I’m in Wilmington, NC and am about to place a tenant in my first rental property. I was wondering what kind of bank accounts the pros use. For example, when the tenant gives you a security deposit, do you just park that in a savings account, or do you put it in some sort of interest producing account to have it passively grow?
@Steve Keisling I only have one property but I put their security deposit in a savings account.
Two accounts and you can use them for multiple properties. I have over 30 rentals using two accounts.
Checking: all money goes in, all money goes out. Tenant pays deposit, I put it in Checking and then transfer it to Savings. Tenant pays rent, I put it in Checking. I pay bills from Checking. I maintain a small reserve to prevent any issues.
Savings: Security deposit is transferred and held here so I don't accidentally spend it. I also keep my reserves in savings (maintenance, taxes, insurance, etc.). When I have additional money in Checkings, I transfer it to Savings and hold it for the next investment.
For my business, I keep two accounts also. One is checking for property expenses & rental income, and the other is a savings account for the refundable deposits. I then track everything in QuickBooks using classes, but tracking it in excel would work too. The important part is knowing what and how much is a refundable deposit because the account will be earning interest.
Here's what I do:
Checking account for expenses
Savings account for rent
Savings account for deposits
@Kevin Zolea thanks!
@Nathan G. Makes perfect sense. Thank you!
@Michelle Gerac super helpful. Thank you!