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.)
Chelsea, MI · Member since 2019 · 50 posts · 52 votes
6y
@Satyam Mistry
I use Ally Bank to hold security deposits and a reserve account. They recently released a new feature that lets you create “buckets” within an account. You can then separate and divide up security deposits by property within an account.
I love your idea of tracking "buckets". My questions is why you do it in Excel? I assume there are dedicated property management software packages to do it.
Question for everyone else: If you use property management software (Buildium, Yardi, etc), what is your experience tracking bank account per property?
Investor · Dallas, TX · Member since 2019 · 74 posts · 28 votes
5y
@Eric Wilkinson - knowing you are using Ally Bank for your security deposits, are you also using their Checking account do rent collection? How are you then also managing expenses for maintenance? Still through an Ally Account? Specific “company” credit card?
Rental Property Investor · Chicago, IL · Member since 2015 · 275 posts · 271 votes
5y
@Satyam Mistry - At this point between my business partner and I we have 240+ Single family homes and a few buildings that are 2-4 units. Per LLC or S corp 5-7 properties in each entity. All the revenue collected goes to the bank account for that entity. The idea is to have about 800 to 1.2 million in assets in each entity. Each property has a million dollar coverage and on personal there is a 4 times the umbrella in relation with net worth. This provides good asset segregation, also makes things easy for accounting.
2. Reserves are held as follows. 1 years net cash flow is never touched so there is at least 6 month reserves. I decided to do this because early on when I started I did not have a lot of capital so wanted to stay conservative. With all the additional cashflow we either pay off the properties in the portfolio or buy more free and clear houses.
3. The way we do it is we use LLC to set up the rehab. Meaning we spend the money from that LLC during construction. Then at the time of refi once the house is rented we reimburse the LLC that we spent the money from. The reason for this is that if you write checks for the LLC or S corp that hold your rentals it will become difficult to separate between the initial setup cost and on going maintenance.
Chelsea, MI · Member since 2019 · 50 posts · 52 votes
5y
@Daniel T Stockman
For my rental properties I have been trying to follow the bank account method outlined in the book Profit First.
I have a business checking account at a local bank for all my expenses along with a credit card I use only for these expenses. I use the Stessa app to track expenses and have those accounts tied to it.
In Ally, I have 3 accounts that I have connected to my operational checking. One is for security deposits as mentioned. Another is for maintenance and CAPEX and vacancy. Every month I send a % of rent to that account. This builds and maintains my reserves. The last account is my profit account. Every month I send a % of rent as my cash flow profit. It goes into this separate account to protect this profit.
I use Ally to earn more interest but to provide distance from my operational checking. This is a technique recommended in the book I mentioned.
Property Manager · Fargo, ND · Member since 2016 · 51 posts · 10 votes
5y
@Andrew Holmes with your setup of $1mln per LLC and guesstimating $250k per house you end up with 60 some bank accounts? Your team can't be carrying 60 debit cards for maintenance. How do you make sure everything goes in its own account?
Property Manager · Oklahoma City, OK · Member since 2019 · 577 posts · 351 votes
5y
I own seven rentals and manage four others. I run everything through one dedicated account. If there is a big expense on one property, you can use the cash flow from the other properties. And, in my opinion, the entity functions more like a business than 11 separate businesses. Always make sure to have enough there for tenant deposits though.
I own seven rentals and manage four others. I run everything through one dedicated account. If there is a big expense on one property, you can use the cash flow from the other properties. And, in my opinion, the entity functions more like a business than 11 separate businesses. Always make sure to have enough there for tenant deposits though.
Though borrowing works for self-managed properties, I don't think its ethical to borrow from cashflow from other properties if one manages for others. It breaks the fiduciary duty of property manager to the owner whose funds are borrowed.
Property Manager · Oklahoma City, OK · Member since 2019 · 577 posts · 351 votes
5y
I agree @Aziz Usmanov. I apologize for not being clear. I don't hold funds for the properties I manage. I just collect rents and pay the owner. Owner pays for repairs.
Property Manager · Oklahoma City, OK · Member since 2019 · 577 posts · 351 votes
5y
@Aziz Usmanov I'll admit to being rather unsophisticated. I've done demos for Buildium and Tenant Cloud and found just plain ol' Excel helps me keep track of everything. The propert management software seems to be more focused on finding tenants than the accounting portions. Tenants pay through Venmo, CashApp, Zelle, etc. When and if I grow bigger, I'll need to investigate a more streamlined software.
Property Manager · Fargo, ND · Member since 2016 · 51 posts · 10 votes
5y
@Ben Scott I know the PM software doesn't provide payment flexibility like you have Venmo, Cashapp, etc. I like the payment flexibility that you have, I am assuming your tenants are asking for alternative ways to pay, therefore such a variety.
Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes
5y
No. They are a horrible investment. First they are obviously planning on making money on the deal. So you’ll save money not having it. But most importantly they’ll “wait you out” on a water heater or AC repair. For your own house you’re paying the price. But for my tenants I fix these things the day they break. They’re essential items.
I don’t need the warranty guy coming out ina. Couple days. Saying he needs a part he’ll have in a couple days. And be back a few days after that.
The only “service warranty plan” I’ve ever seen worth a darn is the one through the power company in MN. Heck. They’ll come out and say somethings broken and going to be expensive. You should get our warranty service and it will be free. It’s like $8/mo with a 4 month minimum.
Real Estate Broker · Tulsa- OKC Oklahoma · Member since 2017 · 868 posts · 801 votes
5y
One bank account. Hire and accountant to keep it all straight. If you don't know what you are doing hire an expert. Stay in your lane. I can say this bc I hate accounting!