I have your standard “Income” account that all income is deposited to and “operating expense” account that all expenses are paid through. I also have Holding accounts where I transfer money temporarily to accounts like “Property tax” “Insurance” etc. but I always transfer said money back to the operating expense account to pay any of the previously mentioned.
What is the best way to deal with this? Add all accounts and mark them as transfers or just add my income and operating expense accounts and delete the transfers to and from the “holding” accounts from stessa as if they never happened?
@weomhomes This issue is really about discipline, business structure, and sanity.
If you own all your properties in your personal name or under the same LLC (one company), where you keep the money doesn’t really matter.
Many landlords struggle to stay disciplined and avoid spending what’s in their bank account instead of following their financial reports. In those cases, it helps to move money aside and earmark it for its intended purpose such as insurance, taxes, or future capital expenses.
For your sanity, constantly moving money back and forth and tagging transfers can get tedious when it doesn’t actually matter. If everything falls under the same company, just pay expenses directly from the account where the money sits.
The exception would be partnerships, S-corps, or other entities that require separate balance sheets. In those cases, you do need to track transfers along with owner contributions and distributions.
Thanks a lot for taking the time to respond! I totally agree my structure could definitely use some improvement.
As I’m still figuring things out with the business, it’s been a big learning curve for me. I didn’t originally have holding accounts set up, but now with heating season approaching and end-of-year expenses (heating oil, property taxes, and insurance) coming up, after the repairs needed from dealing with a rogue tenant, I realized I barely have anything set aside.
You’re right, paying expenses directly from the account where the funds are sitting makes a lot of sense!