All Forum Posts by: Max Emory

Congrats, @Jacob Havlovick! Any tax pro who is familiar with REI will be able to help you. House hacks are fairly straightforward regardless if the units are separately metered. For bookkeeping purposes, I recommend designating a separate bank account exclusive to the house hack activities to keep some sanity.

Hey @Bailey Rentz, I'll say that we use QuickBooks Online exclusively for all of our Clients and they are constantly working to improve the bank feed feature and specifically the connections. Small, local banks and credit unions always have connection issues no matter the software. But, I like to make relationships with software that take feedback and execute to fix quickly. 

Since you mentioned REI Hub, I worked with REI Hub in the past and they had the same connection issues but their CEO is usually good about making quick updates to create a better user experience.

That being said, there is no perfect solution out there regarding bank feed connections so I'd go with one you know and ensure the accounts are linked on a weekly basis to be confident every transaction is flowing through without interruptions.

@Wyatt Nauman, make sure the partnership operating agreement is extensive. Even more so since you'll be living in the house that you guys are partners on. That may introduce some "extras" in the legal arena.

Also, ensure you guys are complimentary to each other regarding skillsets, resources, and interests so there's potential to do more deals in the future.

Super cool you're getting started with REI and looking for partnerships!

@Christopher Morris, after being an REI myself since 2019 and our bookkeeping firm serving many REIs who have different strategies/business models, I'll tell you what is super clear to me...

Never rely on rental properties to feed your family. Rental properties are a high CapEx / low cash flow business model by nature. There are a few different ways to make good money with rentals but cash flow is typically the smallest of the income streams for rental properties.

Now, an exception is if you scale a medium/large portfolio of rental properties that have zero debt, then you have the potential to cash flow enough to put groceries on the table.

When you're getting started, you have to get cash flow in place via high cash flow / low CapEx business models. In the RE space, that's typically flipping & wholesaling. Cash flow feeds the family. Once you have more than enough cash flow and it's stable, that's when I would start conducting wealth-building activities such as purchasing long-term buy-and-holds.

This is something I'm passionate about because I see people (including myself back in 2019) buying into the passive income / retire early from rental properties rheteroric and it's just not a thing for 99.9% of people (some find a way to make it work).

This is just my opinion. I know there are exceptions out there.

Hope that helps!

@Brice Alef-Torrisi, there's lots of different ways to skin this regarding entity structure and financial account structure. Just keep everything as simple as possible in the beginning. Most people who have crazy/complicated entity structures and financial account structures as a result don't need it. Now, if you've already set up LLCs per property, then yes, have at least 1 checking account per LLC.

For people who own their properties personally, keep personal accounts that are exclusive to RE activities so all of that activity stays separate from other personal transactions.

@Rene Hosman, QuickBooks Online for everything. It makes it super easy for us to produce all the financials our Clients need for their tax pros to file their tax returns. I will say using QBO properly takes experience so it's not the best software for an REI doing their own books who doesn't have any training. With training, it's great.

Time spent varies from Client to Client, but I'd bet they probably spend ~30min answering our questions and clarifying transactions to close out the year. Then, we do everything else. It helps that we don't allow transactions to pile up throughout the year.

Most of our Clients before having us do their books would have to extend every year and some even went multiple years without filing tax returns. For the ones who did get everything together themselves to file came to us shortly after talking about how horrible of an experience it was and how they would never do it themselves again (lots of wasted time that took them away from making money).

Hey @Reyna Ayala, simplicity is key to setting yourself up for growth without all the headaches. Your account structure depends on your goals for growth and if you plan to self-manage or hire a PM. If you hire a PM, your financial account structure can be simpler.

If you plan to continue purchasing rentals, I like some key accounts at the "management" level (income, opex, tax, owncp, reserve) and only have 1 checking account per property to prevent having 100 accounts and unnecessary complexity. I also like having credit cards at the management level rather than a credit card per property.

We can get into the weeds with this stuff but it all depends on your specific goals and how you're managing your properties. Then, once you incorporate an entity structure, that will play a part as well.

Hope that helps!

@Bob Asad, there are a lot of different account structures out there but absolutely keep security deposits in a separate account from your opex/income account. 

It can be a separate checking or savings but just make sure to have a "holding" account where only security deposits are held for your sanity.

I won't speak to liability since I'm not a property manager, attorney, etc. 

Just speaking from a cash flow management/account structure perspective.

Hey @Tyler Davis, I'll echo what @Angie Keefe and @Jake Baker have said. There are many ways to skin it but I would go ahead and upgrade to QBO Plus. We use QBO Plus for most of our clients. We track multiple disregarded entities using the location feature and multiple properties using the customer feature (units can be tracked as sub-customers). You can absolutely use classes in place of customers but classes are limited to 40 with QBO Plus. So, we avoid this by using the customer feature. The customer feature also links to the project feature if you want to make use of that eventually.

This structure works great for our clients and their tax pros. There is no "perfect" structure out there but I've tried a lot of different ones within QBO over the years and this is by far the best I've found.

I use this structure for my own portfolio as well.

Hope that helps!

Hey @Marie Copul, since you want to leave your job, I recommend focusing on a high cash flow business model within REI to begin with before getting into the lower cash flow (wealth building) models.

So, flipping and wholesaling are the typical high cash flow models within REI. We serve plenty of flippers/wholesalers who make around $500k/yr and some are higher.

Once your salary is replaced (or a good portion of it), then stabilize the flipping/wholesaling with a great team so it doesn't require as much of your time/energy. Then, begin dumping cash into buy-and-holds to satisfy the long-term wealth-building side of the equation.

If you wanted to keep your high-income job and only use REI for wealth building, I would recommend buy-and-holds (lots of different asset classes out there) from the get-go.

Lots of different ways to get there. Hope that helps!