All Forum Posts by: Jake Baker

@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.

@David Martoyan

We have done a lot of flips and BRRRRs in Jacksonville FL throughout the years. 

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.

I have also shifted my focus to buying better. It is harder to sell on the back end, but I do feel like it is easier to negotiate nowadays. The metric we track is how many offers we send out. Eventually someone bites.

@Guillermo Perez

Positives:

- Equity Built: You now have $70K in equity, which is a solid result for your first deal.
Cash Flow Potential: If the property rents well and covers your debt service while providing some cash flow, that’s a win.

- Experience: You've successfully navigated a purchase, rehab, and refinance, which are the core components of BRRRR.

Considerations: 

- Budget Overrun: Being $27K over budget highlights the importance of tighter cost estimates and contingencies. Future deals should include a 10-15% buffer for unexpected rehab costs.

- You should consider some other lenders. You should be able to get 75LTV.

@Nevin Wilkie

Great tips from @Matthew Becker. I also like the navy cabinets for rentals. It tends to hide marks better.

Walls: Neutral tones like SW Repose Gray, Behr Swiss Coffee, or Moore Classic Gray are renter-friendly and modern.

Trim and Doors: Use a crisp white like SW Extra White or Moore Chantilly Lace.

Accent Walls: For a touch of style, consider an accent wall in soft blue-gray. 

Caveat: Since this is a rental, there is no need to overdo it. Rehab to the standard of the neighborhood. No need to spend an extra $1000 for something a tenant won't notice.