All Forum Posts by: Max Emory

Hey @Brian Quo, this depends on your strategy. If you currently have a high cash flow income stream in place that allows you to weather the negative cash flow storm from your rental(s) with the intent of holding the property(ies) for appreciation, then it may make sense for you. Then, you can calculate how much cash this property(ies) is going to eat over the period you plan to hold it and see if what you can sell it for (less commissions, taxes, etc) will produce a profit. Then, the question is how much profit will be left and is the amount/ROI worth the venture/risk.

And, if you don't currently have a high cash flow income stream in place, it absolutely doesn't make sense.

Hope that helps!

Welcome, @Rosette Poole! It's nice to have you in the BP community! You'll learn a lot here.

I recommend focusing on 1 strategy/business model and going all in on that one until you've mastered it and it's stable. Then, if you want to get crazy, begin tackling another. Focus and consistency are going to be your best friends.

Also, I wouldn't tackle buy-and-holds right now unless you currently have a high cash flow revenue stream in place. Been there and made those mistakes in the past haha. But, you already know that having property management experience.

@Pat McQuillan, get with an REI-savvy tax pro! They can walk you through all of this and will help you create a tax strategy based on your goals.

Your statement that "insurance can't be deducted" reinforces that it's most likely in your best interest to hire a professional to help you with this.

The forums are great but not a substitute for hiring a tax pro.

@Marc Shin, those are great parent folders and you can build out sub-folders within those. The list of folders you could build is endless so try not to go too far down this path. You'll modify your folder structure over time but this is a great start.

Hey @John Semioli, DSCR may be worth looking into as long as you have accurate and up-to-date bookkeeping records.

Hey @Tyler Bilinovic, if you plan to purchase more properties go ahead and link up with an REI-savvy tax pro to form the relationship early so you're not scrambling as you're scaling.

Even with just 2 rental properties an REI-savvy tax pro is worth the money.

Hey @Mark Dutton, congrats on your first few rentals! That's awesome. 

Rentals are a low cash flow / high CapEx business model.

That being said, don't rely on your rentals for income to feed your family. If they cash flow, great. Put that cash flow towards reserves.

I recommend keeping hefty reserves (3-6 months worth) for mortgage payments, repairs/maintenance, CapEx, etc.

Things pop up with rentals. You can "cash flow" for 2 years straight and have 1 major repair that costs that 2 years' worth of "cash flow". I experienced this myself when I had 25 units a few years ago.

You will have evictions, turnover costs, unexpected repairs/maintenance, CapEx, vacancy, etc. It's not a question of "if", it's "when".

Keep good insurance policies on each property, keep hefty reserves for each property, open LOCs for extra reserves if you can, and keep a tight hold on the management of the properties whether you manage them yourself or have a PM do it.

Stay hands-on even if you have a PM. Bad things happen more frequently when you buy into the "passive income" idea and don't check in on your properties frequently.

Lastly, keep a tight hold on your financials (aka bookkeeping) so you always know the performance of each property.

Just my 2 cents.

Nice! There's a great Facebook group called, "Bookkeepers for Real Estate Investors", that helps with this too!

Hey @Brandon Clark, congrats on your 1st rental!! That's huge.

My 2 cents is to ensure you keep up with all business-related and property-related financials (aka bookkeeping).

Bookkeeping for REI companies (especially rental property companies) is super nuanced. For example, for rental properties, lots of the categorization depends on the REI's specific tax strategy regarding what we're capitalizing versus what we're immediately deducting. It's heavily dependent on what the tax code allows and who is interpreting the tax code. There's room for flexibility depending on the desired tax strategy.

Once you have more than a few properties, you'll want to consider software. But, excel is totally fine in the beginning (in addition to your PM software to capture transactions outside of the properties).

We use QuickBooks Online exclusively for all of our REI Clients. I use it for my personal portfolio as well. We've found it has superior reporting features, integration features, and is overall more efficient to work within than other REI-specific software.

The downside is QBO is not set up for REI so you'll need to do that or work with an expert to ensure it is set up for your business appropriately.

Something else to keep in mind is your entity structure and how your entities file tax returns. As a general rule, each entity that files a separate tax return (partnership, s-corp, c-corp, etc) will need its own QBO subscription. If entities are disregarded, you can keep up with more than 1 in a single QBO account using the location/business feature to keep track of them separately. This will save you on subscription costs.

If you want to discuss any of this further, I'm happy to answer questions and help walk you through it.

Best of luck!

Hey @David Fitch, we use QuickBooks Online exclusively for all of our REI Clients including multifamily owners. The properties are usually managed using Appfolio (like yours) and we translate the property-specific details from Appfolio to QBO each month. It's a manual process but allows us to view all business-related financials in 1 place.

We've also found QBO has superior reporting features, integration features, and is overall more efficient to work within than other REI-specific software.