As a real estate investor, landlord, or property manager, you’ve got plenty of things to do besides look for a business bank.
There are renters to find and manage, property maintenance and upgrades to oversee, and maybe (hopefully!) even new real-estate deals or investments to consider.
But the bank you choose to work with actually impacts your operations — both day-to-day and in the long run — far more than you might think. It can be tempting to simply open a business bank account wherever you already do your personal banking, but all banks are not made equal when it comes to fees, ease of payment collection, and fund/cash flow management.
Ultimately, you can save yourself significant time and money, not to mention manage your budget more effectively, if you take the time to choose a business bank that meets your unique needs.
Let’s start by understanding the role banking services play when it comes to property management.
Do you even need a business bank account?
It can be a little daunting to open one or multiple business accounts. And you may be wondering why you can’t simply manage business-related funds through a personal account.
Not only are there several benefits to keeping corporate funds separate from personal money, but you are also protecting yourself from potential risk. Here are the biggest reasons to open a business banking account:
- When tax time rolls around, it’s much easier to track all your business income and expenses if they are kept separate from personal funds.
- When you separate your personal and business expenses, you avoid commingling funds and better protect yourself from liability. Should you ever need to go through an audit or something similar, providing access to your business accounts will be simple.
- You look more professional if you are accepting and making payments via a bank account that has the name of your business listed rather than your own name.
- If you want to accept credit card payments, you’ll need a merchant account that connects to a business bank account. This also helps you appear more professional and makes it easy for renters to pay you.
- Collaborating on a business bank account is easier — you can provide banking access to your bookkeeper or accountant without exposing your personal bank account.
So, what do you need to keep in mind when choosing who to use for your business banking?
What to consider when choosing a business bank:
There are several factors to consider when deciding which business bank is the best fit for your real estate business.
Here’s what you’ll need to consider at a glance. First, you’ll need to decide on the type of financial institution. Next, you’ll want to understand all potential banking fees. Assumedly, you want them to be as low as possible (or better yet — non-existent!). And finally, you’ll want to make sure it’s easy to send, receive and access money, as well as manage bookkeeping and cash flow.
Then there are factors that will specifically help you as a property manager or owner manage your type of business more effectively, such as separating rental income into different accounts and painless multi-entity management if you have more than one property in your portfolio.
So ask yourself the following questions before choosing a business bank.
1) Should you choose a traditional bank or neobank?
You may be aware that there are two key types of banks offering business accounts.
Traditional banks with physical branches, who often offer a diverse array of account options — including, say, interest-earning savings accounts — for both personal and business purposes. You get in-person customer service with these types of institutions, but also are likely to pay higher fees in comparison with neobanks.
Neobanks are online banking platforms designed for day-to-day business use. While they may not offer brick-and-mortar locations, they can provide both more flexibility (multiple accounts, for instance) and additional features (like advanced automation) to help businesses manage their finances, at a lower cost, or even none at all.
2) What kind of fees will you be asked to pay?
There are several types of fees that banks can charge. This can include everything from opening an account to any type of transaction — and these costs can really add up over the course of a year. That said, as online institutions, neobanks are less likely to charge you expensive fees, or may eliminate them altogether.
When considering a business bank, find out if (and how much) it will charge you for the following services:
- Fees to open each account
- Monthly service fees
- Minimum balance requirements
- Overdraft fees
- Fees to send funds
- Fees to receive funds
3) Is it easy to receive, withdraw and transfer money?
You want it to be as painless as possible to get and access rent money from tenants, but sometimes banks limit how much you are allowed to receive. There also may be “holds” or transaction limits on how much money you can withdraw or transfer at a time.
As well as asking your potential business bank about their policies for money collection and transaction limits, you may want to consider adjacent services that help you better manage the receipt of funds.
For instance, Rentec Direct offers easy-to-use general ledger accounting systems (designed specifically for managing real estate-related finances), as well as secure online rent collection systems for receiving payments — which you can then safely store in your business bank account.
4) Are you able to keep funds separate as needed?
Not only is it easier for bookkeeping purposes to keep certain types of real-estate funds separate from others, but in some cases it’s a legal requirement.
Things can get complicated quickly and you should always consult your accountant about how to organize funds — but in essence, your business may be subject to laws about “commingling” different types of funds. For example, it’s no problem if multiple investors pool funds for a single property into one account. But, depending on your state laws, you are not allowed to commingle security deposits in the same account where you receive monthly rent payments.
So you want to be sure you can easily open and access multiple business accounts at your chosen bank — hopefully without extra fees. It’s particularly handy if you can use the same login and dashboard to manage all your accounts.
5) Can you conveniently manage funds for multiple entities?
If you own or run more than one property — or hope to in the future — you may have multiple real estate companies set up as part of a 3 tier real estate corporate structure.
With this structure, usually, each of your properties is its own entity, and your (separate) property management company is responsible for overseeing the operations of these companies. Meanwhile, all your real estate companies and your property management company might be part of a larger holding company, which helps you access lower tax rates and protects each company from the legal liabilities of other entities.
Ideally, your business bank will make it easy for you to access and oversee the funds for multiple entities via a single login and dashboard manager.
6) Does the bank enable better bookkeeping, cash flow management, and collaboration?
The financial institution you choose should not only meet your business banking needs efficiently and without exorbitant fees, but help improve the following operational elements as well:
As the main source of information for all your transactions, the bank should make it easy to access, sort through and export data related to your finances. And if they also automate parts of the accounts payable process, it will further reduce administrative, and back-office burdens.
Better bookkeeping processes and data — in conjunction with the ability to maintain several bank accounts in a single dashboard — can provide you with a birds-eye view of all your funds. In turn, this visibility can help you optimize cash flow management.
When it comes time to collaborate on financial management and planning with your bookkeeper, accountant, lawyer, or even joint-venture partners, it will be far simpler if your bank offers safe and secure third-party access (with explicit user permissions that you can easily set up) to your banking information.
A platform for all your business banking needs
Ultimately, the best business bank for property owners or managers streamlines financial management through efficient and low-cost banking services — which in turn empowers your business growth opportunities.
Look for a bank that offers features such as:
- No fees to open an account
- No monthly fees to maintain accounts
- No minimum balance requirements
- No fees for sending and receiving ACH transfers or checks, as well as the ability to make mobile check deposits
- Multiple no-fee checking accounts per business entity, helping you to compartmentalize types of expense
- A single login to manage multiple accounts for multiple entities
- The ability to enable secure banking collaboration with staff, partners and service providers
- Enriched transaction data and automated accounts payable integrations, driving more efficient bookkeeping
If you can spend less time on banking administration, you can focus instead on growing your property management business.