Banking and Accounting for Single Family Home House Hack

House Hacking
3yFollow

Banking and Accounting for Single Family Home House Hack

Kyle Roberts
New to Real Estate · Richmond, VA · Member since 2020 · 28 posts · 16 votes

Hi Everyone!

I recently purchased my first property, a single-family home in Richmond, VA and am planning to house hack. I'm trying to figure out how to set up the banking for managing the property. I've heard it's best to get a separate bank account from your personal account. However, do I need to pay my mortgage through this account? What about repair and maintenance expenses for the property, as I've read online you need to split those based on what is for the "rental" portion of the house vs the primary residence portion of the house. Can anyone who's managed a SFH house hack provide insight on how they managed the finances of the property?

Thanks in advance!

Kyle 

2Reply
22 views

Most Popular Reply

Peter MckernanBusiness Member
Residential Real Estate Agent · Irvine, CA · Member since 2013 · 2k+ posts · 1k+ votes
3y


@Kyle Roberts I would put it in one account and they use that for expenses and mortgage, and have checks come to you in this account as well. This is what would be the best action for getting the right balance of cash in and cash out along with doing the book keeping for it. The same with utilities, bill pay of utilities and then pay through the account as well. 

The McKernan Group4.957 Reviews
WebsiteView Page
2Reply
See this reply in the discussion

6 Replies

Jump to latestLatest
  • Peter MckernanBusiness Member
    Residential Real Estate Agent · Irvine, CA · Member since 2013 · 2k+ posts · 1k+ votes
    3y


    @Kyle Roberts I would put it in one account and they use that for expenses and mortgage, and have checks come to you in this account as well. This is what would be the best action for getting the right balance of cash in and cash out along with doing the book keeping for it. The same with utilities, bill pay of utilities and then pay through the account as well. 

    The McKernan Group4.957 Reviews
    WebsiteView Page
    2Reply
  • Ryan ThomsonBusiness Member
    Real Estate Agent · Colorado Springs, CO · Member since 2018 · 1k+ posts · 1k+ votes
    3y

    hey @Kyle Roberts you don't NEED or HAVE to do any of those things. It will be a little easier for your taxes and finances if you create a separate account for all of the property's income and expenses including the personal and rental part. Then have a second account for your personal expenses and income (groceries, job, etc). 

    I would use an accounting (I use quicken) software to then manually label those expenses as related to your portion of the property or the "rental" portion. I think its too complicated to make sure you are always using the right card and bank account for the right property portion. I just have one card for all my investment properties. Then I go through and label the expenses for which property it is for. 

    The Assumable Guy544 Reviews
    WebsiteView Page
    1Reply
  • Brandon Wagner
    Real Estate Agent · Northern Virginia · Member since 2021 · 106 posts · 50 votes
    3y

    I house hack my residential property.  I handle the finances this way.  

    Bills for the entire house are all through my personal account.  For example, Mortgage, Utilities, landscaping.  I then write off the percentage of my property that is rented, compared to the percentage that is not in my accounting software.  This is done based on the sq ft of the property.  So if your house is 2000 sq ft, and you rent out 800 sq ft, you can write off 800/2000 = .4 = 40% of these expenses.

    Bills for just the house hack portion (AirBNB) go through my business account.  For example, Furniture, dishes, decorations, and the income generated from AirBNB rentals

    Hope this helps!

    LICENSED REALTOR Virginia® (#0225264736)

    0Reply
  • Antonette El Baz
    Accountant · Member since 2023 · 48 posts · 30 votes
    3y

    Hey Kyle!

    Congrats on your first property purchase and welcome to the world of house hacking! It's awesome that you're taking steps to set up your banking for managing the property. Having a separate bank account for your property is definitely a good idea for keeping your personal and rental finances organized.

    As for your questions, paying your mortgage through the separate bank account is usually recommended. It helps you keep track of your rental property expenses separately and makes it easier for tax purposes. You can also use this account to collect rent from your tenants, which keeps your personal and rental income separate as well.

    When it comes to repair and maintenance expenses, it's a good practice to split them based on what is for the "rental" portion and what is for the primary residence portion of the house, as you've mentioned. This helps you accurately track the expenses related to your rental property for tax purposes and financial management.

    Managing the finances of a SFH house hack can seem overwhelming at first, but with a separate bank account and careful tracking, it becomes much easier. You can use accounting software or even a simple spreadsheet to keep track of all your expenses and income related to the property.

    I hope this helps! Best of luck with your house hacking venture, and feel free to ask if you have any more questions.

    0Reply
  • Bentley Goddard
    Member since 2023 · 2 posts · 1 vote
    3y
    Quote from @Kyle Roberts:

    Hi Everyone!

    I recently purchased my first property, a single-family home in Richmond, VA and am planning to house hack. I'm trying to figure out how to set up the banking for managing the property. I've heard it's best to get a separate bank account from your personal account. However, do I need to pay my mortgage through this account? What about repair and maintenance expenses for the property, as I've read online you need to split those based on what is for the "rental" portion of the house vs the primary residence portion of the house. Can anyone who's managed a SFH house hack provide insight on how they managed the finances of the property?

    Thanks in advance!

    Kyle 




    It's awesome that you're planning to house hack. Now, let's talk about managing the financial side of things. It's commonly suggested to set up a separate bank account specifically for your property. This helps keep your personal and rental finances separate and makes it easier to handle the accounting. Speaking of accounting, it's important to decide how you'll pay your mortgage. Many people prefer to pay it through their rental property bank account. This way, you can clearly track the expenses related to your investment. When it comes to repair and maintenance expenses, it's recommended to keep them separate as well. One idea is to establish a reserve fund within your rental property account. This fund can cover any repairs or maintenance needed for the rental portion of the house. For expenses tied to the primary residence, you can allocate them separately. Keeping meticulous records of income and expenses related to your property is vital. This ensures proper accounting, simplifies tax reporting, and provides an accurate overview of your property's financial performance. Remember, it's always wise to seek advice from experts in real estate investing or property management to tailor their insights to your unique situation and comply with local regulations. Good luck with your house-hacking adventure!
    0Reply
  • Basit SiddiqiBusiness Member
    Accountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes
    3y

    Yes, a House-hack is an asset that is partially investment partially personal.

    Therefore, not all your expenses on the property are tax deductible as a rental expense.

    [email protected]917-280-8544
    Basit Siddiqi CPA4.979 Reviews
    View Page
    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free