All Forum Posts by: Cliff Benner

I'm an Accountant as well, and have this issue with these more Industry or "inexpensive" Softwares for Books. I just find that they aren't worth it because of all the edits you have to make on the spreadsheet to get the same result, and one of the softwares refused to allow Journal Entries which seemed like a huge red flag to me. 

I use QBO and love having the class feature, which is a bit more per month, but you have to have it to separate out transactions for properties for Tax time anyways. This allows me to show my clients how profitable each property is and how changes to the property or how they manage them affects that property. I do have them sync their bank accounts and credit cards to eliminate human error in entering items, and ask them to avoid putting personal expenses on those accounts. This allows us to automate where transactions go and we create reoccurring depreciation entries so they can see what their return will most likely look like. 

 This was the issue I had with Stessa, single entry and that doesn't allow for JEs. 

For me, Down Payment and Closing Cost, Since I am young and want this to be my retirement, I want to buy as much now and hold forever. So Down payment is more of a concern to me. I can refinance when rates drop in the future. 

 Hi Daniel,

I recommend reading Buy then Build for all the steps in the process. But you are on the right track.

First is reach out to the Broker or preferably the Owner if available and request an NDA. Once you get that, sign it and send it back, then request their financials and documents pertaining to the sale. 

This is usually the financials they use from their Accounting system and not concrete numbers but allows you to see how they are doing. Mom and Pop shops are not that great at accounting and the numbers tend to look like they can't afford to live so take that in to account plus the operations they are doing. 

If you are interested, you can request to meet with them and/or submit an LOI detailing your offer on price, financing options, terms, and other items related to the purchase.

If accepted, request Tax Returns for this business, and have an Accountant(reach out to me if you are looking for help with the Analytics of a business purchase) compare their financials to the Tax Return. If they are willing to Lie to the IRS, they are willing to Lie to you. But this also lets you bargain by saying "you say it makes money but you have never claimed any profit".

If you like it and then you get a lawyer to draft a contract with all the Details, detailed out even more and push for a closing day.

Once that is good to go, you make a new business then do a DBA form if you want to keep the existing name for recognition.

The buyer does NOT need a representative like Real Estate, it is fairly uncommon for buyers to have one. If you get one, I would say find one who knows the industry because I am sure you will have to pay them their fee, but that fee is always negotiable in the purchase as well. I know someone who did and they worked with them on every step and helped out. You will need an Accountant to help figure out the EBITDA or Seller's Discretionary Earnings(SDE) for you and compare to the Tax Return to make sure it all looks good and makes sense. You will need a Lawyer for all the Contracts items, and if real estate is involved, a Title Company too.

Lawyer and Accountants will charge by the hour, mostly because a $100k purchase has less to look at then a $1mil purchase. Buyer Brokers may do hourly or a % of the purchase price or both because they may help you get a lower purchase price but that hurts their pay day. 

I live in Denver, CO and invest out of state, due to cost. It was challenging to start.

My realtor was not on my side and I trusted her to much, she said the house was fine, her husband did inspections and said it was fine and not to worry, the ARV was double the house value. We purchased this as a BRRRR on a Line of Credit, went to do a few fixes then refinance. We bought it for $90k they said it was worth $90k after $30k in repairs, then a second appraisal said $120k so we could get out of the Hard Money loan by getting a personal loan and maxing out our LOC again. My PM, who did not know my realtor, said the house looked good, nothing needed to be done, and got it rented.

Turns out both were terrible, the house needed new HVAC, AC, windows, Doors, Pipe fixes, Water Heater, electric line, I found all this out after my Tenant Sued us because of the house's condition.

We spent a 9 months of the tenants chasing off contractors before we got it repaired and the tenants out, then the judge granted us all our rent so we finally go that. Got a new PM who made us fix things and walked it with me(first time for me seeing the property), then we finally paid off all but the mortgage and now we cash flow about $400/month. 

Lots of lessons learned and we will be buying there again with our new team, but we now verify everything our team says and we keep an eye on everything more than ever. We are also quick to complain and fire if we have to. 

I discussed this on BP Podcast Episode #610 if you want to hear more. 

 Hi Rene! My advice, as an Accountant, would be to have an Accountant help set up your Chart of Accounts and Class/Locations at least. This is where a lot of people make mistakes and then keep those mistakes going until they decide to outsource it.

Also, Tax Accountants can create Profit and Loss Statements but that isn't their specialty and they aren't focused on keeping your financials in order. A good Accountant or Bookkeeper will work with you to tie out all your accounts and let you know any issues or advice as it comes up throughout the year.

I would be more than happy to chat with you more about your finances, I was one of the few Bookkeepers to be invited to BiggerPocket's Financial Service offers and have been working with them on ways to improve it as I help more and more investors with their Books. 

It helps I am an Accountant and have all my accounts sync in, with Work Papers for depreciation, asset basis, and use my monthly statements to get me the correct Interest and Principal amounts each month.

I do this same thing for my clients and they really like being able to see how they are doing each month. 

When negotiating, did the renovation credits decrease your final purchase price and your monthly payment terms?

 For my Bookkeeping clients, we sign them up on BOX and are able to share the folder with them. They can then Download the app and scan receipts right into it where I can make sure it is accounted for and file it away for them. It also lets them sign pdfs on their phone so they can sign contracts and send them off if they need to.