Owning a rental business is not an easy task. You have to look after the finances, properties, and whatnot. One vital aspect of this business is the financial management. And that is where the separation of personal and rental finances comes in. This is the age of convenience. So, you, as a landlord, cannot steer clear of experiencing the benefits of having a separate landlord banking account. What’s more? It makes your life easier. And who doesn’t want to make his/her life simple in addition to saving money?
If you want a clear financial overview of your rental business, it’s time to separate personal and rental finances with landlord banking accounts. Let’s find out why it is important.
The first and foremost reason for keeping the rental and personal finances separate is saving loads of money. You earn money from the rental properties and also incur some expenses while handling rental operations. Subtracting expenses from revenue gives you taxable income. And having a separate landlord banking account track your expenses in a better way. Right expense tracking helps you keep track of profitability, and hence you can make informed financial decisions.
It is considered as a professional standard to keep your personal and business finances separate. You cannot get special protection for commingled accounts. Due to any cause, if your account is frozen or you are being sued, the authorities will not consider any personal funds in the account. And everything will be considered as part of your business account. You will be surprised to know that some states even consider it against the laws or regulations to commingle the security deposits with other funds. That is why having separate business and personal accounts protects you in such situations.
Helps in scaling
Having a separate landlord banking account becomes all the more important if you want to scale your rental business. Extending your business means more financial records to take care of, which further leads to more transactions. Thus, the organization becomes even more important. A separate account provides you with a clear picture of the financial performance of your properties. You can then make wise decisions about expanding your portfolio. Moreover, it strengthens your relationship with the investors and leaders. You can then easily show that your rental business is a legal entity. And as more investment properties start coming in, your business will definitely scale.
Commingling means combing your personal and business funds. Many states don’t allow landlords to commingle security deposits with other assets. This rule came into existence to protect the renters as the security deposit actually belongs to the renter throughout the lease duration. Sometimes commingling might not be illegal, but generally, it is regarded as a bad business practice. In addition to that, separate accounts make the organization of finances easy and simplify your taxes.
Do you know that some landlord banking accounts help you earn potential rewards? Yes, it is true. You can enjoy the rewards if you spend on landlord-specific categories and earn a high annual percentage yield (APY) on your savings. Who doesn’t want to get such immense benefits by opening a separate landlord banking account to manage rental properties? Furthermore, you can open the account through an online platform that also lets you set up tenant reminders, late fees, invoicing, and many more.
Beyond the above-mentioned benefits, you can save loads of time. You don’t have to go through your bank feeds line by line. Your tenants can deposit their rent in your rent account, which streamlines the process of rent collection. You don’t need to manually track and verify rent receipts. It not only saves time but reduces the chances of errors and confusion.
Want to reduce the tax preparation fees? Open a separate landlord banking account for managing your rental properties. You can then easily claim your relevant expenses and deductions to reduce the tax burden. You can easily identify and categorize the transactions related to rent so that no deductions and expenses are missed. Couple that with a free tax calculator, and you’ve simplified the process exponentially. In this way, you minimize the tax liability. Besides, separate accounts have a significant role to play in transparent documentation when an audit occurs. It gives peace of mind to the landlords, thereby reducing the chances of additional scrutiny.
To make a long story short
There is no denying the fact that keeping your personal and business finances separate comes with a plethora of benefits to the landlords. It simplifies the processes of accounting, bookkeeping and saves you time and money. It is one of the best ways to keep your property finances under control and organized. Consequently, with tax simplification, you can hire financial help at cheaper rates. So, grow your portfolio and experience the unlimited benefits with a separate account for personal and business finances.