Why Every Landlord Needs a Separate Bank Account for Each Rental Property

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As you build and scale your real estate portfolio, systems and processes become paramount to streamlining your operations and preventing overwhelm, especially when it comes to tracking cash flow, capital expenditures, and rent collection. There are a variety of strategies that allow landlords to take the stress and overwhelm out of scaling, but there’s one that offers multiple benefits, yet is often overlooked: Creating separate bank accounts for each rental property.

In this article, we will highlight the benefits of having a separate bank account for your rental property vs. your personal finances, and how separate accounts for each rental property can exponentially simplify your bookkeeping, tax prep, and more.

Separate Accounts for Each Rental Property

Separating your personal and business finances streamlines your accounting by ensuring that you’re not commingling funds. This makes it easier to perform monthly bookkeeping, pay bills, calculate taxes, and track your income and personal expenses. It also gives you credibility, as potential investors, partners, and lenders will see that you’re serious about your business and that their security deposits, investments, and other business funds will be safe from any non-business debt or collections.

There are also legal and tax benefits. Having a separate bank account for your rental property streamlines the preparation of financial statements for tax purposes, allowing you to keep track of potential tax deductions and eliminating the hassle of sifting through personal transactions to find business-related ones. To top it off, there’s also an opportunity to take advantage of additional features and earn rewards, including discounts, cash back, and the possibility of earning an above-average annual percentage yield (APY). 

Baselane, for instance — the No. 1 banking platform built for independent real estate investors — offers a competitive annual percentage yield and up to 5% cash back on debit card spending with no monthly fees, which helps you generate more passive income in addition to making it easier to manage your finances.

“The thing that was compelling to me about Baselane was the APY for the working capital,” says Austin Scherer, owner/operator of three properties across multiple states. “The ability to keep your funds in a place where they’re actually making money for you is great. On top of that, rent collection is integrated in a seamless way where it's turnkey and hands off, making it simple to financially manage each property.”

Multiple Bank Accounts for Separate Properties

Scaling is difficult. In each investor’s business, there comes a critical point when the time spent sorting through and separating expenses and transactions becomes overwhelming. Having separate bank accounts for each rental property — and even separate accounts within each property for rent collection, security deposits, check writing, and savings — allows you to retire tedious spreadsheets and get a simplified financial view of each property. 

So whatever banking platform you use, the ability to create unlimited accounts is paramount. Baselane, for instance, allows you to manage unlimited virtual accounts and cards under one login and even open separate accounts for each property or unit and security deposits.

“It cuts down on hours of time for my admins every month,” says Rio Tomlin, an investor who owns and operates 16 residential units and four commercial units. He began using Baselane in October 2023 and says it has simplified his month-to-month operations. “Not having to track who paid, what the late fee is, or if the lease is about to expire makes everything so much easier. Once you put all that information in, it just happens automatically every month. So that’s a huge feature.”

Other Key Advantages of Multiple Accounts

Yes, simplifying your operations is a desirable benefit. But having accounts for each property — and even multiple accounts for each — can also protect you as a landlord and position you to more effectively grow your portfolio.

Here are some other key advantages of having multiple bank accounts:

• Meet legal requirements for owning/managing multiple properties by keeping funds from each entity separate, as some state laws mandate.
  
  
• Simplify bookkeeping and cash flow management by avoiding commingling of funds across properties, enabling clear tracking of income, expenses, and future projections for each entity. You can even open separate accounts for individual units to plan for future renovations.
  
  
• Protect the business from tax losses and individuals from audit risk by maintaining organized financial records for each property, allowing for easier tax filing, maximizing deductions, and limiting personal liability.
  
  
• Utilize the profit-first method for real estate, a strategy that leverages having multiple accounts to hold funds for different purposes such as real revenue, profit, tax, owner's pay, and operating expenses so investors can “pay themselves first.”
  
  
• Strengthen position for acquiring new mortgages/loans by demonstrating a track record of sound financial performance with separate, comprehensive records for each current property.

“Each building or each unit can have its own account,” says Tomlin. “And they send you a debit card for each account, so you can make payments to and from there, which makes accounting much easier.”

“Before Baselane,” Scherer says, “we didn't have one account for rent collection and another for payments and day-to-day things. And as far as adding additional properties down the line, the ability to create a different virtual account specific to each property, and subsequent virtual accounts within each, keeps everything structured and scalable.”

Other Benefits to Look for in a Banking Platform

Unlimited virtual accounts and cards give landlords freedom and flexibility to tailor their bookkeeping to their individual needs and streamline accordingly. But there’s more to virtual banking than how you use the accounts themselves. 

Here are some additional benefits to look for in a banking platform:

• No account initiation fees or monthly maintenance fees for multiple accounts
• No minimum balance requirements
• Virtual debit cards with built-in spend controls
• The ability to make mobile check deposits
• Multiple no-fee checking accounts per business entity
• The ability to securely link external accounts and transfer funds
• A single login to manage multiple accounts for multiple properties
• Automated accounts payable integrations for more efficient bookkeeping
• Advanced security features

Conclusion

Managing your rental property’s finances can be tricky. As you scale, it gets exponentially more overwhelming. So finding the right banking platform that allows the flexibility for multiple accounts for multiple properties should be the lead domino as you scale your real estate portfolio. Ideally, you’ll find a platform that features all the benefits listed in this article so you can streamline your finances and position yourself to effectively grow your portfolio.

Baselane — with more than 40,000 real estate investors who trust the platform for their banking, property management, and bookkeeping needs — is one of those platforms. Management Library even listed Baselane as No. 1 on its list of best business bank accounts for real estate in 2024. 

“There were so many features that I thought it was way too good to be true,” says Tomlin. “I felt like there was no way that one platform could do all of these things and do them well. Baselane does.”

About Baselane:

To discover how Baselane can help you streamline your finances and scale your real estate portfolio, visit baselane.com/joe. Sign up for Baselane today for a chance to win a $500 Amazon gift card.

Disclaimer:

The views and opinions expressed in this blog post are provided for informational purposes only and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action.

Baselane is a financial technology company and is not a bank. Banking services and FDIC insurance are provided through Thread Bank1, Members FDIC. Cash back is credited once per month for all rewards above 1% and credited to your account with a maximum of $2,000 annual spend per calendar year. 1% cash back is credited instantly following purchase with no maximum spend. No minimum spend applies. Terms and conditions apply.