Accounting, Property Management, Rent Payment

Landlord Banking: Why You Should Use a Dedicated Bank Account for Landlords

bank account for landlords

Should you have a bank account for landlords? Having a business banking account is a necessity for any independent business, especially real estate. Digital-first banks are gaining popularity for personal accounts but have not gained much traction in SMB/business accounts. These banks still need to be tailored towards these businesses and better serve them.

Linking banking and rental property management software simplifies landlord banking by streamlining rental management, accounting, rent payments, taxes, and more. In this article, we compare key aspects of traditional banks and credit unions with landlord-dedicated bank accounts – such as those offered by software providers like Baselane and Stessa – so that you can make the right choice.

Why Landlords Should Open a Separate Bank Account for Rental Property

The biggest benefit of one, centralized landlord banking account is that it allows you to collect rent and track expenses for your full portfolio. Unlimited virtual accounts and the ability to tag transactions by property or unit means you can see your finances on a property level, without handling multiple accounts and logins.

internal link Also Read: The Best Online Rent Payment Service for Small Landlords

Moreover, virtual accounts allow you to keep security deposits separate without opening another costly account. This helps you avoid commingling and abide by any legal requirements. Once you have set up separate accounts for each unit, you can then link each account directly to each property. This decreases the probability of accounting errors and helps put your income and expense tracking on autopilot within the platform. With separate accounts, most investors find that their financial reports are more precise and there is less manual work to do.

internal link Also Read: Reporting and Accounting Tools: Best Accounting Software for Landlords

Often you can be eligible for potential rewards for spending on landlord-specific categories (such as cash back at home improvement stores) and high annual percentage yield (APY) on your savings. With a dedicated bank account for landlords, you can track rent collection, set up tenant reminders, late payment fees, and invoicing – all in your banking platform. Some landlord banking tools like Stessa also speed up accounting by allowing you to tie purchases directly to a property.

Plus, you can integrate the banking platform with bookkeeping tools and auto-tag expenses to Schedule E categories. Having a direct link to banking, as opposed to Plaid (which many property management software products use), avoids the many syncing issues that Plaid tends to have.

landlord banking

Comparison: Bank Account for Landlords vs. Traditional Brick and Mortar Bank

Landlord banking and traditional banks have a few similarities in the way they operate. For instance, both types of accounts are FDIC insured up to $250,000 per depositor, per insured bank, for each account ownership category. They both accept all major forms of payment such as ACH, debit/credit, Zelle, etc. However, there are quite a few differences as well, including:

Costs and Fees

Small business accounts often have minimum balance requirements, ACH fees, and low APY on deposits. Landlord banking accounts often do not have such requirements.

For instance, Baselane and Stessa do not have any monthly maintenance fees. There are no minimum balance requirements, no fees on bounced checks, and no inbound wire fees. This makes it easy to offer tenants additional payment methods. Outbound domestic wires with Stessa incur a $5 fee, though it doesn’t support international wires yet.

internal link Also Read: Landlord Accounting Software for Your Rental Property: Stessa Overview

Likewise, Baselane’s bank account for landlords has no monthly minimums and no fees for opening or maintaining an account. There are no fees on cash withdrawals or transfers. Plus, you don’t need any minimum deposit.

internal link Also Read: Baselane Overview: Landlord Banking & Rental Property Finances

Interest

Landlord banking options often offer higher interest as compared with traditional business accounts. For example, Baselane offers 2.40% APY and Stessa offers 2.00% APY whereas traditional banks offer as little as 0.03% APY.

The higher the APY, the faster your money grows. These landlord banks offer high interest yields that are 80X the national average on all deposits, even on security deposits.

Cash Back

Traditional banking usually has no cash back rewards on debit card spending. A bank account for landlords, on the other hand, may offer cash back on home improvement and other landlord-related spending.

For instance, Baselane offers up to 5% cash back on all home improvement spend (up to $5,000 / year), and unlimited 1% cash back on all other debit card spend:

  • 1% cashback is unlimited
  • 5% cashback is capped at $5K on spend per year

Stessa account holders can earn 1.1% cash back on debit card purchases. There is no limit to the amount of cash back you can earn.

Integration

Traditional banks are not integrated into bookkeeping and rent collection tools, which means they aren’t tailored for landlords. On the other hand, a bank account for landlords is integrated into your bookkeeping and rent collection systems. This saves you time and money. Additionally, you can connect your Baselane account with any bank you use. It supports integrations with 11,000 banks and credit unions.

Virtual Accounts

Traditional banks do not have virtual accounts whereas landlord banking often offers unlimited virtual accounts. Multiple virtual accounts help you get better organized. For example, you can create separate accounts for every unit of a triplex, to segregate savings for a future remodel, or to keep security deposits separated.

For instance, with both Baselane and Stessa, you can automatically track income and expenses with unlimited free business or sole proprietorship accounts. This allows you to open a dedicated account for each rental property or portfolio.

Bank Account for Landlords: Takeaway

Opening a bank account for landlords can save you time and money by centralizing your rent collection, bookkeeping, and banking all in one place. With a dedicated bank account for rental property, you can simplify real estate investing.

We recommend that you check out landlord banking options such as Baselane and Stessa. Both tools have streamlined landlord banking for new and seasoned property owners alike.

Baselane allows you to create multiple accounts per property to keep expenses organized and funds separated. For instance, one of the unique features to help landlords accomplish this includes a dedicated virtual account for security deposits. You can also apply for virtual and physical debit cards that have smart built-in controls. So you can decide how frequently and how much can be charged, for everything from monthly utilities to quick maintenance.

  • Integrated set of property management tools to help real estate investors and landlords save time and money while increasing their rental property returns.
  • Strength: Landlord Banking

Stessa automates bookkeeping and financial tracking by securely syncing with the bank and financial accounts associated with your rental property. These could include checking and savings accounts, dedicated credit and debit cards, mortgage accounts, and other debt accounts. Once you link your accounts, the platform automatically tracks your transactions. It then organizes them into easy-to-use reports of assets, liabilities, income, and expenses.

Stessa has recently introduced all-in-one money management with a Stessa Checking account, making it even easier to integrate banking with your property management tools. As compared to a traditional bank, it is easier to use Stessa to open a checking account in the name of your LLC or other business entity. Depending on the nature of your entity, you may have to submit extra documentation, but everything can be done online.

  • Asset management and accounting software for real estate investors, including smart money management, automated income and expense tracking, personalized reporting and more.
  • Strength: Accounting and Financial Tracking

Disclosure: Some of the links in this post are affiliate links and Landlord Gurus may earn a commission. Our mission remains to provide valuable resources and information that helps landlords manage their rental properties efficiently and profitably. We link to these companies and their products because of their quality, not because of the commission.

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About Chris Lee

Chris comes from a family of real estate investors, and remembers well his childhood of helping to prepare apartments between renters. He now manages his own property, apartment complexes, and condos. He has particular insight into the issues around short-term rentals as he manages those for himself and for other owners.
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