All Forum Posts by: Jake Baker

@Jaedon Stout

BRRRR Strategy - This works well when buying properties below market value and rehabbing them to increase equity. The key is ensuring the after-repair value (ARV) supports refinancing to pay off the initial funding without overextending.

Fix-and-flip - This requires sharp numbers and market knowledge. Your clients should focus on properties with significant equity potential and work with experienced contractors to stay within budget and timeline—especially with borrowed funds on the line.

Avoiding Bad Deals - Encourage them to work with experienced agents, contractors, or mentors and always run multiple scenarios, including worst-case outcomes, to stress-test their numbers.

Reserves - Advise your clients to keep a reserve fund separate from their loan for emergencies, unexpected expenses, or delays.

@Lisa Albright

One thing to consider is your return on equity (ROE). If you have a lot of equity and little cash flow, you should consider accessing that equity to use elsewhere.

Another factor to consider is your interest rate on the debt. Consider a HELOC for value-added BRRRRs or flips if you have a low interest rate. If you already have a high interest rate, consider a cash-out refinance with a fixed rate rather than a HELOC.

A third option could be to sell. Consider the "2 of the last 5 year rule" to avoid capital gains. If the signs point to selling, consult your CPA about the tax implications.

@Thomas Farrell

The BRRRR is alive and well. However, it is not what it used to be. "Perfect BRRRRs" are rare nowadays. That doesn't mean you shouldn't BRRRR. It is a complimentary strategy to pull some of your money back and hedge your bet.

My view on making money in real estate: 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. Market Appreciation is the least predictable, but historically, where you will make the most money.

We still use the BRRRR strategy in Jacksonville, FL. It isn't easy to make things pencil, and I don't see it getting much better over the next 12 months.

I have changed my rental strategy to Co-Living (rent by the room). I don't use padsplit (weekly rentals); I rent on long-term leases in B Class neighborhoods. This plays into the affordability issues for tenants by allowing them to live in nicer neighborhoods for less money, yet I get monthly revenue comparable to short-term rentals.

@Brice Alef-Torrisi

I agree with @Drew Sygit that you do not need separate checking accounts for each property if the ownership is the same. It sounds like you purchased this property in your personal name. Dedicate one checking account and credit card exclusively to real estate. Keep personal and business finances separate to create less headache.

You should also do the following to make your bookkeeping easier:
- File all receipts in a dedicated Google Drive folder. Digitize physical receipts for easy storage and use a consistent naming convention for easy sorting - 2024.03.25 Home Depot.
- Maintain proper records, such as contracts, settlement statements, and promissory notes.

@Christopher Morris

Focus on building and maintaining active income first. While many gurus glorify the strategies they're selling through courses or books, methods like BRRRR 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. (virus lockdowns, natural disasters, record-high interest rate hikes, etc.) My bookkeeping firm pays me active income regardless of the economy or who the president is.

@Patricia Andriolo-Bull

Stessa is an excellent platform for tracking income and expenses for investors; it is user-friendly. However, its downfall (and really what makes it so easy) is that it is a single-entry system. This means there are no checks and balances to ensure all transactions are entered correctly. A double-entry system (like QuickBooks) allows you to reconcile your bank statements, ensuring no missing or duplicate transactions. I would recommend Stessa so much more if you could reconcile; hopefully, they will! Or maybe they do now since the last time I used it.

@Rene Hosman

For those in the multiple-day category. At the bare minimum, you should do the following to make your bookkeeping easier:

Dedicate one checking account and credit card exclusively to real estate. Keep personal and business finances separate to create less headache.

File all receipts in a dedicated Google Drive folder. Digitize physical receipts for easy storage and use a consistent naming convention for easy sorting - 2024.03.25 Home Depot.

Maintain proper records, such as contracts, settlement statements, and promissory notes.
Additionally, you can track income and expenses consistently using software or spreadsheets.

As you scale, if bookkeeping isn't fun, consider hiring a bookkeeper for a couple hundred bucks per month. This is often one of the first things a real estate investor will outsource.

@Chris Kay

Cosmetic Updates - If you focus on flooring, paint, fixtures, and a basic kitchen and bath refresh, $50k is doable, especially in markets like Michigan.

Full Kitchen and Bathroom Rehabs: Depending on finishes, these can eat up to $20k-$30k alone. Opting for mid-grade materials will help stretch your budget.

Structural/Mechanical: If the home needs a roof, HVAC, plumbing, or electrical work, that can take a big bite out of your $50k fast. A roof replacement alone could cost $8k-$15k.

Here is a "general" rule of thumb for my market in Jacksonville, FL.
Light Cosmetic ($40 x Sq. Ft)
Medium Cosmetic ($50 Sq. Ft)
Heavy Cosmetic ($60 x Sq. Ft)
Studs Down ($85 x Sq. Ft)
Luxury ($175 x Sq. Ft)

@Marie Copul

I agree with @Marcus Auerbach that you are in a great position as a high W-2 earner. 

If the goal is to replace 500K in cash flow, consider strategies like short-term rentals or rent by room. 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. 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. https://fred.stlouisfed.org/series/MSPUS

Focus on optimizing active income first. Could you double in your income and invest that? Could you work half as much and still make the same money? While many gurus glorify the strategies they're selling through courses or books, methods like BRRRR aren't easy and can put you in a tough financial spot if you're not careful. As Marcus said, flipping is another job... trust me. 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. (covid, historic rate increases, etc.)

@Bailey Rentz

Stessa is an excellent platform for tracking income and expenses for investors; it is user-friendly. However, its downfall (and really what makes it so easy) is that it is a single-entry system. This means there are no checks and balances to ensure all transactions are entered correctly. A double-entry system (like QuickBooks) allows you to reconcile your bank statements, ensuring no missing or duplicate transactions. I would recommend Stessa so much more if you could reconcile; hopefully, they will! Or maybe they do now since the last time I used it.

It’s an excellent solution for smaller portfolios because you can easily spot 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.

QBO has every feature you need to run a business, excellent reporting features and integration with other software. It is the most popular software in the industry, and most Tax Preparers are familiar with it, which makes tax season easier. Bank connections are pretty good about not breaking. 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.