Choosing a bank that has the right services for your rental property business needs involves careful consideration. After all, you do not want to entrust your money to a bank led by someone such as William R. Beamon. Beamon swindled more than $20,000 in rent payments and security deposits from unknowing tenants. To top it all off, the properties were not even owned by him, but instead, the bank he worked for. Incidents like this can cripple your entire business overnight. Fortunately, most banks are not concealing such fraud.
However, some banks have their own downfalls in the form of fees, special policies, and poor customer service. All of these factors can also have a profound effect on your success as a property owner. Therefore, follow along with us below as we discuss the specific services and policies to compare when deciding on the best bank for your rental investment business.
How to Choose the Best Bank for Your Rental Property Business
Successful landlords know that financial services are essential to smooth transactions of all kinds in the rental property business. The key here is that these features should help you pursue and achieve investment success. Check out the list of key questions to answer below that will help you find the best bank for your rental property business.
- How Would You Rate the Customer Service?
- Do They Have Direct Rent Deposit Capability?
- What Are Their Transaction Fees?
- What Online Banking Services Are Offered?
- Are the Hours of Operation Conducive to Your Business?
- Do They Offer Financing Services Tailored to Property Managers?
- Does the Bank Have International Banking Services?
How Would You Rate the Customer Service?
Professional, courteous, and comprehensive customer service is a vital part of any business. When you have questions regarding financial transactions, you want to know someone who will quickly and conveniently resolve the issue.
Before making your final decision on which bank to choose, visit the bank and meet the people, you will be conducting business regularly.
The right bank can answer all of your questions thoroughly, returns your phone calls or emails promptly, and treats you as though you are already a trusted and loyal customer. It is important you feel comfortable with the bank you choose and those that will be caring for the finances that fund your investment portfolio.
Do They Have Direct Rent Deposit Capability?
Many landlords grow tired of traditional payment methods and want to collect rent online as a convenience to both them and their tenants. So, consider a bank that has this service built in. Your tenants pay their monthly rent with direct deposit rent collection, and it transfers straight to your designated account.
That said, beware of the fee charged to your tenant for using the online payment service through your bank. If you do not allow alternative methods for paying the rent, the tenant may be unhappy with your bank’s large added fees. If the fees are too high for this service, but everything else is exactly what you need, consider using alternative software to collect and process rent payments.
What Are Their Transaction Fees?
It is no surprise that many banks make the bulk of their money off charging their customers hefty bank fees. That said, the best banks keep their fees as low as possible. While it is unlikely that you will pay zero fees to your bank, you can lessen the cost regardless of which one you choose. So, carefully evaluate the types of transactions you regularly conduct each month and determine the bank’s related fees. For instance, returned check fees may not apply to you if you or your property management company collect the rent via an online portal. However, transaction fees may apply if you are regularly transferring money from an online portal to your bank account.
What Online Banking Services Are Offered?
Banks that prioritize convenience for their customers will have a robust list of online banking services. As such, it is crucial to compare these services amongst the different banks you are considering. Common online banking features include but are not limited to the following:
- Accessibility of account balances, activity, and history
- Transfer of funds both internally and externally to other banking institutions.
- Recurring or future-dated transfer setup
- Viewing of check images
- Ability to reorder checks
- Bill pay-services
- E-bills and notifications
- Security measures including password changing, user ID requirements, security images, phrases, and challenge questions
- Online banking guarantees
- Paperless options
- Online statement access
- Ability to download and save statements and/or print them
Are the Hours of Operation Conducive to Your Business?
When it comes to rental property banking needs, some transactions need to take place in person. For example, cash or check deposits, opening of new accounts, or applying for additional loan financing is typically made with a banker in person. However, if you work all day and the bank closes at 4 pm, it isn’t easy to make the trip.
Therefore, looking for a bank that has extended hours or is open on Saturdays will help tremendously if making trips to the bank is something you plan to do frequently.
Do They Offer Financing Services Tailored to Property Managers?
Having a banker who is familiar with investment property financing helps a great deal with your overall success. After all, having someone who understands the mortgage process, complications that may arise, and different loan options will help get you what you need faster as an investor. Their expertise can assist landlords through the qualification process all the way to signing the final paperwork.
Does the Bank Have International Banking Services?
Are you a Baltimore property owner that lives outside of the United States? If so, you will need to bank with a financial institution that offers international banking services. So, if you want to receive your rent payments on time, and have the ability to perform international wire transfers, evaluate each bank you are considering carefully. Check to see what they can offer you as far as foreign banking is concerned and if any additional fees apply.
Essential Banking Tips Every Rental Property Business Needs
Setting up proper accounting practices from the start is an important factor in your rental property business’s success. Whether you self-manage, enlist software solutions or hire a property management company, some fundamentals remain the same. Continue reading as we describe a few essential banking tips for your rental property business.
Create Separate Accounts
For a rental property business, avoiding co-mingled funds will save a world of headaches in the long run. Separate accounts for each property and tenant allow for simplified accounting functions, easier tracking, accurate profitability measures, and faster reconciliation.
Some states require property owners to maintain their tenant’s security deposit in a trust account. Most Maryland leases require some sort of security deposit as insurance against potential tenant damage. That said, it is required that property owners keep these funds in a federally insured financial institution and a separate account designated specifically for security deposits. Additionally, the money must then be deposited into this account within 30 days of receiving it, plus any deposits over the amount of $50 must bear interest at a rate of 3% per year starting six months after the deposit was received.
Therefore, finding a bank that will support you in having a separate bank account for your security deposits without wreaking havoc on your pocketbook with extra fees, charges, or special requirements, is the best solution for fulfilling your obligation as a property owner dealing with security deposits.
Track and Itemize All Expenses
Expenses for property owners create a serious organizational need. Besides, tracking expenses allows owners to evaluate a property’s overall investment performance better to make informed decisions. Besides, when the end of the year rolls around, owners will want to retrieve vital expense information to get the most out of their tax advantages. For example, the IRS tax code allows rental property business owners to claim the following expenses, which can drastically lower your tax bill:
- Advertising Costs
- Auto and Travel Expenses
- Cleaning and Maintenance
- Homeowners and Landlord Insurance
- Legal and Other Professional Fees
- Property Management Fees
- Mortgage Interest Paid to Banks
- Repairs and Supplies
- Depreciation Expenses
Establish and Maintain Key Reports
After tracking, reporting is the next essential financial process for landlords. Establishing reports that can easily allow you to evaluate metrics, profits, expenses, and income is vital to your business’s success. Not only do these reports improve operations, but it also makes you look more professional to banking institutions, lenders, or investors.
Periodically Reconcile Records
Waiting until tax season to reconcile accounts is not a good idea, especially if your records are less than up to date. That said, even the best of intentions to keep accurate records can fall victim to human error occasionally. So, take time to keep records current and audit them periodically throughout the year. By establishing a comprehensive tracking system, reconciling against your bank paperwork should be a simple task done each month.
In the end, the bank you choose for your rental property business needs will be determined by which specific services you require. These services help your business operate in an efficient and financially sound way. So, comparing the different options in your area is a surefire way of making the best decision for your rental property business needs.
If you need help with your rental property bookkeeping tasks, tasks, contact Bay Property Management Group today. As a highly qualified property management company in the Baltimore area, Bay Property Management Group can help you keep your financial records in order. We provide full transparency regarding your property’s profits and expenses, all while keeping your important documents safe and secure. Bay Property Management group gives you the peace of mind that not only the bank you choose is the best option, but the company you entrust to manage your property is as well.