Separate bank account to collect rent?

Question

Hi all,

I am curious to know what the BP community thinks about opening a separate bank account to collect tenant rent. I currently don't want to start an LLC yet since I am in the beginning stages (haven't purchased a property yet). However, I plan to house hack and I am curious to know what are the best strategies in collecting rent in the meantime and once I own a few rental properties.

Thank you in advance :)

Scott M. · Answer

LLC or not you are running a business with income and expenses.  Yes, you should open up a separate checking/savings account to handle your business income and expense.  Do not comingle with your personal money.

David M. · Answer

@Michelle Garcia

Without a separate entity, it really doesn't matter if you co-mingle your funds legally...  Its just an accounting/bookkeeping issue.  Of course, consult a qualified professional or two...

Its really a matter of bookkeeping and your State's laws.  You may need a separate bank account to hold the security deposit, for example of the latter.  As for the former, if you can keep track of your expenses, i.e. bookkeeping, then it really doesn't matter if you have a separate bank account, credit card, etc.

The point of the separate accounts is to figure out what expense was for what.  For example, if you didn't have separate accounts, when tax prep times along and you look at your credit card statements, how do you figure out if that Home Depot charge was for perhaps some new door hardware for the rental or just something for your own residence?  Again, bookkeeping...  For some, they like using a separate bank account and separate personal credit card just for that purpose --- its automatic bookkeeping, so to speak (until you have more than one rental...).  If you enter all your transactions into a spreadsheet or something similar, you will at least know where you are financially/accounting wise "all the time."  I know some people still are "old school" and literally hand their accountant a shoebox full of receipts that they have written notes on them.  The accountant has to play "catchup bookkeeper" for the entire year --- but (s)he gets paid for it apparently...

All that being said, there are other advantages to having an additional checking account.  For example, prior to Zelle/Venmo, I had (actually still do), tenants who just "direct deposited" funds the old fashioned way --- they went to the bank branch and deposited the funds into my bank account.  Yes, I gave them "my bank account number."  But, it doesn't bother me since I routinely sweep the incoming rents into my regular bank account.  So, if somebody every hacked that account, they would at most get the month's rent roll.

Hope that helps.  Good luck.

Simon W. · Answer

not to be a forum police, but this topic has been beaten to death. try the search button next time.

Colleen F. · Answer

@Michelle Garcia a separate bank account and credit card will help you immensely in accounting for income and expenses.   If you are doing a live in with room rental charge everything that is a business expense to that account and CC and receive all income that way as well. You can divide it percentage wise later.   It is a mess trying to parse out charges for a rental property otherwise. Put your internet and electricity through that account. Any Home depot charges.

If you do a duplex/triplex just put the relevant charges for the rented units to that account.

Separate bank account to collect rent?

Most Popular Reply