Do I need a separate bank account for my rental property?
Separate bank accounts help you save money
Separate bank accounts help you save time
Separate bank accounts help others help you
Separate bank accounts help protect you
Separate bank accounts help you to scale
Bonus: How many separate bank accounts should I have for my rental properties?
If your portfolio has grown to include multiple legal entities, you should have at least one account for each legal entity you hold property in, as each entity is itself a separate business that has its own assets, liabilities, revenues, and expenses. The axiom could also be keep your personal and business and business accounts separate- and for all the same reasons on the rest of this list!
Security deposits are another situation that may warrant additional accounts. Some landlords are required to hold deposits in a separate account, but laws can vary by state and locality, so make sure to be aware of any specific requirements for holding security deposits that may apply to you.
Beyond that is a matter of personal preference. Some rental property owners like to keep an account per property. This can make categorization easier as long as you maintain good discipline with using the correct card or check for each expense incurred. However, maintaining more accounts can get cumbersome if your properties share service providers or if you frequently need to transfer money between accounts to cover unexpected expenses. You should think about your cash reserves and monthly transactions to decide how many accounts will work best for you.
Conclusion: separate bank accounts are the foundation for successful rental bookkeeping
There are many reasons that maintaining a separate account is so widely recommended. This truly is step number one, the foundation, the place to start to get your investment property finances organized and under control. All other accounting and bookkeeping best practices flow from here.
Last updated: June 29, 2020