How do you separate income and save for expenses? If everything lines up and its a good property what do you do to set money aside, hypothetically if your income was 1000 and you set aside 100 each for 10% for Maintenance, Cap Ex, Vacancy, and Management what do you do with it as far as collecting and separating it?

Is there an app for that?

Do you put it in a single account for the property to use as needed, or only use what's collected for Cap Ex just for Cap Ex etc.?

Do you collect rent put it into an account for that property and just keep track of how much is designated for what?

Would it be better to put it in separate accounts for each category so you would have 400 for those variable expenses and the other 600 in its own account?

What about when you get 3+ properties or multifamily? Do you make an account or 2 for each property, or each door?

I haven't got any properties yet but I'm curious how everyone keeps track and keeps everything separate so when I do I want to make sure I'm organized the best I can be right away so I don't get overwhelmed or anything as I get more properties.

I'm a saver, so it all goes into my main bank account. I keep track of income and expenses separately (old school with a notebook as it is faster and easier).  I have enough set aside to cover the unexpected...which with multiple rentals seems to happen on multiple units at the same time.

How do you track it in your notebook? do you track income and expenses based on the property or do you do a total income total expense?

Everyone has their own style and preference. I have a separate account for each property and manage expenses/income in a spreadsheet. I think keeping accounts separate is helpful in extremely helpful especially when reconciling and doing your taxes. I always try to have a specific base level of money in each account for reserves.

@Cody Benedetto That makes sense, kind of along the lines I was thinking. For that base amount do you get to that and then just take less per month for the expenses or just keep adding to it? and is that a specific amount that your comfortable with or do you try and hit a certain percent?

@Ryan Guffey upon purchase I padded the account with enough to be very comfortable. If for whatever reason capex were to deplete I’d replenish accordingly. Hopefully that never happens but I sleep better know worst case scrnario, something bad happens and I need to drop $10k on an unexpected repair, it’s already there.

@Cody Benedetto Thanks that makes sense. I would definitely rather be prepared for worst case scenario then blindsided by it, though just starting out ill probably have to start with lower reserves and build that up first and hope my DD and inspections catch anything so nothing happens for awhile

@Ryan Guffey You'll want to always track income and expense by property or you'll pay a lot more for your accountant's time as they will do that for you. 

I'll track any income and expenses that come up and allocate to the property via excel.

I usually invest the profits rather than keeping it inside a bank account, but I will keep a separate chequings account per property to deposit funds and pay HOA fees

@James Ma when would you recommend getting an accountant involved? Right away or after I get a few properties?

I want to invest the profits instead of letting it sit but I wanna build up some reserves first

@Ryan Guffey

You could use Ally Bank. They have a concept of buckets within a given account (checking or savings) that can keep those expenses both separate from one another but combined as far as per property.

I use Ally bank as my regular savings account haven't gotten a rental property yet. One feature I like and thought about when I saw your comment was that they have what they refer to as buckets. So in an account that has $10k in it you can create your own buckets to filter the total balance into. It's all one account but let's you visualize how your money is being divided up. You could create a bucket for cap ex, one for vacancy, etc. Just a thought

@Nicholas Gessner Thats not a bad idea either, would be nice having 1 account per property and still sorting it like that. Ill have to check my bank and see if theres anything like that around here

Originally posted by @Ryan Guffey :

How do you track it in your notebook? do you track income and expenses based on the property or do you do a total income total expense?

Most of the items are the same, so I have things like rent (eg $1050x12), insurance, property taxes, etc as separate line items and then a column for each property.  At the bottom are repairs that come up and I write down what those are under the right column/property as I get receipts.  I keep all my receipts in one spot with ones for each property paper clipped together.

You can start talking to accountants before purchasing your property but not critical unless you're thinking of purchasing a property at a loss on purpose for tax reasons. Definitely start looking after you buy one so you can align on how they like their paperwork, if they have any templates etc. that will save them time as they tend to charge by the hour 

While it is a tad labor intensive to set up - an easy way to track income and expenses is to have a seperate checking account for each property. Then put all income for each property in and use it for expenses for each property. 

If that is all you did you would have a basic profit and loss for each property just in your monthly statement. 

You can then take x amount that you want to save and transfer it into a savings account. You can have one savings account for multiple properties or one savings account for each. 

Also set up an account to hold tenant deposits 

you can make it as complex as you want but the above is a good way to keep things straight.

Btw a conservative approach to savings is to save enough so you have one years worth of expenses set aside. 

@James Ma Do you invest gross profit or after tax deductions? Are you investing into a fixed stock or a high yield savings so if you need to access the cash flow you can?  

@Ryan Guffey

I maintain minimum balance in checking to cover expenses. I also use the wave app which pulls bank account data (separate business account) and allows basic reporting. I do an end of year spreadsheet which breaks down each property. The spreadsheet also calculates averages so I can compare properties.

@Ryan Guffey Use stessa.com app (free not sure for how long as it's recently acquired by RoofStock) It can pull transactions from bank, convert receipt sent from email transactions, and many cool reporting feature such as income, cash flow, capital expenditure. Each transaction whether imported from bank, manually enter, or from emailed receipt you can assign to a property or unit in a property

@Ryan Guffey read the book Profit First, a must read for every business owner/investor and/or listen to the author of that book who was interviewed twice on the BP Biz Podcast (episodes 30 & 97).

I have a HELOC I am  using to pay for expenses, reason being interest rates are low and I think I can earn more in stocks so intend on leveraging the HELOC to cover all expenses while injecting as much rental cashflow into equities (I typically stay in safer telco and bank stocks with ~5% dividend yield so my HELOC rates are covered)

Originally posted by @John Moore :

@James Ma Do you invest gross profit or after tax deductions? Are you investing into a fixed stock or a high yield savings so if you need to access the cash flow you can?  

@Ryan Guffey I use an excel spreadsheet.

@Ryan Guffey Perhaps this is redundant to clarify, but just note, setting aside reserves does not count as an expense. It's all considered income to you. Once it comes in, just sweep out a certain percentage each month until you have at least 6 months in reserves set aside in a separate account. Once you hit 6 months, now you can switch to downpayment savings mode!

@Ryan Guffey , regarding income and ACTUAL expenses, I use Quickbooks online for bookkeeping.  My accountant has access too, so I track, then around tax time tell him when everything is up to date, and he goes in, reviews, asks questions about anything he sees that might seem out of line, then prepares taxes.

Management, if you actually hire a manager, will take their expenses out on their own, and send you a P&L each month.  In the past, I have been able to tell my managers how much to hold in reserves, and anything that comes up they use it, and then only distribute proceeds back to me once the reserves are rebuilt.

If you self manage, you can open a savings account, and as long as it is within the same bank, easily transfer reserves into the savings account or a high yield online account to earn a little extra interest.  Personally, I do not invest my reserves in anything with real risk.  Could I earn more money if I did, maybe.  But, I could also be forced to realize large losses (i.e. the 30% market drop at the beginning of COVID) if I needed that capital in a down market.

@Ryan Guffey I use Stessa to track my income and expenses per property (free at the moment). Some other investors use QuickBooks as a start and upgrade if needed. I look to have 6 months of loan payments plus real estate taxes on hand then an additional $50-$100 each month per property I add to that. Mainly because I'm still acquiring properties, the bank wants to see liquidity and reserves. Currently have 8 doors with a 12 unit apartment building pending.