A separate account with a $5,000 minimum per rental property protects your personal funds and ensures you’re covered when unexpected costs arise.

One of the most important lessons I’ve learned from investing in real estate is the value of maintaining a dedicated operating account for each rental property. Although this might seem like a minor detail, it plays a major role in helping investors manage expenses while protecting their personal finances.

When you purchase a rental property—whether it’s your first, second, or third—it’s essential to set up a separate operating account designated specifically for that property. This account should be used exclusively for expenses related to the property and should not be mixed with your personal funds. Here’s what you need to know to put this into practice.

Keep a $5,000 cushion per property. This reserve isn’t meant for the major repairs you can anticipate, but rather for those smaller, unplanned expenses that can disrupt your finances. Having this cushion in place gives you peace of mind and helps you avoid dipping into your personal budget when the unexpected happens.

“Setting up a separate operating account designated specifically for each rental property ensures your finances are protected. ”

Plan separately for big-ticket repairs. Major repairs like replacing a roof, water heater, or HVAC unit should be treated differently. These are the types of expenses you can plan for based on the age and condition of the items, and they often range from $5,000 to $10,000 depending on the size of your property. The funds for these replacements should be set aside in addition to the $5,000 cushion.

Scale your operating reserve as you grow. As you acquire more rental properties, it’s not always necessary to keep $5,000 per property. When you reach five to ten properties, you can begin to lower that reserve to around $3,000 to $3,500 per unit. Instead of managing separate accounts, many investors find it more efficient to pool those reserves into one larger operating account that covers multiple properties.

If you’re unsure how to get started or want help refining your system, I’m happy to offer guidance. My team works with investors daily, and we’re investors ourselves, so we know exactly what it’s like to manage properties day to day. Feel free to call us at 480-267-9368 or send an email to Office@GoodCompanyRE.com. We’re here to help however we can.