When purchasing rental properties, there is often a steep learning curve. You have to understand the market, figure out how to finance the purchase of a property, and learn how to screen tenants. You’ve probably heard horror stories involving unpaid rent, broken toilets, or issues with HOAs.
Even the basics of real estate investing can be difficult to master. Everything from paying quarterly taxes to separating your business and personal finances is new to many real estate investors.
If you don’t have a plan to streamline your business, your bookkeeping could turn into a bigger nightmare than a leaky toilet or delinquent tenants.
In this post we explain:
- What to look for in a bank for your real estate investments
- The best banks for your investments
- Why setting up business banking is so important
My experience as a property owner
As a real estate investor, I have made almost every mistake when it comes to choosing a base organization for my real estate business.
You’ve mixed up work and personal finances. You have selected banks that do not allow cash or mobile deposits. More than once I’ve chosen banks that closed down after a year or two, meaning I had to set up all my accounts again at another bank.
What to look for in a land bank
- There are no monthly maintenance fees. Business bank accounts often carry fees of $15 to $20 per month or more. But there’s no real reason to pay these fees unless you’re doing a large amount of business. In general, you can find free checking accounts that fit your real estate needs.
- Multiple ways to accept money. You may plan to raise money through online collection, but you never know how your tenants will actually pay you. I have received cash, money orders and personal checks even though my lease clearly states that I only accept online payment. Ultimately, I don’t refuse the tenant money. Find a bank that allows you to deposit cash and checks so you can have the money in the right place.
- Integration with other bookkeeping and management tools. If you use bookkeeping or other rental property management software, you’ll need to have your software connect to your bank account. Two of the banks we recommend below are built as integrations with comprehensive rental property management tools. Other banks are not specifically integrated with management tools, but connect to bookkeeping and other management software.
- No transaction limits. Some business accounts charge fees if you have more than 20, 40, 50, or 100 transactions per month. While rental properties typically don’t require a lot of payments, these limits seem unnecessarily frustrating to overcome.
- Be wary of newer establishments that may close their doors after a few years. Online banks or newer fintech companies often offer great incentives like high returns, account opening bonuses, and more. But they may not succeed in the long run. If your bank closes, you may not be able to access the funds in your account for weeks or even months. Furthermore, you will have to set up a new account with new payments. It is very painful, so be aware of this when searching and go with a more established institution if this is important to you.
“Overrated” banking features.
While the above features are very important for real estate investors, there are some features that new real estate investors may overestimate. These are some things to think about:
- Access to loan products. Generally, real estate investors use financing to purchase real estate. However, your primary mortgage bank does not need to be known for its loans to real estate investors. If you buy single-family homes or small multi-family homes, a mortgage broker is more important than a banker. They can help you shop for mortgages at a range of banks depending on your needs at the time. Mortgage brokers can also help establish home equity lines of credit or refinance homes to cash out equity to purchase new investments.
- High-yield current accounts. Right now, you can earn amazing returns when you deposit cash into high-yield checking or savings accounts. But the cash you earn from real estate will often be reinvested in a future property purchase or used to pay off the mortgage. If you can find a high yield, that’s great. But it’s not the end of the world if you have to transfer money to a higher-yielding account once every three months.
The best 5 banks for real estate investors
Based on the above criteria, these are the five best banks for real estate investors.
1. Basalan
Baselane is an integrated management and banking solution for property owners. Founded in 2020, the company offers a free commercial inspection to property owners. The Baselane system includes beautiful reporting, high account returns, and access to loans and insurance products designed for landlords.
Account highlights:
- Fully integrated with tenant screening and rent collection systems
- Accepts mobile check deposit (via mobile web page)
- Accepts cash deposits at Allpoint ATMs
- Up to 2.63% annually
- 1% cash back on all discount purchases + up to 5% cash back on your first $2,000 in spending
- No transaction limits
- Home loans are available
- Mortgage insurance is available
Account risk:
- Only established in 2020
- It’s difficult to switch to Baselane if you’re using an alternative rent collection system
Bonus: Baselane is now offering a $150 bonus to new accounts!
⚠︎ This is a banking service provider, not a bank.
Baselane is a fintech company, not a bank. Although they use partner banks to provide banking services, your FDIC insurance protection may be limited. Read this article From the Federal Deposit Insurance Corporation (FDIC) to understand the risks of using a non-bank company.
2. Stesa
Stessa is a recent outgrowth of Roofstock, a turnkey real estate company. Stessa was founded in 2016 but was recently acquired by Roofstock. The company has both free and paid solutions for realtors to consider.
Account highlights:
- Free integration with property management software
- Some free reports
- Earn up to 3.49% APY
- Deposit checks via mobile phone
- Get Table E with a paid subscription to Stessa Pro
Account risk:
- Inability to deposit cash into accounts
- Stessa Pro costs $20 per month or $192 per year
⚠︎ This is a banking service provider, not a bank.
Stessa is a fintech company, not a bank. Although they use partner banks to provide banking services, your FDIC insurance protection may be limited. Read this article From the Federal Deposit Insurance Corporation (FDIC) to understand the risks of using a non-bank company.
3. Mercury
Mercury is a fintech banking service that has made a big name for itself over the past few years. They focus on small business and startup banking – but the same features small businesses use work great for landlords too!
Account highlights:
- Online digital banking
- Accepts mobile check deposits
- No monthly fees
- Accepts a range of business types
Account risk:
- There are no physical branches
- There is no support for cash deposits
- Higher interest rates require more money
⚠︎ This is a banking service provider, not a bank.
Mercury is a fintech company, not a bank. Although they use partner banks to provide banking services, your FDIC insurance protection may be limited. Read this article From the Federal Deposit Insurance Corporation (FDIC) to understand the risks of using a non-bank company.
4. Exos Bank
Axos Bank is a digital-first bank that provides free business checking for a range of companies. On top of being a great place for your business checking account, Axos is a full-service bank that offers high-yield savings, CDs, and more.
Account highlights:
- Up to $400 to open a new account
- Accepts mobile check deposits
- Accepts cash deposits at Allpoint ATMs
- Pays up to 2 local wires per month
- Accepts a range of business types
- Access to a full-service business bank
Account risk:
- You need to set up external bookkeeping tools
- You will not earn interest when using Business Basic Checking
- No more than 60 remote deposits each month
- Minimum daily balance is $5,000 to waive the monthly trading interest checking fee
5. The first Internet bank
Founded in 1999, The first Internet bank is a leader in digital banking, but continues to push the envelope to serve its customers. The award-winning Do More Business Checking account has no minimums and no monthly fees.
The account is ideal for landlords looking for an established bank to set up their finances.
Account highlights:
- There are no minimums or monthly fees
- No transaction limits
- Earn 0.5% APY
- Deposit checks via mobile phone
- Deposit cash into ATMs
- Pay up to $10 in ATM fees
- Access to high-yield savings and other banking products
Account risk:
- Cash deposited in ATMs is not immediately available
6. Digital Federal Credit Union
Digital Federal Credit Union (DCU) has robust free screening options for member employers. To join DCU, you must join a member organization or be eligible through your employer or community sponsor.
Fees to join a member organization start at $10. Although the word digital is included, DCU has branches in the North East as well as mobile banking options.
Account highlights:
- There are no minimums or monthly fees
- Up to 20 transactions per day
- Deposit checks via mobile phone
- Deposit cash into ATMs
- Access to more than 80,000 ATMs
- Pay up to $10 in ATM fees
- Access to high-yield savings and other banking products
Account risk:
- Earn just 0.1% APY
- You must be eligible to become a member of DCU
- Pay $10 per deposit if you deposit more than 20 items per day
Create a separate land bank
Each business checking account has advantages and disadvantages and none of the accounts listed are perfect. The most important thing is to separate your funds as quickly as possible.
Bookkeeping becomes simple when you keep your real estate funds separate from your personal funds. And if you’re struggling to make a profit from rental properties, you’ll want to know how much you’re losing each month.
Do yourself a favor and start opening a real estate checking account before you start investing in real estate or as soon as possible. Just as with personal banking, be sure to choose a service that suits your preferences and business needs.
