All Forum Posts by: Jake Baker

I agree with @Ronald Rohde. Focus on building and maintaining active income first. While many gurus glorify the strategies they’re selling through courses or books, methods like out of state investing aren’t easy and can put you in a tough financial spot if you’re not careful. My bookkeeping firm provides me with a steady active income, which allows me to keep doing deals, cover unexpected expenses, and navigate the occasional black swan event.

My Take on Cash Flow:
Cash Flow is a hedge against corrections. Cash flow (in my portfolio as a whole) covers my expenses. Forced Apperception (BRRRR or buying at a discount) is also a hedge against corrections. Forced appreciation allows me to build equity from the beginning of the investment, so if I need to firesale for an unforeseeable reason, I will likely not be underwater. Debt-Paydown and Tax Benefits are also a result of time. Market Appreciation is the least predictable, but historically, where you will make the most money.

@Joanna Highet

Regarding bookkeeping, most companies are not worth the money, so vet them carefully. However, if you partner with the right one, they will be instrumental to your real estate growth. Your bookkeeper needs to specialize in Real Estate or thoroughly understand the industry because it is very balance sheet-heavy. I recommend staying away from companies that outsource bookkeeping overseas. Many firms will offer bookkeeping, but they outsource overseas and mark up the price. Most of the time, quality is sacrificed due to lackluster systems. 

My recommendation: Find a US-based bookkeeper who specializes in real estate and doesn't have too much on their plate.

 @John O'Leary , we rent by the room on a one-year lease and do not use a pad split. Pad Split tends to have shorter stays. 

@Eli Joffe

Given that it is your first deal, you may want to consider partnering with an experienced flipper/brrr investor in the Cincinnati area on your first deal. You're in a solid position with your credit score for the refinance.  Hard Money will fund 90% of the purchase price and 100% of the rehab on a draw schedule. You have a good amount of savings to add value with. As well as some hands-on experience to be more involved in the process. My point is to take it slow. I got crushed on my first flip. 

@Magda Rose

Is this a 5% return on investment? or return on equity?

@Jennifer Fernéz

House Hacking a primary residence is the best way to generate wealth for the typical American. Do this every two years within your means and willingness to sacrifice comfort.
No matter what strategy you pick, sacrifice is required. Whether you are sacrificing your comfort to house hack, money for a down payment to cash-flow more, or one of the wealth generators based on the market itself, there is no one-size-fits-all perfect investment.

@Kyle Kline

My Take on Cash Flow: 
- Cash Flow is a hedge against corrections. Cash flow (in my portfolio as a whole) covers my expenses. 
- Forced Apperception (BRRRR or buying at a discount) is also a hedge against corrections. Forced appreciation allows me to build equity from the beginning of the investment, so if I need to firesale for an unforeseeable reason, I will not be underwater.
- Debt-Paydown is a result of time. This is the easiest to predict. Tax Benefits are also a result of time, good bookkeeping, and tax advisory.
- Market Appreciation is the least predictable, but historically, where you will make the most money. Real Estate values, nationally, have never decreased over any 10 years.

@Bao Vu 

From a bookkeeper's perspective, here's how this should be reflected:

Tax Basis for the Flip:
For tax purposes, the purchase price of the property you flipped (bought in 2023, sold in 2024) will count as part of your cost basis. This includes:
- Purchase price
- Renovation costs
- Closing costs (buying and selling)
- Holding costs

These expenses offset the selling price to calculate your taxable gain. 

QuickBooks Setup:
For flips, I’d use the following accounts:

Flips in Progress (Inventory)
FIP - Purchase Price
FIP - Buying/Closing Costs
FIP - Rehab Costs
FIP - Holding Costs
FIP - Selling/Closing Costs

Real Estate Cost of Goods Sold (COGS)
COGS - Purchase Price
COGS - Buying/Closing Costs
COGS - Rehab Costs
COGS - Holding Costs
COGS - Selling/Closing Costs

At year-end (e.g., Dec 31, 2023), move flip costs to inventory and back into COGS on Jan 1, 2024. This ensures your books match the timing of your taxable income.

It sounds like you're off to a great start—make sure everything is categorized correctly and consult a CPA to confirm your setup.

@Keetaek Hong

I use QuickBooks Online (QBO) for my flipping business, rental businesses, and bookkeeping clients.

However, many on the forums will advise against QBO. It can feel like feature overload. The main reason is that it is not initially set up for a Real Estate business like other “real estate-specific” accounting software. It takes a certain level of QB knowledge to set it up correctly.

My General Recommendation: Spreadsheets are usually fine for your first 1-3 properties. 3+ properties, you should use a software. If you plan to scale at all, I recommend QBO. If you do not like bookkeeping/accounting/technology, hire a bookkeeper specializing in real estate investors.

@Ben Trageser Stessa is an excellent platform for tracking investors' income and expenses; it is user-friendly. I believe it is now free with a BP Pro subscription. However, its downfall (and really what makes it so easy) is that it is a single-entry system. Overall, it’s an excellent solution for smaller portfolios because you can easily spot any discrepancies. However, if you have a more extensive portfolio or plan to become larger in the next year or two, I would look for a double-entry system that allows bank reconciliations. Most bookkeepers won’t work in it if you plan to outsource it in the future.

@Jonathan Greene Grant is awesome! I know him personally, and he is the reason I got into co-living. BP should have him write the co-living book.