Investor · Omaha, NE · Member since 2019 · 130 posts · 139 votes
Hello, I am a newer member to BP, but am looking forward to learning as much as I can from all the experienced investors here. I currently have 6 rental properties and am curious to know how others with multiple properties handle banking.
1. Do you have all your properties rents deposit into 1 bank account or have them go into separate accounts?
2. How do you handle reserves for each property when using 1 bank account? Do you have a general rule such as 3-6 months reserves for each property and then try to maintain that balance times the number of properties if you are using just 1 bank account?
3. Would you use this same bank account that rent and reserves are deposited into to also draw for remodeling other properties or recommend a separate bank account that is used just for these remodeling draws for properties that you buy and rehab before renting? Most of the properties I am now looking for require some updates before renting so am curious what the best way to handle banking for these rehabs would be from an accounting standpoint.
Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes
6y
14 properties for 20 years. My largest expense was $2300 for an ac unit 10 years ago and $2600 for another unit 2 years ago. Probably 12 water heaters at $1,000 a piece, another 12 appliances all under $1,000. I would say the average year is $3-5k worth of repairs. With $20k per month in rent, $10k per month in income. It just isn’t an issue once you have more than 4 or 5 properties. 1 property is the most dangerous position to be in.
My average tenant stays 4-8 years.
I have 2 x 30 year mortgages because it made the payments sub $600 total PITI I have 2 x 15 years because they were my largest loans and I got a lower interest rate and tons of saved interest. I hate owing money and I didn't need the income so I've rolled all the profits back in to paying them off. I have 10 paid off properties and I'll pay off 1 in 2 years, another 2 years after that.ill probably leave the last 2 as they are maybe $100k
I have a property manager for all but 2 of my properties 8% of rent is my only PM cost other than $150 renewals and $300 new tenant commissions for realtors
Like I said, I understand if you have 10 or 20 year asphalt roofs ($5-7k every decade or two) but I’ve spent less than $500 total in 280 “property years” on roof repairs. I’ve spent less than $1,000 total on heating (a couple igniters and a thermocoupler). Close to a zero on exterior painting. Your mileage outside of the southwest will vary.
Ps. I sold my primary last July, the first property I’ve ever sold at 51 years old. I moved in to one of my rentals that my wife I will live in for 2 years and then sell with the partial primary exemption. I’ll then move in to my out of state rental on Lake Minnetonka in MN. (They have 21 months left on an 8 year lease.)
Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes
6y
12 in state rentals and 1 out of state. 1 account for everything except my MN rental requires their security deposit be held separate so I opened a CD with their deposit.
Once I had 6 rentals I stopped using reserves, I’ve never had repairs exceed my monthly rental income. (Actual income, not rent.) your experience may differ if you have older properties, asphalt roofs, or other high maintenance aspects.
Quicken is overkill for personal and rental bookkeeping but I’ve used it for 20 years starting with personal budgets. I mainly use it for comparisons of year over year.
12 in state rentals and 1 out of state. 1 account for everything except my MN rental requires their security deposit be held separate so I opened a CD with their deposit.
Once I had 6 rentals I stopped using reserves, I’ve never had repairs exceed my monthly rental income. (Actual income, not rent.) your experience may differ if you have older properties, asphalt roofs, or other high maintenance aspects.
Quicken is overkill for personal and rental bookkeeping but I’ve used it for 20 years starting with personal budgets. I mainly use it for comparisons of year over year.
every property at one point has an unexpected huge expense and especially if you have several properties it can be a lot of money, what would you do in that situation?
Investor · Omaha, NE · Member since 2019 · 130 posts · 139 votes
6y
@Bill B. Thanks for the reply. When you had those 6 rentals were they all on 30 year mortgages to maximize cash flow? What %'s are you calculating for vacancy, maintenance, and capex in general? Now that you are at 13 rentals do you self manage or use a PM company?
New to Real Estate · Columbus, OH · Member since 2018 · 41 posts · 30 votes
6y
We've only ever utilized unique bank accounts for separate partnerships (or other legal entity), or if a separate account is required for deposits payable. In this example if we had 20 properties owned by 6 separate partnerships, we would have 6 separate bank accounts plus an required accounts for holding deposits payable. Your accounting software and a solid budget should take care of the bookkeeping and planning associated with having multiple properties utilizing the same bank account.
Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes
6y
14 properties for 20 years. My largest expense was $2300 for an ac unit 10 years ago and $2600 for another unit 2 years ago. Probably 12 water heaters at $1,000 a piece, another 12 appliances all under $1,000. I would say the average year is $3-5k worth of repairs. With $20k per month in rent, $10k per month in income. It just isn’t an issue once you have more than 4 or 5 properties. 1 property is the most dangerous position to be in.
My average tenant stays 4-8 years.
I have 2 x 30 year mortgages because it made the payments sub $600 total PITI I have 2 x 15 years because they were my largest loans and I got a lower interest rate and tons of saved interest. I hate owing money and I didn't need the income so I've rolled all the profits back in to paying them off. I have 10 paid off properties and I'll pay off 1 in 2 years, another 2 years after that.ill probably leave the last 2 as they are maybe $100k
I have a property manager for all but 2 of my properties 8% of rent is my only PM cost other than $150 renewals and $300 new tenant commissions for realtors
Like I said, I understand if you have 10 or 20 year asphalt roofs ($5-7k every decade or two) but I’ve spent less than $500 total in 280 “property years” on roof repairs. I’ve spent less than $1,000 total on heating (a couple igniters and a thermocoupler). Close to a zero on exterior painting. Your mileage outside of the southwest will vary.
Ps. I sold my primary last July, the first property I’ve ever sold at 51 years old. I moved in to one of my rentals that my wife I will live in for 2 years and then sell with the partial primary exemption. I’ll then move in to my out of state rental on Lake Minnetonka in MN. (They have 21 months left on an 8 year lease.)
Investor · SC NC, VA · Member since 2020 · 1k+ posts · 756 votes
6y
One checking account for 53 doors, 7 properties. Budget is $1000 each door for maintenance. We also have to give interest on security deposits but at .0025 per year it’s insignificant. Accountant downloads from bank account into quickbooks every couple of weeks.
I started with separate bank accounts it helped keep my records on order, but what a pain. I went to one account that serves at the management account and one account for security deposits. I use quick books to separate the classes/accounts. Those separate bank accounts were great when learning, but it is so much easier with one you just need to track things. Keep a balance in there for an emergency fund. I always tried to keep 6 months in reserves. Now I keep 20K for any emergencies.
Property Manager · Denver, CO · Member since 2016 · 107 posts · 43 votes
6y
@Satyam Mistry Have 1 bank account that rent goes into for all properties, and 1 that all security deposits are kept in. You do not need a separate account for individual properties in any state I'm aware of.
Rental Property Investor · Big Sandy, TN · Member since 2013 · 147 posts · 91 votes
6y
Get good relationships and meet the actual repair people. I spent 15k by paying retail for plumbing, HVAC, and electrical on my houses before finally getting to work directly with them as freelancers off the clock. Everything cuts to about half price if you can work with people off the clock.
I market the hell out of my listings as soon as I know it's coming. I show them before they are even complete, but lots of people like to see you spend the money. It shows that you'll make the repairs later down the road.
I average 3-10 days vacancy on a turn and 3-4 weeks on a total remodel. A less than 5% vacancy is definitely doable even in a small market if you push it and run like a business and not just an investment.
Investor · Omaha, NE · Member since 2019 · 130 posts · 139 votes
6y
@Max T. Hello Max, using a separate account just for reserves/capex is interesting that too making it a savings account rather than checking so it can earn some interest as you will not be drawing from that account too frequently. Am curious as to how you deposit into this reserve account from the cash flow that is going into your regular checking accounts for your properties? Do you deposit a certain % amount of cash flow into the account on a fixed basis say once every month or quarter?
@Kenneth Garrett Hello Kenneth, so this one checking account that is used for regular rent deposit and expense is the same one you use to draw for reserves/capex when needed? How about properties that need a $10-20k rehab at some point, if you are not financing this amount would you draw from that same checking account as well? I am currently using Cozy to update and reconcile expenses for each individual property.
If it’s repair for a unit it would come out of the management account. That’s the purpose of the account. You then can categorize it by classes to track the account and it’s expenses.
Hello, I am a newer member to BP, but am looking forward to learning as much as I can from all the experienced investors here. I currently have 6 rental properties and am curious to know how others with multiple properties handle banking.
1. Do you have all your properties rents deposit into 1 bank account or have them go into separate accounts?
2. How do you handle reserves for each property when using 1 bank account? Do you have a general rule such as 3-6 months reserves for each property and then try to maintain that balance times the number of properties if you are using just 1 bank account?
3. Would you use this same bank account that rent and reserves are deposited into to also draw for remodeling other properties or recommend a separate bank account that is used just for these remodeling draws for properties that you buy and rehab before renting? Most of the properties I am now looking for require some updates before renting so am curious what the best way to handle banking for these rehabs would be from an accounting standpoint.
(1) Each multifamily building has its own bank account. It's written into the lease that tenants must deposit their rents into that particular account (either by online bank transfer or by walking in a check/cash); I do not collect rents directly, nor would I if anyone asked. Systems don't work if there are any exceptions. Each tenant living in a building has their own unique rent amount, so even if they do not leave a notation with the rent payment, I know whom paid the rent based on the amount alone.
(2) I keep reserves in an interest-bearing money market account at the same institution that holds the rent payment/operational checking accounts for the properties. At any given time, there is about $5-7K in each building's operational checking account. I pay all regular building expenses out of these accounts. I keep the expenses in virtual "buckets" via an excel spreadsheet, so I know where my money is being spent. Here are the monthly allocations (+10% cushion for vacancy): taxes (TTM/12), vacancy/turnover 5% GSR, water/sewer/trash (TTM/12), repair/maintenance (10%), cap ex (3%-goes to money market monthly), CAM (lawn/snow) (3%), insurance (TTM/12), debt service (actual), property mgmt (12% - although I self manage). Any time a "bucket" gets too full, I remove some to the money market. My goal is to have 3 months GSR as a reserve, but like others have said, the more properties you have, the less reserve per building you will need because you can mitigate any huge expenses with the collective pool.
(3) I would not keep renovation funds in a bank account. You are losing to inflation each month. I would instead (and do) use a LOC to draw from as needed either for new acquisitions or renos, then service that debt with the rental revenue. All the profit left over from operational costs goes against the LOC to increase my available funds. It's still essentially liquid and that money sitting in there is offsetting the interest.
Investor · Omaha, NE · Member since 2019 · 130 posts · 139 votes
6y
@Wesley W. Thanks for your insight. For an investor doing primarily single family homes would you recommend they use 1 checking account for rent deposits and regular expenses such as mortgage, interest, property taxes, and maintenance and then use 1 savings account for reserves that get drawn from for bigger ticket capex items? The reserves account would then also get fixed monthly deposits from portion of cash flow from rent?
Rental Property Investor · The Vampire State · Member since 2013 · 2k+ posts · 2k+ votes
6y
@Satyam Mistry Yes, I might use 1 account for every 3 or so SFR. Each account I have collects a bit over 3K in rents each month, and I'm comfortable with that volume. More than that, especially involving multiple assets, would get a bit more confusing to me. Also, when the properties are at various stages of repositioning, I changed the percentages based on the need. Now that they are all stabilized they all have similar expenses so the formulae are the same.
Hi Satyam. I Manage 9 multi-family properties, including one for a friend.
These properties have gained a lot of appreciation over the years and several years ago, I decided to sell some ownership interest in several of them.
Each property has been treated as it's own business with it's own business Checking Accounts.
When it came to selling a portion of several buildings in the portfolio, it was very easy for me to keep everything separate, add new partners onto the Operations account, produce tax return numbers, etc.
So you can imagine if you have several different partners in several different buildings. For example: - building 1: Me, Partner 1, Partner 2 - building 2: Me, Partner 2, Partner 3 - building 3: Me, Partner 2, Partner 4 etc.
By keeping everything completely separate, audit trails can easily be set up and the integredy of the Accounts are maintained.
Each Building Partner can have read only access to the Accounts so they can monitor it for excessive expenses, fraud, etc.
In fact, this helps build confidence in me as the manager for the Buildings amoung all 10 of my Partners.
Is it difficult? NO! If you use one bank, when you log in, you should see all of your bank accounts for each property.
In regards to rent collections, if you use a rent collection website like https://Avail.co (that's the one I use), you can specify the Bank Account where your rents are to be deposited.
When it comes to paying expenses, all the City (Property Tax, Registration fees, etc.) and Utility expenses (Heating, Electrical, etc.) are automated on each of these County and Utility website. For instance, the County Website allows me to have a list of properties that I manage and which bank account to withdraw the property taxes from. Same for the Electric and Gas bills. It really makes paying expenses on a per Building basis really easy.
When it comes to paying for a specific fix, say a plumber that fixes a Boiler for a Building, I generate a Maintanence Case in my PM Software (this is my own software I created) for that building and Unit. When I get an invoice from the Plumber, I update my Maintanence Case to include the Invoice, then pay my Plumber via electronic payment (normally Zelle) to his Account.
The money is withdrawn immediately from the Building's Operations Account via Zelle and deposited immediately to the Plumber's Account.
I don't write checks anymore. I find that the time savings of doing everything electronic is worth for me to teach my Contractors to use electronic payments and track it that way. They do it because they get paid immediately once I inspect the work, which can be done via pictures or a Camera that I have installed if not in person. If I see the work in person, I can actually pay the Contractor via my Bank App right then and there.
There will be some common expenses, however. I have a Bank Account for common Expenses (such as the monthly subscription fee for the rental collection, document signing and other software). Because all the Property Bank Accounts are in the same bank under a single log in, it's easy for me to automate these monthly transfers to the common account so that the subscriptions are paid.
What this also does is allows me to decide how much each property should pay for a common subscription.
For instance, I pay $15 per month for DocuSign (used to get all the paper work signed electronically). Just to keep the numbers simple, let say I have 30 total units in the 9 buildings. On a per unit basis, that works out to be $0.50 for the DocuSign monthly subscription PER APT.
So for Building 1, which is a 4 Unit Building, I have a $2 ( 4 x $0.50 ) automatic transfer to the Common Expenses Bank Account.
For Building 2, a 3 Unit Building, only $1.50 ( 3 x $0.50 ) is transferred to the Common Expenses account, etc.
All of these are automated.
I'm not sure if my style of Management is considered complicated to most of the Managers here, but it's so easy for me to Add or substract Partners in my Portfolio, run reports (for instance, what are the utility bills for the year across all properties to see if any is out of whack), generate tax return numbers for all the partners even if they own different buildings at different percentages, etc.
I guess because I buy multi-million dollar properties, I always envision having multiple partners, which then leads me down this road of having a very flexible but sophisticated way to handle the Operations.
Investor · Omaha, NE · Member since 2019 · 130 posts · 139 votes
6y
@Llewelyn A. Thank you for your detailed reply! I agree if having multi family properties it makes sense to have a different bank account for each of them. I am currently primarily doing single family homes so at some point when the portfolio increases in size may look into grouping some together maybe that are in a particular neighborhood and using the same account for those as I can imagine that once you get to a certain number of properties using just 1 account may be confusing from an accounting standpoint or it may still be ok if other accounting softwares are in place. What is your opinion on accounts for single family homes?
Rental Property Investor · MI · Member since 2019 · 192 posts · 205 votes
6y
@Satyam Mistry
I now have 7 properties and 5 of them have its own LLC and bank account so that they are protected from each other. I self manage. I'm very organized and my husband does the repairs. If it's a repair that he cannot do, we have personal relationships with a handyman, plumber, and electrician.
Last year I had a major plumbing repair where I had to borrow money from another account. But will pay it back at the end of the year.
Rental Property Investor · Douglas County, MO · Member since 2014 · 1k+ posts · 1k+ votes
6y
Hubby and I own 12 houses, and I would go crazy if I had a separate bank account for each. Well, actually, the houses are owned by 3 separate LLCs. They are managed by a 4th LLC, which owns no real estate. Those 4 are owned by what you might call the "master" LLC.
In spite of all that complication, we do just fine with 3 bank accounts. One for security deposits, one for the managing LLC, and one for the master LLC.
All payments are received by the managing LLC and deposited into one bank account. All bills are paid from that account. Reserves and funds set back for taxes and insurance are simply a matter of bookkeeping entries.
As rents are received, they go into the "operating fund". Each month a certain amount is moved from the operating fund to the "insurance fund" and another amount to the "tax fund". At the end of the month, anything above $xxx in the operating fund is moved to "reserves".
In reality, all the funds are in one account at the bank. The money is simply designated as being in a particular fund in QuickBooks.
Every quarter, anything above $xxx in the reserves is transferred from the managing LLC bank account to the master LLC bank account. This is an actual movement of money from one account to another at the bank.
At any moment, a glance at the accounts in QB tells me how much money is set aside in the various funds and how much is available for regular monthly expenses. It is very simple to use, though rather complicated to explain!
Rental Property Investor · MI · Member since 2019 · 192 posts · 205 votes
6y
You’re doing a good job!!! You asked us how WE do our accounts. In no way would I give you advice on how you should do yours. Im on this forum for conversation. I also wouldn’t make someone feel belittled because he/she does something different from how I do it. I’m very comfortable on how I’m managing my rentals as far as my LLCs and bank accounts go. We all have different ways of managing our rentals but our main goal is to make money. What works for one may not work for others. You do what works for you and be happy with your decision like I am 😊.