So while I continue to look for a deal, in the down time I have been trying to get business prep sorted out while I wait for a good deal to come onto the market. Just a bit of background, I am a first time buyer, I have enough capital to buy the first property with an FHA or similar low down payment, and then in about a year purchase a second with regular mortgage. Currently, all I have been doing is gathering knowledge and trying to acquire my first property.
So to the point of this post, I have read blogs like this one, posted by @Matt Faircloth
And this one by @Sharon Vornholt
Both of which talk about items that a Landlord and real estate business should have to look and act professional, which in turn could help you avoid tenant conflicts by appearing bigger than you are, thus them not testing you.
My dilemma is at what point should I, a hopefully soon to be first time landlord, start looking at acquiring these items or anything else you think I should have? When should I get them? How much roughly should I spend on them? Finally, WHY? Please try to elaborate.
3. Business Logo
4. Business Cards
5. Business Email (Not a gmail.com but 123abcompany.com)
6. Property Management Software/Accounting (Not excel)
7. Business Phone Line (could be google voice ex)
8. Something you come up with
I am not necessarily looking for hey go use this service, but more of a methodical ideas as to how to expand my brand, professional appearance in correlation to my Business growth. This could be measured in many ways, like at x monthly income add this or at x units you should have this. Also keep in mind I don't want to add things unnecessarily and have expenses without supporting income, unless you think its absolutely worth it!
Thank you all in advance!
@Andrew Auger I bought my first rental property in 2000. I have four multis and two SFRs. I have 26 total units. My tenants take me very seriously and sure they test me but im still here and many of them are not.
I dont have one of the things you listed. The only item there that I used to have is accounting software. I scrapped it a few years ago. I now use a ledger book and a pencil.
Dont worry about all that stuff. Half of my tenants dont even have computers nevermind know what my website is. Actually I do have a website but its more for the brokerage and investment side of my business and I built it myself.
Just focus on doing your first deal. You will learn as you continue to invest which items on that list are important and which (most) are a waste of money.
I don't think you really need anything but a plan for accounting until you get started. I use Quickbooks, set up as described in @Nancy Neville's book (you can search her since I can't tag her for some reason). I didn't set it up her way until this year, but wish I had from the beginning.
I set up an LLC and website while we were in Escrow on the first property, the business e mail came with the website. I use a template that matches my website for the letterhead and just got business cards a few months ago (after being into this for 2 years). Figured as we were looking into a third purchase that would bring us up to 10 units it would be nice to have some cards.
I think it would be better to focus now on your systems- develop or find a lease you want to use, figure out how you will screen potential tenants- what your criteria are and what company you will use for background checks, how you will accept payment, etc.
@Rob Beland As always I always appreciate your feedback but I know I am going to be wanting some or all of these at some point, just a matter of price and when.
Some of the list come from looking for that deal, like the business cards, to which I could have used at the REIA club I went to, where I got access to a potential "deal", well by deal I mean a guy trying to sell me a property for 100% appreciation because he smelled new guy on me, but you get the idea. Also, I don't blame the REIA and I had a wonderful time at it and will be going again.
@Kelly N. So you got your Business Website, Email, & essentially Letterhead once you had your first property under contract. You didn't get the business cards until a bit later.
Did you create a logo or did you just go with your LLC Name?
As for accounting, this one I am torn on in so many ways. I am an accountant in my 9-5 job, so the little kid in me goes, I want the big shiny integrated program like Buildium or Appfolio. But then the realist in me goes your new set of income does not support that program. QuickBooks has plenty of features, I have used it in my professional life, but I don't feel it will be really what I am looking for. In reality, I will probably just use Excel at first until I feel the income and hassle have hit the point where an integrated site would be beneficial.
Lastly, I am gathering and have gathered a pile of information and I am putting into a lovely business plan/action plan which I intend at some point to let the BP community go to town on. I have identified a Lease(s) that I plan to use, being the Greater Boston Real Estate Board leases as Mass is insane with its laws compared to other states. I also have figured out most of what you mentioned, ACH payments, screening company, and rental criteria. I just am trying to figure out these minor things while I wait for a good property to come available in the towns I am looking at.
Thanks for your input!
Andrew: Being an Accountant yourself you know the importance of figures playing a major roll in any venture thought of my man.
The first thing you do when you decide to be an investor in real estate is to see if you have enough money to buy a property, right?
So in order to see if you have enough money you look at your bank account and see how much money you have in your savings account for a deposit to place on the home or to use at an auction. Plus you need to consider how much income you make less your expenses on the purchased property to see if you can afford the mortgage, property taxes, repairs, take into account vacancies, tenant's not paying rent and evictions. (Not to mention unexpected costs). Once you are sure you can afford to go "for it", you begin.
So in order to find out whether this is feasible to pursue, you had to take a look at your finances, which is either via pencil and paper or excel or some other "money in money out" software program.
As an investor in Real Estate, you are investing in the "big guys" (gals) game. A ton of money. Not a mere hundred bucks here and there. Tens of thousands of dollars. If you're going to go "big time", you need a robust (and reasonably priced) software program that will do the trick. At the beginning you certainly don't want to spend big bucks on software programs that will eat up your Equity.
Right off the bat the moment you purchase a home you have an expense account. A huge one and a mortgage payment. As soon as you purchase the property, enter the purchase into QuickBooks, and then enter in all the expenses that's going to cost you to get it ready to rent. This way you and QuickBooks are starting together, from the very beginning, from your very first dime!
Right off the bat you have an accurate accounting from the moment you began your business to the time you call it quits of every dollar you invested in your business, to the time you sold every property.
As an Accountant you know that lenders don't want to see a Mickey Mouse Profit and Loss Report. They want to see professional stuff. They want to see you are a Professional business person.
Sure you can purchase the big expense software programs because, as you said, your inner self loves the big fancy stuff, and so do I. But we wouldn't be good business people, if we couldn't find a great software program, which only costs a couple of hundred bucks and does as much as if not more than the big fancy stuff.
The number one thing to purchase even before purchasing a house is QuickBooks or a financial software program, because then you are entering right from the start your Equity money deposited into the business, and how it's being invested, less expenses your dishing out!
More CPA's than not are using QuickBooks and are very happy when they see their clients come to them with a Profit and Loss Report printed from QuickBooks or an Accountants copy. The more info you provide your accountant, the cheaper the cost to have them do your books, because you are providing them with every single data they need to file your taxes instead of hunting and constantly having to call you for this and that.
Besides, buying QuickBooks is an expense account, so keep that in mind.
@Nancy Neville Thanks for the very detailed response!
My Fiance and I are in a great spot, we are saving a good clip of cash each month on average and have enough saved up to put a small down payment down on our first property, have plenty of reserves for issues that pop up both real estate and normal life, and have enough to then in about a year look at another property to put 20% down for conventional financing. So we are all set in that department, but thank you for checking :)
I used QuickBooks for 4 years in my previous job before I moved onto a larger company. I by no means have the wealth of experience that you do with the program, but I can confidently say I know it well enough. My concern with a QuickBooks type program is that it is only meant for accounting. Thus, if I grow over time I will have to have secondary and tertiary programs to support it, many of which have from what I have read fairly robust accounting embedded within them. So, my point from before was simply I could see the benefits of just going with Excel/ledger based to start and then when the revenue and hopefully profits warrant that larger program, make the jump.
Thank you for your input!
Andrew do you know that you can enter in all your rental properties into QuickBooks along with the following information:
- Year of the house
- Purchase Price
- Yearly taxes
- Square Feet
- Type of home
- Property land discription
- Amount paid for it
- And anything you want to say about that property you can do it.
- You can even have QuickBooks remind you when a lease is going to expire.
You can enter in rents due and only enter them once and have QuickBooks enter it for you automatically each and every month.
You can do the same for bills owed, if they are the same amount each and every month. Memorize it and QuickBooks, like a Butler, will do the work for you.
I have had seasoned CPA's write me and say they didn't know the Power of QuickBooks until they contacted me and I enlightened them. The same for seasoned QuickBooks users who have used QuickBooks for over 20 years didn't know the power of QuickBooks.
Please know that I'm not trying to sell you a product. I'm trying to help you and others know that QuickBooks does far more things than anyone can imagine.
The only time QuickBooks wouldn't be for you, would be if you were worth millions of dollars, like Donald Trump, or have a huge business. But then again there is Enterprise Solution for big time investors.
Just thought you might like to know.
My list would start with:
- My needs with my research
- Procedures for everything
- Process for everything
- Who is going to do what, when and how
All you need is a good cell phone.
@Andrew Auger - I just went with a "canned" logo from the vendor once I was feeling the need to order business cards.
I use Quickbooks for the accounting, I don't think I will need to use anything else for quite a while (if ever). I used Nancy's book to guide me in setting it all up- I had used Quickbooks for a couple of other businesses and set my first two properties up on my own, but after two years and with another property on the horizon I decided to buy Nancy's book and set it up her way a few months ago. We are about to add a couple more properties bringing us up to 16 apartments, I am happy with how things are set up now and know tax time is going to be smoother with the changes I made. I also like that I can run different reports to show me any aspect I can think of. I used Excel for accounting once upon a time, and know from experience that you can make it do what you need it to, it will just take a lot less time to do it in another platform such as Quickbooks.
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