All Forum Posts by: Jake Baker

@Steve Sorensen

Assuming your plan is to do all SFR, you could do flips and brrrrs. Since it is tough to get "perfect brrrrs" nowadays, you will want the flips to offset any money left in the deals from the brrrrs. This will allow you to pick the best ones as rentals. You could structure a simple LLC with an operating agreement that tells the equity splits. Some investors like a preferred return. You could have the LLC pay you for services as well.

@Ross Hayes Yes that is correct. If I have 300k of equity in a rental that cash flows $1000/mo or $12k per year. That is only a 4% ROE. I can probably refinance or sell to redeploy that money to make a better return.

When I flip a house I look at the ROI - how much money did i make / how much money did i deploy

When I BRRR a house I look at COCROI but I care more about how much forced appreciation I created. You cant get a loan nowadays unless it cashflows. I care more about having a great property in a great location than having a "perfect brrrr"

Find the deal first. LLCs come with yearly fees and you still have to file a tax return even if you don't do anything with it. It is easy to quitclaim a property you bought in your personal name to your new LLC.

Hi @Ross Hayes.

Always be careful of rehab expenses. Look at permit history to gauge the big ticket items. Be conservative with your ARV.

I look at Return on Equity when analyzing my current portfolio. "Can I sell this property and make a better return somewhere else?

Hi @Stephanie Cortez. 

I left my w2 last year to go full time into flipping. I agree with @Chris Seveney that you have to make sure your cash flow is right. I slowly acquired 2 airbnbs over 3 years that cash flowed really well and I was doing 5-10 flips a year with OPM (other peoples money) while working a w2. So I had enough cash flow from the airbnbs to pay for my shelter and food expenses plus I had a good amount in savings before I took the leap of faith.

@Mitchell Mabee 

I agree that it is time to hire a CPA. Most CPAs charge separate for Tax Preparation and Tax Advisory. Your last question probably falls into the tax advisory realm. Since you have multiple properties now, you should consider hiring a bookkeeper to manage your reporting. What are your current bookkeeping practices? A CPA won't be able to give sound advice unless you can a clean P&L for each property.

Hi @Tania T.

I agree with @Chris Seveney that QuickBooks Online is the way to go. If you have multiple properties that you need to track, you will need the QBO Plus subscription so you can track by "class". Your tax preparer will need separate P&Ls for each property. You can simply add your accountant/tax preparer as a user which makes it way easier come tax time. 

Transactions sync to QBO so I can track the progress of my flips. Honestly, there are a lot of flip software out there that are just shiny objects. We do 20 flips a year, and run 90% of our business through Quickbooks Online, including Budgeting, paying bills, KPI reporting, etc.

If bookkeeping isn't your thing, hire a bookkeeper to manage this for you so you can focus on growing your business. 

Have you considered raising private capital to do some flips or BRRRRs? Perhaps you could partner with someone on your next primary residence. 50% of something is better the 100% of nothing. Congrats on your progress so far. You have done a lot in 3 years!

@John Philip Eugenio ADU Geeks is an ADU company in San Diego. They can consult for you and help tell you what you are allowed to do, or they can complete the entire remodel for you as well. Might be worth hearing what they have to say. It's possible you are able to build additional detached ADUs in the back. It would be good to know that in case you want to do that in the future.

The principle of a loan is a liability account (money owed) so it would go on the balance sheet. Every month you likely pay a mortgage payment that includes:

Principle paydown - Liability Account (Balance Sheet)

Interest - Expense Account (P&L)

Taxes & Insurance Escrow  - Asset Account (Balance Sheet)

Once a year, your Mortgage company will pay your Taxes owed and Insurance Premium - both Expense Accounts (P&L)