You need bookkeeping for two main reasons.

  • The first is non-negotiable – your CPA or tax prep software needs your bookkeeping to file your income taxes each year, specifically the expenses on your Schedule E and to set up depreciation schedules for your properties.  If you aren’t managing your books, then you are paying your CPA to do it at tax time.
  • The second reason is to keep an eye on your business to see how it is doing at any given time and to check for anomalies like unusually high expenses in a given month.  If you are not monitoring your business, it can cost you money that you don’t need to spend.


There are a few things that make rental real estate investing unique:

  • Specialized software for rent collection – you or your property manager will typically use an application or web site specifically designed for rent collection – Apartments.com is a popular example for people who self-manage and App Folio is a big one used for larger property management companies.  If you did this in your bookkeeping software, you would set up your tenants as customers and invoice them each month for rent.  While this would work, other options are going to be easier for tenants to use.  Invoicing is a big part of most bookkeeping, and not needing to use it means you can use simpler/cheaper plans with most bookkeeping software platforms.
  • Bills and billing back tenants – again, you will typically be using a separate software system for bill tenants back for damages that they cause.  For this reason, you don’t need to track the bills in your bookkeeping software.  You only need to track the payments, which is a simple transaction.
  • Class/category/etc. tracking – one thing that you really need for rental property bookkeeping is some way to categorize all of your income and expenses by property.  Different bookkeeping software call this functionality different things.  Regardless of what it is called, it is needed for rental property investing.
  • Transaction volume – a typical rental property portfolio does not generate many transactions compared to most other businesses.  You will have rent to collect and a few things to pay each month for each property – well under 15 transactions per month per property on a normal month.
  • Repeat transactions – most transactions generated by a rental property are the same each month.  You collect the same rent, you pay the same mortgage payment, you set aside the same amount for property taxes, you pay the same amount for insurance, etc.  This lets you make use of the rules that most bookkeeping softwares provide to help you categorize transaction.  When done correctly, this cuts down the amount of time it takes to manage the books of a rental property company significantly.

One thing that rental real estate investing pretty much requires is some way to group income and expenses by property.  Your CPA will definitely need this to fill out your Schedule E on your federal tax form.  This is known as “class tracking” in Quickbooks, and to get it requires an “Plus” plan or higher, which is very expensive.  Xero has equivalent functionality called “category tracking”, which is available in every plan they offer, including the version used in the DIY plans that we offer.

Most large banks like Wells Fargo or Chase are supported.  Smaller local and regional banks typically are not.  The same holds true with credit cards – Capital One and Chase Sapphire are supported, but a credit card from your local credit union probably isn’t.  Xero is based out of New Zealand, and is really just now starting to increase their presence in the United States.  Support should be better over time, but it is definitely limited for now.

Here is a list of accounts that you should or can have relating to your rental properties.  The main thing is that you have accounts that are dedicated to the rental property business and not shared with other activities.  While you can have other accounts besides these, you don’t really need them and they will potentially make your bookkeeping more difficult.  Also, we recommend keeping as much as you can at a single bank, and probably not the same bank that you use for your personal finances.

  • (Required) A checking account that handles all incoming rent payments and outgoing expense payments.  The account should only be used for things related to your rental property business.  If you only have a single checking account with a debit card, you can effectively run a rental company.   While you can have multiple checking accounts, we do not advise doing this as it adds complexity to your bookkeeping.
  • (Recommended) A savings account to hold your security deposits.  While not absolutely necessary, we highly recommend a separate account for security deposits.  Security deposits are not your money and are actually a liability to your business.  By keeping them in a separate account, you can easily show how this liability is covered.
  • (Optional) A credit card to pay bills.  If you have a credit card that pays cash back or has other rewards, using it where credit cards are accepted can gain you personal benefits.  Home improvement stores, hardware stores, paint stores, department stores, restaurants, some contractors, and some utility companies will take credit cards without a penalty.
  • (Optional) A savings account for property taxes.  If your bank does not escrow money for property taxes, putting monthly deposits into a separate savings account will save you from having to cough up a relatively large amount of money when property taxes are due.
  • (Optional) A savings account for reserves.  EVERYONE who invests in rental real estate needs to have reserves for unexpected repairs and maintenance.  If you want to be able to see and track the actual amount of money you have set aside for this purpose, a separate savings account will be helpful.
  • (Optional) A property management account.  If you use property management, you will have an account at your property management company.  They will likely hold some reserves for you, they may hold tenant security deposits, and they should either provide you a statement each month or have some way to access their software to download statements yourself.

Any account can be tracked.  These apps probably have transaction list that you can download each month, either as a comma-separated value file or a format that will directly import into an account system.  Worst case, you will have to enter transactions manually – which isn’t a big deal if you only have a couple of tenants.  As you get bigger, I would recommend using a system specifically for rent collection and tenant management.  Apartments.com is a free one that seems to work fine.  There are several other options out there for the same type of service that typically cost a few dollars per month.  If you use property management, they should have their own system for this.

TLDR;  The short answer is, either will work fine.

The big thing that you will gain using business accounts is that they typically allow for read-only access for other people, such as your bookkeeper.  This will significantly speed up the bookkeeping process if your bookkeeper can look up check and deposit images and download statements.  The downside is that these accounts usually have higher minimum balances, potentially have yearly or monthly fees for having the account, and generally don’t have as many features as a personal account.  Business credit cards are harder to get and usually do not have rewards options like personal cards do.  This is also one of those situations where it makes more sense as you get bigger to switch over to business accounts.

Also, smaller banks typically have more laxed rules around adding accountant/bookkeeper access to even personal accounts.  I can confirm several regional bank in the Madison, WI area allow this type of access.  Your best bet is to just ask someone at the bank.

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