All Forum Posts by: Cliff Benner

Flips are treated like a Product for accounting.

So treat the Sale as an Income line of its own, each expense as a COGS, then the P&L calculates your Profit on it.

Loan should have cleared during sale, which the sale can be its own entry.

Usually its like:

Sale Price: CR

Closing Costs: DR

Loan: DR

Cash/Due to Seller: DR

While moving a flip from WIP to COGS can be its own.

COGS: DR

WIP: CR

then on the P&L it will go:

Sale Price: XX

Closing Costs: -XX

COGS: -XX

Profit/(Loss): -XX

That amount, after overhead, is used to calculate your taxable income.

Let me know if that worked.

I use Bridgestream and have enjoyed their service and attention even though I only own one rental there now. 

Regarding the Financial Due Diligence, you will want to take a look at the financials for the past few years and add back in any items related to the Owner that will not be around when they leave; Mileage, home phone costs, personal vehicle, their wages taxes and benefits, meals, donations they make, loan interest expense, depreciation/amortization, and any crazy one-off items. If the revenue is under $5mil a year this total is commonly referred to as SDE, Seller's Discretionary Earnings and that total is taken by a multiplier of 3-4x as a common rule for the purchase price. Above $5mil is referred to as EBITDA and that multiplier is more around 2.5-3.5x.

Then you need to check the financials vs tax return, because if they are willing to lie to the IRS, they are willing to lie to you.

Value the Assets to make sure they will keep working and are worth buying at the price as well.

Look up the book Buy Then Build, it is a great resource. 

Good luck! Any feel free to reach out if you need any help!

For my clients in Real Estate, they have to use the QBO Plus subscription. This allows us to code every transaction to a Class to track that property all year round and be prepared at Tax Time to have financials broken out for each property to be reported. Upgrading will allow you to use the same App to track mileage though.

Using a QBO Accountant allows them to create a new QBO account for you to get a continuous 30% discount they could pass along, otherwise you can upgrade yourself and probably get a discount for a year until the price jumps up to the normal cost. 

I have heard of Baselane, netsuite, freebooks, but because of my 9-5 I don't have the capacity to learn new softwares and stick to QBO. 

I know for me, I would be more worried about the an appraisal, the property i found is one lot with two houses on it, the houses are the same sizes as the rest in the neighborhood and the purchase price is comparable to one house in the neighborhood. So if I could get them each appraised as the same value as the houses around, then it would be a great BRRRR I would hold onto for a long time.

We bought a candle business with seller financing, put 2% down, the rest was financed over 8 years at 8% with Step Up Payments. Low payments the first year and every 12 months we increase the payments a decent amount. 

How are you calculating the ARV for this? Is it treated as 2 houses or 1?

I don't think I remember something like that.

Feel Free to reach out to me, I have an Income Statement Template I built for people that should help out enough until you want to get on a software to have it track for you. 

 Of course!

Let's connect and let me know if you have any questions.

I am in a similar situation in MT. Curious what others say.