose, CA · Member since 2015 · 4k+ posts · 3k+ votes
10y
As far as accounting, I just made a simple Excel spreadsheet for the 25 units I managed, with tenant info each month - each month on a separate worksheet with a running income balance. It showed check numbers, amounts, if anything was owed. It showed what their deposit amounts were, when they moved in, any notes, when rent was raised and by how much.
It didn't include the owner's expenses, just income and tenant info and notes. But, we could just grab the monthly spreadsheet and see pretty much everything we needed to know about any tenant's history and account at a glance.
And once a year, I did a market review and included a column on my spreadsheet of what I thought we could be getting for a unit, and what the tenant was actually paying. This was used to determine rent raises, along with the info that was already on there about when and how much their rent had been raised in the past.
I found Quickbooks to be too cumbersome when using it to manage my daughter's property. I found the time it took to do the constant data entry was a pain. I'm of the old school of throw it in an accordion file for the month - receipts, etc. - then sit down once a month and add it up in a ledger. I don't like the time it takes to go through a software's learning curve. Which is why I have sworn off Microsoft Windows for the rest of my life. But, I digress...
Most folks here are on point. Real Estate can be confusing enough as it is, and unless you plan on holding alot of cash, keeping separate accounts for each property can be cumbersome and expensive (remember that many banks will charge a monthly maintenance fee if you don't maintain above specific balances). I have three accounts like most other posters. A checking for operations, and two savings, one for reserves and one for tenant deposits (in Oregon I am required to keep them in a separate account)
I started with separate accounts for each property, but after property #5 I realized it was more hassle than it was worth.
Investor · Cathedral City, CA · Member since 2014 · 481 posts · 170 votes
10y
In property management systems with accounting, a individual rental property can be assigned to a individual bank in the General Ledger accounts. These individual accounts do not need to be real separate bank account, rather GL accounts.
No matter how many properties you end up owning, you only need 3 accounts. Like @Tyler Hodgson was saying. one checking account to write all your business rlated checks from. A savings acoount to stora all that money you're going to make, and a seperate savings account for secuity deposits. You don't want to commingle the security deposits with your working capital.
Quickbooks is great for keeping track of all your properties. you can have a million dollars in your account, and quickbooks will tell you which properties generated which portion of that cash, and which properties are a drain on your money.
Sounds pretty complicated to me. Ok so you are saying a savings acct to store "all the money you will make" and another for security deposits. What about things like PITI payments and maintenance fees, those come out of a separate business checking account for that property? That acct is going to go to $0 very fast so you'll keep having to top it off from your personal checking and savings accts, which just adds many extra steps.
Whats wrong with having the tenants deposit rent into the same checking account which is used for paying the recurring expenses on the property?
Investor · Philadelphia, PA · Member since 2015 · 3k+ posts · 3k+ votes
10y
I'm throwing my vote for separate accounts for each property. Two accounts for each property: One for security deposits and one for income and expenses. Its a little bit of work on the front end setting it up but then you don't have to do any data entry. Just make sure to use the right debit card/checkbook when making purchases/payments, and make sure to deposit rents in to the correct account.
I have them all at the same bank.
I also have a separate online savings account for CapEx reserves. Each rental property (income/expense) account auto deposits a certain amount (based on the systems in that property) into my general CapEx fund. I've never had to draw on it yet but its nice to know that its there, and it has grown substantially in a short amount of time.
If you do this you keep all the rentals totally separate from your personal funds. Having a W2 job I prefer to keep my expenses within that income. At the end of each year I see that my rental accounts have grown and since I am budgeting for CapEx I like to give myself an annual distribution.
It also makes things easy for my accountant as I just provide him with bank statements. They double as profit and loss reports and makes his job easy.
Investor · Douglasville, GA · Member since 2014 · 313 posts · 181 votes
10y
@Atwan Kwan I'm not sure how everyone else does it, but I transfer 15% of every rent payment into savings every month. I seeded the account with 5K as my emergency fund. The 15% keeps it funded for capex and emergencies. My checking account is my working account. Everything else goes there to pay contractors, insurance, and taxes. When I need capex money, I transfer from savings. When I refi one of my properties, it will also be used to pay the mortgage.
Specialist · Honolulu, HI · Member since 2014 · 1k+ posts · 1k+ votes
10y
Its interesting. From all the replies, we can see that everyone does this differently. I guess that means there us no right/surefire/best way to do it.
what is the rule to amount of money stays in operations (checking),
how often/when do you tranfer
I think it's up to you, really. In CA we don't have to pay interest on security deposits or keep them in separate accounts. The owner I worked for had a separate local account so it would be easy for me to take care of the deposits and any discrepancies with deposits for the property I managed.
But, he withdrew that money into his own main account, where he put all of his other deposits from his other properties.
Once in a while, the bank will screw up and not credit a deposit, so you need to be prepared for that. It only happened a couple of times over 8 years, but we're talking deposits of around $20,000 - $25,000 (depending on the year, etc.) for the building with the 25 units I managed.
The bank resolved everything, but I guess you might want to keep in mind the possibility of a deposit not crediting, and having to be reconciled - before you withdraw any amount that might cause some other payment to bounce.
I keep all funds except for my reserves (10% capex, 8% vacancy, and taxes/insurance) in my checking, as I see a significant amount of money going in an out monthly. All my reserves are set to automatically transfer several days after I get my rent check from my PM. I also automatically withdraw my cash flow the same date as reserves; so all that is left in the checking account ar emy mortgage and utility payments. After going through the rigmarole with a number of lenders, I like to keep my books as clean and simple as possible. When I am working with a lender to finance a new property, it's alot easier to show my accounting with the minimal number of accounts, and transfers between accounts.
Investor · Douglasville, GA · Member since 2014 · 313 posts · 181 votes
10y
@Atwan Kwan. I use a separate savings account more for my own personal reasons than accounting reasons. Having my 5K emergency cushion, in there reminds me not to touch that for other things. Having t15% of rents going to that account gives me a quick glance at the ebb and flow of my capex dollars. I could see all this in quickbooks, but I like having it separated.
My checking/ops account will actually get pretty big at times. When I refi or sell a property. that money goes there. Only a portion of the money collected from rents goes to the checking account.
Rental Property Investor · Olympia, WA · Member since 2014 · 777 posts · 744 votes
10y
@Atwan Kwan @Account Closed with interest bearing checking accounts I don't worry too much about pushing money over to savings. But I generally keep at least 2x my total monthly expenses in my operating fund to make sure I have adequate funds for unexpected events (had to dig up a yard this week to repair a water line - on a newer home!).