I recently closed on my first investment property in my name and will be renting it out soon. What I would like to hear from you is a.) what banks/software etc you initially chose to use for tenant deposits and b.) the type of accounts you set up to collect rent and if you use an escrow account for the security.
OK, second part:
I have been reading about the pros and cons of forming an LLC and using a business checking account. At this point I am less excited about the liability protection and more excited about building viable income history. My questions a.) will tenant deposits into an LLC checking account (does not hold title) be considered business income? If so, b.) will this account work in my favor on future loans?
My goal in 2-3 years is to be able to double my efforts in purchasing power by utilizing my personal credit and business credit.
Maybe I have it all wrong! Just looking for some good feedback from anyone that can help. Thanks in advance!
First things first. Congratulations on your purchase.
In Florida the security deposit must be held separately from any other funds. There are a few other requirements, so make sure that you are following them.
The easiest way to do this is to hold the security deposit in a non interest bearing account. Have the tenants directly deposit into a savings account that you then move to a checking account (either by sweep or manually ) to pay for everything related to the property.
For the first few properties it's easiest to set them up this way. You also get a really good feel for how a property runs, and what the accounts should look like.
As far as an LLC goes, again for the first few properties, keep it simple. If you haven't taken the loan as an LLC, transferring them to an LLC can be problematic. Just insure for the loss risk and go from there.
Once you get a few properties under your belt and have been running them, you can then start to approach local banks about moving to the next level of business accounts, LLC formation, borrowing and the like. Keep looking into it, learning and asking questions so you are ready when it comes time.
Hope that helps.
Download and print Chapter 83 Part II
You need to know these and stick by them.
You have 30 DAYS to notify where deposits are held. They must be held in a FL banking institution. Furthermore, you must notify the tenant within 30 days. I do NOT like interest bearing accts because you must return any interest earned to the owner of the money. Remember, it is NOT your money.
I ALWAYS have tenants sign a statement to this effect"
Deposits are held in a non-interest bearing account, xxx address, FL.
I don't know the legality of holding them in an LLC unless the property is owned by that LLC.
Anything else I can help with just ask.
Thank you for your input!
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