All Forum Posts by: Anna Buffkin

 Ironically,  since I posted this, I have gotten 2 poorly worded 1 and 2 sentence messages that basically both say " how you do that?"  with no background or specific question.

I always feel a little hypocritical as I am often the "Debbie Downer" in those "I have no money, credit, or job posts" as I do use no money down, but tend to tell others why they shouldn't.  

I owned 3 rentals prior to my twins' birth 3 years ago when I was a controller for a manufacturer and my husband a teacher.  I opted to leave full time managerial accounting to be able to spend more time with my kids.  I realized rentals were a way to do this as I take a fixed monthly draw and leave the remaining cashflow in an account for future needs (CAPX, taxes, future repairs, ect).  I have not put 20% cash down on any of my rentals.  I own 10 units (9 properties) + my home.    My rule of thumb as far as reserves is, through cash or credit (excluding credit cards), if I had to, could I come up with $20k (in say 3 days).  I have retirement savings as does my husband, but I ignore them for purposes of real estate outside of loan applications.

Anyway, if I can come up with cash in a hurry I am ok with no money down, but those that ask me about how to get into real estate with no money don't even know where they would get the money to pay for a car repair or medical bill.  Ironically, my more successful friends are often too busy working harder to look at ways to earn money smarter.

Lynn Behm, great way to tell if you have an bookkeeper vs a clerk.  I've made the rookie mistake of assuming someone calling themselves a bookkeeper (or bookkeeping assistant) knows all of this.  Often administrative assistants think they are bookkeepers without knowing enough accounting to do the job.  

I had a temp service send a bookkeeping clerk to cover an employee on leave.  I'm sure she was a great admin, but I've never seen someone so lost on payables.  Speaking of which and adding to your point, make sure your candidate knows the difference between a asset/liability and revenue/expense (and why security deposits are liabilities).  This poor girl, didn't understand the difference between prepaid insurance and insurance expense and I may as well have been speaking Greek to her.  She also lacked the ability to lookup previous accounts used for a vendor.  I ended up giving her a list of most common accounts.  If it wasn't on my list, I had her come get me.  I really should have replaced her, but she was a temp and I didn't want to start over with a new one.   

You need to decide what you need out of your bookkeeper.  Clerks are a dime a dozen.  A true bookkeeper is hard to find and will be more expensive.  

A lot really depends on how hands on you want to be.  A bookkeeping clerk is great for repetitive data entry and generally requires supervision and much instruction. A bookkeeper will self manage your books after an initial conversation to understand how your accounting works and what your needs are.  A bookkeeper will let you know if she sees a problem or an opportunity for savings.  A clerk probably would not fully understand the accounting but understand where to put what data in a program.

Make a list of what you need the person to do and then decide where to find them.  Some people use there CPAs office which often has a person in house to do bookkeeping.  Generally this is expensive.  You could try a bookkeeping agency or put out a help wanted ad.  Also, do they need to be local or remote?  You can try freelancing websites though often you get inundated with resumes from unqualified applicants though if you are willing to weed through you may find a good one as there is a large applicant pool.    Are you looking for them to be a full or part time employee or a contractor?  Also, will the bookkeeper do exclusive bookkeeping or will they be assisting you in the admin side of property management?

I am a former financial controller (manufacturing) but gave it up to be a stay at home mom.  I manage my rentals and do a little bookkeeping on the side.  

*While I used feminine pronouns as most bookkeepers (or clerks) are female, the best one I ever worked with was male.

At just $20k why not a personal loan. I did a signature loan for a condo I purchased for $18k in 2015. I paid 9%, but with no loan fees, its not a bad deal. I later just put the balance on a HELOC then paid it off after a refi of another property I BRRRR'ed.

Also I have 4 mortgages under $75k including one for a $30k purchase through a local credit union that lends inhouse up to $120k. This is another condo, but the credit union's niche is lending on old mill houses common in Upstate South Carolina which generally sell for less than $75k and often under $50k. 

We must have the same Sunday school curriculum.   That was literally the lesson Sunday.

I have been using Excel to track my rentals for years, but feel I am outgrowing it.  My 2019 workbook has 18 sheets!  I have tried Cozy and TenantCloud's free online platforms last January and was not impressed with the accounting functions and returned to Excel.  I am looking at paid software programs like Buildium or QuickBooks as a possible solution.

For some background, I self-manage 10 units comprised of 3 houses, 1 duplex, and 5 condos. Everything is owned 100% by me, my husband and me, or our LLC. There are currently no outside partners. I expect to grow at a slow but steady pace. I have a strong accounting background with a bachelors degree in accounting and finance and a decade of accounting experience including 4 years as a financial controller for a manufacturer. I am mostly a stay at home mom now, managing our (husband and my) rentals.

Right now I am mainly interested in the accounting functions but wonder if I would appreciate the management aspects of a system built especially for rental property.

Thanks for the suggestions in advance.

It's funny.  I'm in South Carolina which has no state minimum wage and yet wages are growing naturally as businesses are moving into our state.  We have a few large Amazon locations, the auto industry in the upstate and new manufacturing coming to our state.  Legislature is voting on a 4-10% raise for teachers.  True minimum wage jobs like fast food are still paying minimum wage as they probably should, but clerical and semi-skilled labor is paying in the $12-$25 an hour range in a part of the country where cost of living is already reasonable. Rents are also rising after been flat for years.  

One does 10 years at 6%.  The other does 20 year Am/5 year balloon at 5.25%.

I would also increase repair costs to closer to 15% for several reasons.  Firstly, repair costs tend to be higher in the first year as you find things wrong thst had previously been ignored.

Secondly, 1 property doesn't give you the benefit of spreading the risk.  I have 10 properties and ran a 13% repair expense ratio last year.  A couple of properties ran under 5% repair to rent ratios.  Most ran between 5 and 10.  1 ran 17% but I had to fix some damage after a move out.  My last property ran 70% before CAPX repair ratio! If it could break, it did. If I owned 25 units, my repair expense across my portfolio may have been able to better absorb the cost and be with the 5-10% bracket.   If I owned less, my expense ratio across the board would have been a higher percentage.  Fewer properties just make it harder to predict and budget repairs costs.

Finally, a small plumbing repair costs the same whether the rent is $800 or $8000 / month.  While I too invest in the low end of the market, repair costs as a percentage of rent are higher in lower rent areas both because the rent is lower and because generally the tenants don't take care of things as well.