How to Set Up Your Rental Accounts

How to Set Up Your Rental Accounts

Your rental is a business and it is important that you treat it as such. To start off on the right foot, it is important that you keep the rental accounts separate from your personal accounts. There are many ways that you can set up your accounts.

Quickly and Easily Setting Up Your Rental Accounts

Limited Properties

Create separate checking and savings accounts at your bank.

Pros:

  • Simple – limited to just two accounts at a bank that you already routinely use so internal transfer is simple.
  • Simplifies Tax/Mortgage – Same bank so no added fees.

Cons:

  • Hard to Identify Rental Payment – With multiple houses in the same account, if the rents were different or multiple people didn’t pay their rent it was impossible to track who paid what without going into the branch.
  • Hard to Track Expenses – If you pay with checks out of the account, come tax time it is hard to know what was paid for what account.

Multi-Properties

You need two rental accounts per rental — a checking account for the operations and a savings for the security deposit. It creates more accounts but at the same time is simpler to track who pays every month.

Side Note: While every state and area is different, many require the security deposit to be held separately. While some require interest to be paid, many areas and states do not have such requirements. No matter what you do, check the laws about the security deposit.

Pros:

  • Easy Identification – Every account has a separate nickname. You could name each account by its street, which makes it very easy to identify.
  • Separated From Personal Accounts – While having it at a different bank can making transferring money a pain. It allows you to keep the two separate. If tenants deposit money into your accounts using teller services you’ll never have the issues with the money being put into the wrong account. This way at least the money won’t go into our personal account.

Cons:

  • Lots of Accounts – With multiple houses in the same account, if the rents were different or multiple people didn’t pay their rent it was impossible to track who paid what without going into the branch.

While the extra paperwork has it moments, it has been totally worth it. While probably not for someone who has just one account, these tips for rental accounts are for the serial investor.

Not comfortable about giving out your bank account information?

While giving your tenant your direct deposit information provides no more information than giving someone a check, there are options for those who wish to have an additional lawyer between them and their tenants. One of those options is TurboTenant an online company that does an application, tenant screening (background/credit checks) and collects the rent. There is no fee except for the credit and background check which is paid for by your tenant during the screen. For more information, check out TurboTenant’s website.

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