Toronto Ontario, Canada · Member since 2021 · 20 posts · 10 votes
Hello BP!
My name is Alex from Ontario and I'm a new and aspiring real estate investor. Looking for guidance on opening up business accounts for someone starting in their personal name.
Which Canadian business accounts do you suggest I open?
Which products are more real estate friendly?
Any specific business card perks I should be shopping for?
I believe I should have one account for incoming rent, a second account for expenses going out and a third account for capital expenditures, holding security deposits, and savings. I would love to apply for a business credit card as well.
Let me know your thoughts and how you would suggest I start. Reply or DM please.
Rental Property Investor · Port Coquitlam, BC · Member since 2017 · 520 posts · 527 votes
4y
@Alex Carpio welcome to BP! While it is critical to keep personal and business finances separate, there is no need to have multiple bank accounts for one property. Income and expenses are tracked in accounting software or in spreadsheets, not by having multiple bank accounts (with multiple sets of banking fees). I use my local credit union for business banking as they are easy to deal with and offer good service with minimal fees.
CTO of BiggerPockets · Seattle, WA · Member since 2019 · 178 posts · 178 votes
4y
Alex, I own a number of rental properties in Ontario and to echo what others have advised, here's what I do:
1: I opened a personal (non business) chequing account at local trust. All transactions flow through that account.
2: I also opened a savings account which is helpful to earmark money set aside as a reserve, outside of my monthly revenue and expenses.
3: I got a dedicated credit card from the bank that's only used for the real estate.
4: I happen to use QuickBooks Online which is set up to automatically pull transactions from all three of the chequing, savings, and credit card. That's where I sort out revenue and expenses per property. QBO isn't an easy thing to learn and I'm sure there's simpler solutions out there that work with Canadian banks.
5: I track the deposits in QBO, I don't keep them in a separate account. It's a liability which you hold in trust but where you do that is up to you.
6: I track when I move my own money into the real estate account or out. In QBO it shows up as "owner's equity" which you either deposit or withdraw. That happens infrequently though since I've designed the business to be self sufficient. Keeping those transfers to a minimum avoids confusion at tax time ("Was that revenue I need to declare or my own money I put in?").
7: I use a property manager because (1) I don't live nearby and (2) I wouldn't take that job so why do it for free for myself (time best spent elsewhere). That being said, if you're just starting out doing your own property management is a good way to learn the day to day.
FWIW I looked into setting up a corporation for the rental business but through discussions with my accountant the conclusion I came to was that it wasn't worth the effort. You may decide otherwise.
Toronto Ontario, Canada · Member since 2021 · 20 posts · 10 votes
4y
@Kevin McGuire Thank you very much for this reply. This is exactly what I was looking for when I first posed the question. I think I will open up an addition personal chequing and savings accounts like yourself. I am assuming the dedicated credit card is also an additional personal card as well? I will look into QBO as @Account Closed suggested to get accounting software. I'm a firm believer in property management and the value they bring to a real estate business. I also do agree that setting up a corporation is not worth it for me at this time as I will be starting in my personal. Thank you for your time and detailed reply Kevin! Cheers.
CTO of BiggerPockets · Seattle, WA · Member since 2019 · 178 posts · 178 votes
4y
@Alex Carpio glad it was of help! Yes it's a personal credit card. I got a second card for my property manager to make all that go easier but yeah they're just plain ol' personal credit cards. Btw, an additional benefit of using QBO is that it's quite standard for accountants and bookkeepers, and your accountant can pull your data at tax time.
Best of luck and congrats on starting on your journey! Kevin
CTO of BiggerPockets · Seattle, WA · Member since 2019 · 178 posts · 178 votes
4y
@Alex Carpio Np! As mentioned, QBO is a steep learning curve but does have the advantage of being so prevalent which means there's a community of content. For example, I found this video series helpful and the "dude" to be responsive to questions:
;list=PLqRhgBZfJuE5kr74b_7MctaQW8hsx6waD
Feel free to DM if you want more details on using QBO. Happy to help a fellow Canadian real estate investor :)
Toronto Ontario, Canada · Member since 2021 · 20 posts · 10 votes
4y
@Kevin McGuire I'm going to add this to my YouTube Watch List for when I'm not at work. I will definitely keep in contact with you Kevin I really appreciate it. Thank you very much for everything.
I want to commend you, first on posting your question and more importantly for engaging with the person who responded. I've been contributing to this forum since 2015 and often (too many times to count), I see someone post a question and then they seem to retreat into the dark. They don't engage or acknowledge the feedback. I'm not sure what was the point of posting a question. This is a forum after all. Engage!
My operations process is quite similar to that of @Kevin McGuire
Your question, "Any specific business card perks I should be shopping for?" Not so long ago I came across a credit card that gives a generous cash back for home renovations related products and expenses. Maybe you know of this already? Cheers.
Toronto Ontario, Canada · Member since 2021 · 20 posts · 10 votes
4y
@Julie Toh Thank you very much for the warm welcome and replying to my DMs. I appreciate the recognition. I can't speak for everyone else but for me, as a beginner, it can be hard to step out of your comfort zone to meet the goals that are important to you. For me, it is important for me to retire early so I can buy back as much my time with my daughter and I want to use real estate as the vehicle to do that.
I used to think I could do this by myself but I have since pivoted. Now I think the best way to grow my knowledge is to network with individuals and take advice from people who are in positions I am striving to be in one day. That's why I'm here on BP. After all the Brandon Turner and David Greene books I decided to listen to them and participate. I believe the best way for me to find success in this business is to make an investor focused team, leverage their work experiences and professional opinions to make better business decisions.
Having posted this question, I now have a better idea than I did a few days ago about how to go about setting up my business accounts and I'm thankful for all of your inputs. I will be opening up a separate personal account to start as most have suggested here. Had I "retreated into the dark" like the fear I create in my head tells me to do, then I would have not learned from all our your experiences on this issue. But fear is just False Evidence Appearing Real and the rollercoaster of emotions I may feel throughout my journey is never more important than my FIRE goals.
I am not familiar with this credit card that you speak of. One of my credit card is the CIBC Visa Infinite that gives me 4% cashback on groceries and gas. I would love to find out and will be DMing you now.