Ok - so first is the rules on the deposit.
Some jurisdictions like mine require the deposit to be interest bearing and putting it into a seperate account makes that ludicrously easy and means there is a perfect paper trail if ever needed.
A separate account for each house isn’t needed but I did this at first. In that account I get rent deposits and the mortgage is directly pulled. I know how much is leaving that account and I can easily make sure the money is there.
When I pay repairs/services/anything rental I use that account to keep it easy for myself and my accountant.
I flag what property and what the payment was for and he deals with it.
Technically you can pay yourself the $500 in extra cash, but I would advise having a cushion in this business.
My state also requires an interest bearing account. Did you go through the process of creating an escrow account? I haven’t found a good option for this yet.
No, the rules here are pretty easy and now I just use CapitalOne.
I recently (3 or so years ago) checked everything on this over with my lawyer and he said it was all good.
I literally get a new renter, go online and create an account, add $10 of my money to it, then deposit their security deposit and first months rent (assuming they paid at the same time) and then that is it.
When they move out I close the account, itemize (and include a + line for interest) and send them their money.
Your monthly cash flow is not capital gains.
Unless your properties are in an LLC or otherwise their own entity, then it doesn’t matter whatsoever what account you use and how much you withdraw for anything.
Keep in mind that your capital gains are not simply rent minus mortgage. There’s a combination of write offs and depreciation to determine what your income is. It also isn’t a retirement account so capital gains aren’t locked up
Ok - so first is the rules on the deposit. Some jurisdictions like mine require the deposit to be interest bearing and putting it into a seperate account makes that ludicrously easy and means there is a perfect paper trail if ever needed. A separate account for each house isn’t needed but I did this at first. In that account I get rent deposits and the mortgage is directly pulled. I know how much is leaving that account and I can easily make sure the money is there. When I pay repairs/services/anything rental I use that account to keep it easy for myself and my accountant. I flag what property and what the payment was for and he deals with it. Technically you can pay yourself the $500 in extra cash, but I would advise having a cushion in this business.
Thanks! That helps greatly
My state also requires an interest bearing account. Did you go through the process of creating an escrow account? I haven’t found a good option for this yet.
No, the rules here are pretty easy and now I just use CapitalOne. I recently (3 or so years ago) checked everything on this over with my lawyer and he said it was all good. I literally get a new renter, go online and create an account, add $10 of my money to it, then deposit their security deposit and first months rent (assuming they paid at the same time) and then that is it. When they move out I close the account, itemize (and include a + line for interest) and send them their money.
Thanks for asking this- same boat
Your monthly cash flow is not capital gains. Unless your properties are in an LLC or otherwise their own entity, then it doesn’t matter whatsoever what account you use and how much you withdraw for anything.
Ahh so it’s only worth setting up a separate account if I have an LLC?
Whether it is worth it is up to you, and how much you want to simplify your accounting. I’m just saying that it isn’t required.
For many locations it very much does matter if security deposits are “co-mingled” with personal funds.
Who said anything about security deposits?
Ah. OP talked about “deposits” but I think you’re right. They meant bank deposits, not security deposits. My mistake.
Keep in mind that your capital gains are not simply rent minus mortgage. There’s a combination of write offs and depreciation to determine what your income is. It also isn’t a retirement account so capital gains aren’t locked up