How to Set up Your Bank Accounts with a Growing Real Estate Portfolio
We answer a submission from Gary around banking and what we do with our bank accounts when our real estate portfolio is growing. When you have multiple properties and you have multiple joint venture partners, there’s lots of different things going on. In Gary’s case, he actually has what I deemed as a fairly complicated system of sub accounts of the sub accounts. And it got rather confusing for me. So this is for anybody out there that has more than one property and in most cases, if you have joint venture partners that you own the property with. We will be following the system that we use and that we generally recommend to most people.
A disclaimer, this does not include anybody that manages other people’s properties. They are only for properties that you own or you co-own with other people. I just want to make sure that you’re aware of that its not for property management.
What we do with our bank account systems:
It’s a main business checking account with a bank. It could be any kind of bank that you can do checks with, email, money transfers, that sort of thing.
Then we set up specific property accounts for each property. Example; property one, two, three, four, as many as you want. Each of those property specific accounts are just basic personal checking accounts.
I am personally on the account and his joint venture partner is on that account. We both have access. The key is making sure you explaining to your joint venture partner that they’re not to do anything with that account without checking with you first because you’re the managing partner, I assume you are in most cases. It’s not an account for you guys to play around with to transfer money whenever. You want to specifically only give them access to it so they can see what’s going in, what’s going out.
Any bills coming in and money going out. Each property specific account you put your rent check into, transfer the money in or however it works for that specific property. The mortgage comes out of that account, whether the mortgage is in your name, a business name or your joint venture partners name. The money comes out of that account.
To write a check for a tradesman or some somebody that doesn’t take a a visa card, we’ll write the check from our main account. We’ll track what the bill was for, right on the receipt, which property it’s for, and then we will transfer the funds from that property back to pay ourselves back. And we just track that with, QuickBooks, Excel spreadsheet, whatever you use to track your expenses. For instance, if there was some job that had to be done at this property, say some plumbing went and I had to pay a plumber with a check, I’d write the check from my main business account that go to him or her, the plumber, and then I would just transfer the funds from our property that we did the work on to pay myself back.
I have a business credit card and that business credit card basically acts like this as well. So the business credit card, I’ll pay for any number of these things and then I just pay directly online from the specific properties account to pay back that credit card.
That is how the flow of money works. The key thing to all of this is that these are just personal checking accounts and you set them up, you get your joint venture partner added on with you so they have access to it too. When it’s time to pay them out, your going to pay them cash flow from it, what I do, I don’t write them checks. I tell them how much money they can take out of the account and then it’s on them to take that money out. This is the system that works for us, we control everything, but our JV partners do have access to it.
In terms of banks, there’s no one bank that’s better than any others. We actually have several accounts with one bank. We have another several accounts with another bank. We have about four different banks that we deal with. There’s no one bank that’s better than any others, but that’s our system. That’s how we work. We found it works really, really well. It’s great for tracking purposes and I highly recommend you do something similar with your own system. I hope this gives some advice to a variety of other people that are looking for how do you do your banking when you have multiple properties and partners.
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