Rental Income - Where do you keep your cheddar?

[Valley of Plenty]

Hey everyone, those of you who have been following the $55,000 $45,000 Triplex Saga will know that I'm currently in the middle of purchasing my first rental property. As per the advice of my accountant, I'm going to be trying my best to keep my business and personal finances as separate as possible, to keep things clear for tax and operating purposes. This means I need an account of some kind to use for the flow of all income/expenses related to my real estate ventures. Conventional thinking tells me to just head to the same bank I use for my personal checking account and open a second account for the business, but I know that there are other options worthy of consideration.

Some alternatives that come to mind are a high yield savings account or taxable brokerage account. I would imagine that a high yield savings account is better than a normal savings or checking account, for obvious reasons, and I also feel like a brokerage account might be okay to use as storage for my real estate cheddar. After all, real estate is a form of investment, and what better to do with investment income than to re-invest it? The eventual goal will be to use the profits from my rental properties to buy more rental properties, but in the meantime does it make sense to keep those funds in the market? What about keeping some portion in a checking account for easy access in case I need it, and the rest in a brokerage?

How do other Mustachian real estate investors handle this?

[norajean]

I just use my normal checking account for everything including all the rentals. I reconcile it all in Mint and Excel monthly.

[uniwelder]

I keep a second account open just for the rentals, with a debit or credit card also for the same purpose.  I make sure to keep enough cash in it to cover automatic withdrawals, like monthly mortgage payments, plus a bit extra for general repair purchases, generally about $5,000 total.  When it starts building up, I transfer money in thousand dollar increments (makes the transfer obvious to me that it wasn't a reimbursement when accounting) out of the rental account and into my personal account.   For times when I forget my dedicated rental debit/credit card or for a cash transaction, I transfer from personal account to the other in the exact amount, say $36.72, so its easy to look back on the receipts later.

I wouldn't keep rental money building up in is own account--- just transfer to your preferred method of investing.  Once its in the personal/brokerage account, do what you want with it.  Just make sure if an emergency comes up, you have easy to liquidate funds somewhere to take care of it.  I personally like having a decent amount of cash available and the credit union I use gives 5% interest on balances up to $10,000.