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Back to: Landlord Success: Proven Strategies & Practical Advice for Stress – Free Property Management

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BANK ACCOUNTS

  • I set up two different bank accounts that I use for all my rental properties.
  • The FIRST account is used to hold all of the Security Deposits, as required by the Tenancy Act. This account is used ONLY to hold the security deposits. 
  • The Tenancy Act states that the Security Deposit account should be a TRUST ACCOUNT.  In the past I have found it difficult to open a trust account if you are not a Lawyer or Real Estate Brokerage. Ask your bank and quote the tenancy act. If you can not get one use a regular interest-bearing account to hold only the security deposits. 
  • The SECOND account is used for all other deposits and expenses. 
  • I start this account with an initial nest egg in the account such as an additional $5,000 or more, depending upon the number of properties I have. This way if a tenant is late paying or there is some other expense, you have additional money in the account and you do not have to worry about making up a short fall immediately especially if you are out of town.
  • All rents from each property go into this one account.
  • The mortgages, utilities, property tax, property insurance payments are auto paid from this account.
  • If you can get the utilities set up on a budget payment plan, the amounts will be consistent every month for each property. This makes the accounting and budgeting easier.
  • I generally pay for any repairs and maintenance out of pocket and do not run these charges through this account. (Keeping all the receipts). 
  • At the beginning of every month, I pull out my printed “Payment Check List” (see Resources section) that is stored in a folder and I look at the bank account online. I then spend 5 minutes and quickly check off all the Debits and Credits that have be processed in the account.
  • When the tenant pays rent via auto debit the account will always show the money going in on the first of the month and it will take a few days for a transaction to bounce if there was Non-Sufficient Funds. So, I check the account on the 3 or 4th day of every month.
  • If there is an issue with one of the Debits or Credits, I deal with it immediately.  If the issue is a bounced rent, call or and text (written record of conversation) the tenant immediately as sometimes it’s a mistake.  Have them resend as much as possible via e-transfer ASAP.
  • I never have 2 properties with the same rent amount. That way I can tell who’s rent payment has bounced.  If there are 2 properties at a $900, I will charge one tenant  $901 to keep my accounting simple. If the tenant complains I just give them $12 out of my wallet at the beginning of the year.
  • When you apply for a new mortgage, you have easy proof that all of your income and expenses match your leases and other application data with one bank account. I print a couple of recent months statements, circle each line item, and write the item name and address beside it for the lender.
  • Choose the correct bank account product to minimize the fees based on the number of electronic and in branch transactions you expect. Review your account fees every year or so.
  • You must keep your financial records, so keep these bank statements. The Tenancy act says you must keep your Security Deposit records for a minimum of 3 years. I recommended keeping all bank records for 7 years minimum.