Accounting for multiple properties

6 Replies

I plan on putting a call into my tax preparer as well about this, but figured I'd ask you all to start:  My partner and I have 2 multi-families: a duplex and a triplex. We're still getting our feet under us and systems in place (and working on our first eviction - hooray) and my question is if you think we should have separate deposit/checking accounts for each building?  A little background:

These are B+ properties whose tenants (when they pay) typically pay in the form of a mailed cashier's check. We're trying to get them on board with bill pay/smart phone transfers - but as they're all inherited tenants we didn't screen them and the previous owner was fine with pony express. We have their deposits in a separate savings account.

Do separate accounts help at all come tax time or for other reasons? Or is it just an option/systems preference?

Keep things simple.  Many new investors think too much.  LOL  They make things harder on themselves and they end of spending lots of money.

With QuickBooks you are able to have one Business Bank Account, (or more if you want) but only one is needed per company. 

Then you have the Class Feature in QuickBooks, which allows you to link each property to income received and expenses paid out,  for each individual property, and this includes your office expenses.  So there is no need to have a bank account per property.  It is over-kill. 

QuickBooks keeps it simple.  But, because everyone needs a little bit of help with every software we purchase, we need to learn how to use it.  Once it is used, you are good to go, and everything is done quickly, and with very little time entering in your data per day or week or month.  

QuickBooks will  make it easy for your CPA to do your taxes, which of course saves you money. The more work they have to do to figure out what you're doing, the more they will charge you.  

Nancy Neville

I do not know what QB has to do with the question asked.

Questions:

  1. Are both properties under one entity or two entities?
  2. Are both properties under personal names (you and your partner)? 

Possible Answers:

If you have it under ONE entity, you will only need 1 Operating Checking Acct and 1 Savings (tenant security deposits).

If you have it under TWO entity, you will need 2 separate Operating checking acct and 2 Savings.

If they are under both personal names, you will only need 1 Op Checking Acct and 1 Savings.

This is for keeping good accounting records so year-end your Tax Accountant won't be hassling you for this and that.

Originally posted by @Simon W. :

I do not know what QB has to do with the question asked.

Please provide the following answers:

  1. Are both properties under one entity or two entities?
  2. Are both properties under personal names (you and your partner)? 

If you have it under ONE entity, you will only need 1 Operating Checking Acct and 1 Savings (tenant security deposits).

If you have it under TWO entity, you will need 2 separate Operating checking acct and 2 Savings.

If they are under both personal names, you will only need 1 Op Checking Acct and 1 Savings.

This is for keeping good accounting records so year-end your Tax Accountant won't be hassling you for this and that.

 Thanks Simon. To answer your questions:

1- both properties are under 1 LLC (of which we are a part)

2- each of us is carrying a mortgage on the respective property.

Since both properties are under 1 LLC you only need one bank account and one trust account. The trust account may have to conform to special rules according to your state and local laws and regulations. If you are in the state of Washington you do have to have a separate bank account for security deposits. Here is a link that can be useful for landlord/tenant laws in the state of Washington (https://www.landlordology.com/washington-landlord-...).  Disclaimer:I am not a lawyer and this is not legal advice.

Originally posted by @Christen G. :
Originally posted by @Simon W.:

I do not know what QB has to do with the question asked.

The one bank account per property question is arising from an underlying need --- you realize that you need to be able to track income and expenses per property, but don't know the best tool for doing that.  Follow Nancy's advice.  Use QB because you are going to want to be able to track income and expenses per property.  It will make tax time, and dispersal of profits much easier down the road.  It will also make it easier to sell individual properties as time goes on -- you will want to be able to show a prospective buyer the actual financials of a single property.  It will make future financing easier -- you will be able to easier run financial reports and show a lender that you run your business like an actual business.

QuickBooks is easy to learn with the video tutors cheaply available on Amazon.  Nancy also has a book for sale.  I struggled through and got my QB set up before finding Bigger Pockets, but if I had to do it again, I would use Nancy's book.

With QB, you can email monthly invoices to your tenants. I personalized our invoices to include our LLC's logo and renamed the invoice "Rent Due". This gets emailed on the 25th of every month. I had read somewhere that LLs who invoice tenants are more likely to get on-time rents. It works for us. We have had 100% on time rents for our class B 6 plex in 2017. It adds a level of sophistication and professionalism that sends a message to the tenants that we mean business.

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I know the use of QB. I also use Yardi Voyager, but the question asked wasn't about expensing things in the correct category. 

This wasn't a question for anyone to promote their product. 

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