Hello, do you separate your cash flow into a separate account from your reserves for repairs, cap ex etc?
I would keep a separate bank account for rentals to ensure that it's separate from your personal. This is best for tax, asset protection, ect .
What I would do is meet with your accountant a couple times a year and discuss a projection for tax time, then you can plan to have 2 separate accounts if you wanted for repairs and for profit and auto-transfer funds to both. But ultimately I'd ensure it all hit one main rental account first.
Thank you, Natalie. We have one account specifically for rentals right now. You believe I should add another so I can separate them into one savings account for income and another (checking?) for expenses?
Typically, all of my rents get deposited into one account. All quick turn around properties go into another account. I take a percentage out of everything for taxes which goes into another account. From my rents, I pay myself each month. All remaining money accumulates in the main account from there and pays expenses, etc. It makes bookkeeping much easier if everything passes through one account
In total I have 4 main accounts that I use.
1. Operating account
property taxes and cap ex are paid out of this account also.
2. Tax account (IRS, not property)
3. Flip money account
4. Security deposits
I just set up accounts to use the Profit First model. This will be my first month with this method- we'll see how it goes!