Managing rental properties can be a great way to build wealth, but it does come with its challenges, especially when it comes to keeping your finances organized. A lot of successful landlords swear by using separate bank accounts for their rental properties, and it makes life a whole lot easier. Having the right account helps you stay on top of payments, manage cash flow, and makes tax time much less stressful.
Whether you’re just starting with one property or already managing a small portfolio, this guide will help you find the best bank account for rental property management, so you can keep things simple and smooth.
How the Number of Properties You Manage Affects Your Bank Account Needs
First, how many properties do you have? Are you just starting out with one or two, or are you already a mini mogul? The number of properties you have will impact how you manage your finances. For example, if you have multiple properties, you may need more advanced tools to keep track of everything.
And don’t forget taxes; they can be a real pain if you’re not organized. It all adds up quickly, right? That’s why it’s so important to keep your personal and business finances separate. Trust me, you don’t want to be scrambling to figure out which expenses were for your rental properties and which were for your family vacation when tax time rolls around.
Plus, having a clear separation makes it so much easier to see how your rental business is really performing.
Bank Accounts for Rental Management
First up, we have business checking accounts. These are your workhorses. They’re great for processing rent payments, paying bills and tracking your daily expenses. Look for accounts that offer:
- Low or no monthly fees (because who likes to pay extra?)
- Free or cheap transactions (you’ll be doing a lot of these)
- Online and mobile banking (because who has time to go to a bank branch?)
- Easy integration with property management software (trust me this is a game changer)
Now you might be thinking “Do I really need a separate savings account for my rental business?” Well it’s not a bad idea. Have you heard of money market accounts? These are like the cool cousins of savings accounts. They often offer higher interest rates and you can still write checks or use a debit card.
Now here’s the big question: online bank or traditional bank? It’s not a one size fits all answer but here are some things to consider. Online banks are great for:
- Higher interest rates (up to 5% in some cases!)
- Lower fees (more money in your pocket)
- User friendly apps and websites (because who doesn’t love convenience?)
On the other hand traditional banks offer:
- Face to face service (sometimes it’s nice to talk to a real person)
- Easier cash deposits (if you receive cash rent payments)
- A wider range of services (like loans if you’re thinking of expanding your property portfolio)
At the end of the day the best account for you will depend on your specific needs. How many properties are you managing? How tech savvy are you? Do you like to do everything online or do you like the idea of popping into a local branch?
Some landlords find mixing and matching works best – a checking account with a traditional bank for everyday stuff and an online savings account to earn better interest on their extra cash. Whatever you choose the key is to keep your rental finances separate from your personal money.
Top Features to Look for in a Bank Account for Property Management
When setting up your rental property business choosing the right bank account is like picking the perfect toolbox for your financial needs. Low or no monthly fees are a big deal for rental property management. Every dollar you save on bank fees is a dollar that goes straight to your bottom line.
Think about it – if you’re paying $20 a month in fees that’s $240 a year that could be going towards property improvements or marketing. Some banks offer fee waivers if you maintain a certain balance which can be a great option if you’re keeping a healthy cash reserve.
You need an account that can keep up with your busy financial life without hitting you with extra charges. Look for accounts that offer unlimited or high numbers of free transactions. That way you won’t be caught out by surprise fees for using your account.
And speaking of digital tools integration with property management software can be a real game changer. Imagine having all your financial data syncing with your property management system automatically. Your rental income is your living so you want to make sure it’s well protected.
Interest Rates and Overdraft Policies
You might not think a few percentage points matter much but they can really add up over time especially if you’re dealing with larger sums of money. Interest bearing accounts can help you earn a little extra on your rental income and security deposits.
For example some money market accounts offer interest rates up to 5% APY which is way higher than traditional savings accounts. That extra interest can help offset some of your property expenses or contribute to your maintenance fund. When comparing accounts look for:
- Competitive interest rates
- Is the rate fixed or variable
- Any balance requirements to earn the advertised rate
- How often interest is compounded (daily is best)
Remember even a small difference in interest rate can add up over time. For example if you have $10,000 in security deposits an account with a 2% APY would earn you $200 a year and an account with a 5% APY would earn you $500. That’s $300 more in your pocket just for choosing the right account!
Now let’s talk about overdraft policies. As a landlord you’re dealing with a lot of transactions – rent coming in, bills going out, unexpected repair costs. It’s easy to slip up and accidentally overdraw your account. That’s where understanding overdraft policies becomes important.
Here’s what to look for:
- Overdraft fees (these can be big, often $35 per transaction)
- Overdraft protection options (like linking to a savings account)
- Daily maximum number of overdraft fees
- Any grace period before overdraft fees kick in
Some banks are more forgiving than others. For example some will give you 24 hours to cover an overdraft before charging a fee and others will charge immediately. Some will cap the number of overdraft fees they’ll charge in a day which can be a lifesaver if multiple transactions hit when you’re short on funds.
Bank’s Reputation and Support for Businesses
First off, customer reviews are your best friend here. They give you a real world view of how the bank treats their business clients especially those in real estate. Look for reviews from other landlords or property managers.
Are they happy with the service? Do they mention any specific features that make their life easier? Look for comments about customer support – you want a bank that’s responsive and helpful when you need them.
For example Chase Bank gets high marks from small business owners for their full service and user friendly online platform. Many landlords like their Business Complete Banking account which offers free incoming wire transfers and integration with popular accounting software.
On the other hand some online only banks like Novo have a strong reputation among small business owners for their low fees and tech savvy approach. They offer features like integration with property management tools and quick mobile check deposits which can be a lifesaver for busy landlords.
Don’t be afraid to reach out to banks directly with questions. Ask about their experience with landlords and what specific services they offer for real estate investors. A bank that can explain how they can help your business is usually a good sign.
Finally, consider the bank’s stability and FDIC insurance. Not the most exciting topic but important for your rental income. Most banks offer the standard $250,000 FDIC insurance but some like Azibo partner with multiple banks to offer higher coverage limits.
Tax Preparation and Reporting
Tax preparation and reporting is one of the most time consuming and stressful parts of being a property manager. That’s why having a bank account with good tax preparation and reporting is key for property managers. First off, an account that provides detailed reports for taxes is worth its weight in gold.
For example some banks offer features that automatically categorize your expenses into tax relevant categories like repairs, maintenance, utilities and property management fees. This means when it’s time to file your taxes you’ve got a clear, organized record of all your deductible expenses at your fingertips. Now let’s talk about how a good account can simplify your year end tax filing:
- Integrated reporting: Look for accounts that offer integrated tax reporting. These can generate reports that match IRS schedules so you can easily transfer information to your tax forms.
- Export capabilities: The ability to export your financial data in formats compatible with popular tax software is a huge time saver.
- Year round tracking: The best accounts allow you to track tax relevant information throughout the year not just at tax time.
For example some property management banking platforms like Baselane offer features that generate tax reports by property. Another feature to look for is the ability to tag transactions with custom labels.
Even if you have an accountant, having this level of organization and detail in your financial records can save you money. Accountants charge by the hour so the more organized your finances are the less time they’ll need to spend preparing your taxes and potentially save you hundreds of dollars in accounting fees.
Final Thoughts
Selecting the right bank account for your rental property business is more than a financial decision – it’s a strategic move that will impact your daily operations and long term success. The right account will not only protect your rental income but also streamline your financials, simplify tax prep and potentially grow your business.
But managing your finances is only half the equation. To really optimize your rental property business consider adding property management software to your operations. One of those solutions is a property management software that simplifies your rental business.
Ready to take your rental property business to the next level? Discover how easy property management can be with Loomlease!