Whats up BP!
To begin, I am a soon to be real estate investor with enough of a nest egg to begin my first deal here shortly. I have been obsessing lately over books, podcasts, webinars, etc and am starting to put the pieces in place to begin my first fix and flip deal. One thing I am also fascinated with and want to implement into my own business is a set of unique systems to make the most efficient, profitable, and successful business I can. The E-Myth really got my brain churning on this topic and now I have a few questions for some investors involving their systems and their teams!
Firstly, every bit of material I have read/listened to/watched has made it clear that extremely important members of my team will be the lawyers and other legal team members. I intend to protect my properties under an LLC and take the necessary steps to ensure myself and my company are set up correctly. My question here is who are the necessary people to get in contact with, what do I need to set up to have a strong foundation for myself and my business, and how can I get the most out of these legal team members (How do I use them to benefit us both?)
Next, when it comes to accounting and book keeping I have a similar question to the one above! What qualities do I look for in a great CPA, what do I need to set up with him to give myself and my business a great foundation, whats the best system to track all finances, and how can I get the most out of my accounting and book keeping team members?
These are questions that I have really been struggling finding the answers to so I hope some successful BP members who are well versed in this field can clear me up a bit!
Hi Hunter. Exciting time for you! You didn't mention your RE strategy (flips, rentals, etc.) so I'll make some general statements here.
I can't speak to the legal bit but I'll comment on the accounting/bookkeeping as I'm a professional bookkeeper. I deal with CPAs all day long and I've not yet had the pleasure of finding/dealing with one that was particularly REI savvy. If you find one, let me know.
As for bookkeeping, you could get by with a spreadsheet to start but Quickbooks Online is so cheap nowadays (Quickbooks Self Employed is $5/mo. for example) that I don't see why you would. Personally, I'd hire a bookkeeper if you can. I make a lot of money every year cleaning up DIY books that are a mess. If you have good books, it'll be easier to get future financing and it almost doesn't matter if your CPA is REI savvy if your bookkeeper knows what they are doing (forget the lady at church that'll do it for $10/hour). If you can't manage a bookkeeper on an ongoing basis, at least consult one to get you set up properly & have them show you how to keep track of your stuff properly.
That's my 2 cents. Hope it helps.
While it is important to surround yourself with awesome team-members to make your life easier. You don't need to build up the whole team from the start. You can add a member every month or so after your business starts.
I think the first thing you need to decide is the area that you are interested in investing.
Once you have done this - connect with a real estate agent who is investor friendly.
Then connect with a lender to see how much you are qualified to purchase.
You normally want to connect with an Attorney in the state that you plan to purchase the property. State laws are very specific and vary from state to state. You can get a recommendation for an attorney through BP, your lender, your agent or by attending a local real estate networking event.
Some qualities to seek for in a CPA/Accountant are how timely their responses are, how knowledgeable they are in the real estate industry and suggestions that they can provide to lower your tax liability.
You should understand the process behind bookkeeping but that does not mean you necessarily need to do it. A lot of investors argue that bookkeeping is a low value tasked job and you can be better off doing other things(looking for deals , networking etc).
@Basit Siddiqi Thanks for the response! What are some things I will need my attorney to do for me in the process of buying, fixing, and selling homes? When I get in contact with an attorney in the state I am investing in, what are the things I should ask him to do?
Below is sample of items that it would likely be best to have an attorney prepare or at the very least review
- Partnership agreement(If you ever decide to partner on a project with someone)
- Lease agreement(Landlord/Tenant laws vary by state and you want your lease agreement to stand up in court)
- Eviction process (Don't try to do your first eviction yourself; doing anything incorrectly will reset the process giving your tenant more time in your home!)
A few tips from my personal experiences and mistakes.
Quickbooks online. It's the standard. Everyone says it, nobody listens, including me. I didn't use any bookkeeping my first year. Then used an accountant and Xero. That was ok, then I switched to QB and a bookkeeper that only works with investors. It was a bear to get everything fixed in xero then even worse to get switched to QB but the future is bright in that regard, finally. Track, track, track the numbers. This is the information and knowledge that will lead you to growing your business.
1. You need a purchase agreement (don't always need or will work with an agent)
2. Ask him the best way to structure your business. Discuss your short and long-term goals. I'd say he will recommend just a sole prop with insurance until you have some assets. Just my uninformed hunch, no advice there.
3. Your lawyer and accountant may not see eye to eye on your structure, their recommendations are based on different goals and outcomes. Decide what is best for you.
4. Use excel to manage any rentals or rehabs. Get organized as best as you can in the beginning, make sure to grind and continue improving these as you learn. Don't get caught up in new shiny object syndrome with all the technology, KISS in the beginning.
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