What should you set up in your books and systems right after buying an apartment building?
Before the first rent comes in, open the property's bank account in the owning LLC's name, enter opening balances from the closing statement, record every security deposit you took over as money you owe, rebuild the rent roll from the actual leases, and move utilities and insurance into the new owner's name. Each step takes an hour or two now and saves days of untangling later.
The order that works
- Form the LLC first if it is new, then get its EIN. The IRS says the EIN is free and can be done online, and to form the LLC with your secretary of state before you apply.
- Open the property's operating bank account in the LLC's name, plus a deposit account if your state or lender requires deposits to sit apart.
- Set up the books for this property alone, with Schedule E expense accounts and a liability account for deposits held.
- Enter opening balances from the closing statement.
- Build the rent roll from the leases and the seller's list, and reconcile the two.
- Move utilities, insurance and service contracts into the new owner's name.
- Tell tenants where and how to pay from now on.
Why one property per set of books: see one LLC per property, separate books.
Opening balances from the closing statement
The closing statement is the first page of your books. It shows the price, your closing costs, the loan, and credits between buyer and seller for prorated rent, prepaid items and security deposits. The IRS says certain settlement fees and closing costs are part of your basis, such as legal fees, recording fees, transfer taxes and title insurance, and that land cannot be depreciated. So the purchase is split between land and building.
Example a made-up 12 unit building is bought for $2,400,000 with $36,000 of closing costs that add to basis, for a total of $2,436,000. If 20% is allocated to land, land is $487,200 and the building is $1,948,800. The seller credits the buyer $14,400 for the 12 deposits of $1,200 each and $3,100 of prorated rent already collected for the month.
| Account | Opening entry in the made-up example |
|---|---|
| Land | $487,200 |
| Building | $1,948,800 |
| Security deposits held (liability) | $14,400 |
| Cash: prorated rent credit received at closing | $3,100, recorded as rent income for the days you owned the building |
| Mortgage loan (liability) | The loan amount on the statement |
| Owner contribution (equity) | Your down payment and costs paid in cash |
How the land and building split is set, and how long the building is depreciated, are questions for your tax preparer; see rental property depreciation over 27.5 years.
Security deposits you took over
Every deposit the seller collected is now usually your obligation. Texas, for example, makes the new owner liable for returning security deposits from the date title is acquired, requires the new owner to give each tenant a signed statement that names the exact deposit amount, and requires landlords to keep accurate records of all deposits (sections 92.105 and 92.106). Other states have their own rules, so check yours.
In the books, the deposits go to a liability account, not income. The IRS says not to include a deposit in income when you receive it if you plan to return it. Make sure the total in that account equals the deposit list tenant by tenant, and that the cash credited at closing actually landed where your state requires it to sit. Security deposit accounting covers the entries.
Rebuild the rent roll from the leases
Do not copy the seller's rent roll as is. Read every lease and compare: rent, start and end dates, deposit, who is on the lease, and any concessions or side agreements. Note every difference and settle it with the seller or the tenant. Owners often ask tenants to sign a short letter confirming their rent, deposit and lease dates for exactly this reason. The finished rent roll is the base for everything else; see how to keep and read a rent roll.
Utilities, insurance and service accounts
| Item | What to do | In the books |
|---|---|---|
| Water, sewer, trash | Transfer the owner-paid accounts on closing day | Utilities expense |
| Common-area electric and gas | Transfer, and confirm which meters are yours | Utilities expense |
| Property and liability insurance | Policy in the LLC's name, effective at closing; lender named if required | Insurance expense, or escrow if the lender pays it |
| Pest control, elevator, fire alarm monitoring | Get the contracts; keep, renegotiate or cancel | Cleaning and maintenance or other expenses |
| Laundry or parking income contracts | Get the contract and the payment address changed | Other income |
Setting up a new building in DoorKeeping
In DoorKeeping, each property has its own LLC books: ledger, bank account, deposits held and profit and loss, with expense accounts mapped to Schedule E lines. Tenants pay the new owner's bank directly, each with their own memo and an exact amount with its own cents, so the first month's payments are easy to match. Once your units are in, you can ask Claude or ChatGPT for the rent roll on any date to check it against the leases. DoorKeeping does not give legal or tax advice, so your attorney and tax preparer still confirm the closing entries.
Sources
- IRS, Publication 527, Residential Rental Property, read Oct 29, 2026
- Texas Property Code, Chapter 92 (Residential Tenancies), read Oct 29, 2026
- IRS, Get an employer identification number, read Oct 29, 2026
Questions
- Are security deposits transferred at closing income to the buyer?
- No, not when you expect to return them. They are a liability in your books. The IRS says to include a deposit in income only when you keep it.
- Do I need a new bank account after buying a rental property?
- Yes, ideally one in the owning LLC's name for that property alone, so its books stay separate and easy to reconcile.
- Are closing costs deductible on a rental purchase?
- Many are added to the property's basis instead, per IRS Publication 527, and recovered through depreciation. Your tax preparer sorts each line.