All Forum Posts by: Michelle Gerac

I always like for my money to make money, so I would either pay down the principle (will save you money on interest over time), or add it to your reserve fund (if it has a decent interest rate, to make a little money). I don't know what you mean by "hundreds," and you may only end up with pennies in savings or income. 

I don't see how applying to the escrow fund or adding it to a down payment is saving or making money with the money. 

I'm no business major though. There's probably some more financially savvy opinions out there.  

Hello! I did a quick google search on landlord requirements for security deposits in Florida, since I've never leased outside of Texas, and based on what I found, you might be able to get away with just disclosing the institution name and providing information about the interest. Someone from Florida can probably help you more, but I've included a link to Florida's Statutes regarding this, if it's any help. 

http://www.leg.state.fl.us/sta...

I usually do a 5% for a newer property, and 10% for anything prior to 1990 as an initial analysis. Sometimes I even factor 15% if it looks like it has obvious problems. Once an inspector views the property during the option period, you should be able to tighten the figure a little like @Aj Parikh said. That being said, I have a property I lease out that was built in 2007 and I spent more than 10% last year. It was flood damaged and renovated though, so I did budget a little extra for it. This year should be closer to 5%

I agree with @James Mcsweeney I use a debit card, but it's all the same. I have two accounts for my rentals, one is the operating account (Checking Account that has the debit card and I use it for repairs, management fees, etc.), and one holds the security deposits (Savings Account - no card, but it is interest bearing). If you have more than one property, it will be important to track which expenses go to which property for tax time. This is why you will hear some people creating new accounts for each rental they have, but as long as you are able to code each expense you make, with the property it belongs to, two accounts should be enough. 

I don't use a business accounts, and don't know what the benefit would be, other than establishing credit in your company's name. 

I use my debit card to pay for everything. Sometimes if it's a large expense, I will write a check, but it all comes from my rental Checking account. 

@Patrick M. Okay, thank you for sharing how you handle that, it makes sense. I'm sure it makes your tenants feel like you're taking care of them and their assets and might help them take better care of yours. The way I currently do things, mine just have to trust I don't spend it (I wouldn't), so I like your approach. 

I did a quick excel spread sheet and got numbers close to @Greg M. as well. ($972 per month - I didn't account for vacancy or water/sewer). 

• Mortgage - $537
• Property Taxes - $280
• Insurance - $40
• Capital Ex - $115

The numbers look good if you're able to rent out both units, so even though you will be living in one unit, it still looks like a profitable investment in the long-run (once you move on to your next property). I guess it depends on what you're comfortable with paying right now. 

Also, I don't know if you've done this yet, or what others recommend, but I would definitely get a trusted inspector out on a property that old during the option period. 

Before handing over the keys, I get the first month's rent, security deposit (equal to first month's rent) and pet deposit if applicable. 

@Patrick M. Are you required to give back interest on the security deposit? I've wondered that in the past, so I would appreciate any information you could share with me on that. Also, what if you have multiple security deposits in the same account, do you calculate out the interest towards each, or have a set amount you return? I've always just coded it to "other income" and added it to my taxable income for the year since I get a 1099-INT. It's never much money. 

I think a business account is a good first step. If you plan to learn and use accounting software, then I definitely think it would be helpful. If not, then for sure logging things in excel at a minimum. As you grow, good bookkeeping will become critical, but I am curious to know if other members of the community think it's important to start out using accounting software or not? I use it now and am very happy with the reports I can pull and information I can get, but without gaining a little experience in real estate first, I don't know how helpful it would've been to have all this information on my first property. I tend to prefer to jump-in and figure things out as I go, and accounting software on my first property might have been more than I could handle. 

 I'm leaving a link below to a post Michael Plaks left that details trip deductions. It's actually for combination business/personal, but I think it would still help answer some of your questions. https://www.biggerpockets.com/...

I hope this is at least a little helpful, and I think you're smart for asking these questions early on. 

Congratulations on your duplex!!

I would definitely recommend opening a separate account. I don't use a business account, but I do have a separate account open at my credit union (two accounts actually - one for security deposits, and one for rental income/expenses). To be 100% honest, I didn't do this on my first flip, because I thought I was organized enough to track everything in excel, and I ended up not. At tax time, I'm sure I missed out on deductions, but if I could go back in time, I would've started off doing things correctly. 

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.