In Escrow on first deal... best practices for what's next?

Question

My wife are in escrow on our first rental property purchase (in the Columbus, Ohio market) and are underway with inspection, finalizing the loan, getting quotes on homeowners insurance, interviewing property managers, etc. Are we approach close over the next month, and in the time after, what are some best practices for us to consider? I'm thinking potentially tax, liability, etc. but would love to understand specific steps people would recommend for the hours, weeks, months, and beyond.

Thank you!

Samuel Diouf · Answer

I would make sure to connect with an investor friendly accountant to understand the tax benefits you may be able to pursue.

Kerlous Tadres · Answer

Great question!

I would recommend you make sure the company you guys choose for PM track all the maintenance costs that you guys spend money on

Drew Sygit · Answer

Is the property vacant of tenant-occupied?

Brandon Clark · Answer

Not going to manage this one, planning to hire a local PM (have been intro'd to one that's been very helpful so likely to go with them)

Max Emory · Answer

Hey @Brandon Clark, congrats on your 1st rental!! That's huge.

My 2 cents is to ensure you keep up with all business-related and property-related financials (aka bookkeeping).

Bookkeeping for REI companies (especially rental property companies) is super nuanced. For example, for rental properties, lots of the categorization depends on the REI's specific tax strategy regarding what we're capitalizing versus what we're immediately deducting. It's heavily dependent on what the tax code allows and who is interpreting the tax code. There's room for flexibility depending on the desired tax strategy.

Once you have more than a few properties, you'll want to consider software. But, excel is totally fine in the beginning (in addition to your PM software to capture transactions outside of the properties).

We use QuickBooks Online exclusively for all of our REI Clients. I use it for my personal portfolio as well. We've found it has superior reporting features, integration features, and is overall more efficient to work within than other REI-specific software.

The downside is QBO is not set up for REI so you'll need to do that or work with an expert to ensure it is set up for your business appropriately.

Something else to keep in mind is your entity structure and how your entities file tax returns. As a general rule, each entity that files a separate tax return (partnership, s-corp, c-corp, etc) will need its own QBO subscription. If entities are disregarded, you can keep up with more than 1 in a single QBO account using the location/business feature to keep track of them separately. This will save you on subscription costs.

If you want to discuss any of this further, I'm happy to answer questions and help walk you through it.

Best of luck!

Remington Lyman · Answer

Nice. I was going to say make sure you get them the tenant statements and leases prior to closing

Brandon Clark · Answer

Appreciate it Max. Super helpful response here @Max Emory - thank you!

Remington Lyman · Answer

Are you self-managing?

Alfath Ahmed · Answer

Property taxes in Columbus were re-assessed in January of 2024. They can get re-assessed again at sale if it meets certain requirements. Best practice is to connect with good property managers like @Kyle Tom from Elite Property Management.

He does a great job for all of my out of state investor clients. I would also make sure that you pull rental comps, sales comps, and make sure that you negotiate after the inspection if you see anything alarming.

In Escrow on first deal... best practices for what's next?

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