All Forum Posts by: Daniel Reyes

@Daniel Reyes to answer your question; it all depends but in my case, the CPA firm will often have the better advice mostly because as in all things real estate : the advice (solutions) will mostly benefit the one giving the advice. Depends on their role. Always consider the angle of your advice/"research" CPA wants clean Audits and does not want the IRS saying he filed that return incorrectly and that's wrong.. now some employee working for you everyday will advise you on how to make things better for them everyday and so on.

@Simon W. wins the best advice award; If you have enough in your budget and enough supporting assets to hire an actual seasoned real estate controller, do it

Your question is almost like your trying get your head around as if there is an owner with 2 choices: either hire employees or sub it out to a vendor. OK if you EVER have the choice of hiring an employee verses a vendor AKA " a-sub" then "sub it out" always every time. However, your scenario may or may not allow that. Some of us have so many moving parts, its impossible to hire a firm AKA vendor.

You have to first work to organize and position your scenario for the path you are taking, get it redundantly clear as tho the role of who or what you are hiring. Choose where you can very clearly describe what you expect, move by move even the most detailed and above all else (even if you hired the controller): a way you can monitor what very specifically is getting done.

If you not invested in a REIT but owing things yourself, then you have to learn how to make management decisions. You first need to learn the accounting software and how its being used. Learn how to use the Audit feature and see whats getting posted. The biggest screw up is where they code credit card expenses fyi. Good luck

Thank you for your thoughts, Charley. You got to the fundamental question :). Sub or hire? Your view is to subcontract this work out if possible. Thank you!

0 Votes

Originally posted by @Alina Trigub:

Simon,

Real estate bookkeeper that has been doing nothing but real estate bookkeeping for years will most likely do just as fine of a job as controller. Everything comes with experience. If they don't have "controller" title, doesn't automatically rule them out. What helps is if they are working directly with CPA(s). Then they would have the SOPs established for this line of business.

Overall, I agree that there's a need for such services.

Originally posted by @Simon W.:

There are a lot of potential investors and people who need accounting services, but do not want a full on in-house accounting department would most likely outsource. There are more entrepreneurs now than in the past and I see it will keep growing.

As for value, the quote "You get what you paid for" holds true.

You can get a paid intern that will have no knowledge and will be just the tasks when given. This turns to a micro-managing situation. Year-end comes and the CPA will be spending countless hours to fix the financials and bill a huge amount for the work without a reliable person to speak to on what went on during the year of operations. Your book will still be a mess.

You get a typical bookkeeper that can pay bills and enter receipts. They might not code the expenses properly or do not know how to maximize profit and have to constantly rely on a CPA. The bill will be high and your bookkeeper might also be running on over-time because real estate is about allocation. The bookkeeper might not know how to run budgets correctly or set procedures to make things run smoothly

You get a Real Estate Controller who has been doing nothing but real estate accounting for years and years and you won't need to micro-manage, no need to worry that expenses are coded incorrectly, does not rely on the CPA and in fact knows how to communicate with the CPA efficiently to save you money. Create budgets and set procedures.

Alina, thank you for your response. I agree with these assessments. It appears this finance person becomes more important when taking a more strategic role with the company, and not necessarily just the debits and credits. For "bookkeeping" an experienced bookkeeper and a real estate accountant who has risen to a controllership role can both do the work. Perhaps then, the question becomes: would you consider hiring/contracting a fractional CFO? As always, thank you for your thoughts :).

Daniel

0 Votes

@Jonathan Stastny

Hi Jonathan,

Thank you for posting! Congratulations on continuing your real estate journey.

Residential properties (4 units and below) are only valued using the sales comparison approach. This means typical value appreciation strategies are riskier from an investment perspective, as no matter the investment to the property (capex for example), the property’s value will be somewhat capped by the single family homes around it. As this is a duplex, we might consider the property using square footage, total bedrooms/bathrooms, etc. against other residential properties nearby.

The financing and deal structure of this property will of course greatly affect the narrative of this asset.

Please feel at liberty to contact me if I might assist. I wish you well!

All the best,

Daniel Reyes

1 Vote

@Justin Kane

Interesting Justin, I’m very curious: what can you tell me about your experience with Bench? Is it all you hoped for? If not, what would be better? Curious to hear your perspective on this.

0 Votes

@Simon W.

Our backgrounds might overlap a bit you and I :). I enjoyed reading how you presented the different levels of real estate accounting and, most importantly, the risk associated with each.

0 Votes

Originally posted by @Charley C.:

Very good question. I really say it hinges on who you got working for you where. Really what do you got to do? post/code the deposits and expenses (loaded comment)

Without even yet talking about expenses, just Deposits for example: Quick book takes time if you invoice and let renters pay you online. Somebody needs to view images from checks or other forms tracking. Its not hard to explain that part. However, Is the CPA or other similar firm really going to log in to your bank, and view check deposit images, track the merchant window in QB, track the tracking numbers? etc etc or more likely tell you what you already know, ask the same questions you answered several times before and give you more work to do as a third wheel? and think you hired them to be a consultant instead of a worker bee? that's been my experience with third parties

Hi Charley, thank you for sharing this! To paraphrase this idea - your outsourced accounting partner should by performing the work and proactively providing solutions, as opposed to giving you items to research. Does that sound like a fair assessment?

0 Votes

@Dean Hunter

Hi Dean,

Thanks for posting! There are some good, quality exchanges here. If I may, I might add a few items that could be helpful.

A 20% anything may intimidate a HNWI or family office, etc. The conversation may have a larger focus on validating this figure because it is so impressive. Sponsors typically will not guarantee returns, but if you are looking to make this more attractive, you might “guarantee “ a 12% preferred return in the PPM before you get paid. This is not necessarily standard, but if you are confident, it is attractive. Of course, then you will have the opportunity to overdeliver. As this is a partnership, it is in the investor’s best interest that you are also thriving; be generous with your long-term ;).

Please feel free to connect with me if I might assist with anything.

You will do excellent, Dean. I wish you well!

All the best,

Daniel Reyes

3 Votes

Originally posted by @Peter Tverdov:

The question becomes, what would you pay for this service? I currently have an intern now who handles some book keeping on Quickbooks but I see a need in this space, especially with REIs.

Thank you, Peter! A few additional question, just out of curiousity based on your response: 1) how do you assign value to this service?, and 2) do you see the value in perhaps having an external finance "partner"? This would be in addition to a CPA who typically is most involved during tax season and for tax purposes.

0 Votes

Hi Justin,

Thank you for posting! And congratulations on venturing out and starting your own management company.

Typically, this will range based on several factors - a couple of which will be: 1) your vendor relationships and, 2) your property management software. Your ability to leverage your vendor relationships and get cost-effective and quick,/reliable service will make an impression on tenants and owners alike. Your software of choice, if properly utilized, will facilitate the flow of communication between all of your stakeholders, and provide the opportunity to build streamlined services. There are companies that have property managers and then some who have opted to title these roles "portfolio managers" (managing one client's investment property portfolio perhaps), ranging from 50 to 200+ properties. This varies based on talent, proximity, etc.

Historically, single-family rental property management has been a challenge to scale for many reasons, but it can be done. Plan well, and don't give all of your business services to one, institutional investor ;).

Please feel at liberty to contact me directly if you would like more help and to continue the conversation. I wish you well, Justin.

All the best,

Daniel Reyes

5 Votes

Originally posted by @Simon W.:

Well, it is a bit biased since I own my own accounting firm, but outsourcing is the future. Ideally, investors should delegate work and focus on what they are good at, which is investing, not dealing with tedious work. If investors spend countless hours asking accountants on BP on how to code things and where to put things in the financials, then that just tells me they aren't focusing on getting more deals.

Agreed Simon, thank you! I'm curious - why do you think outsourcing is the future?

0 Votes

All Forum Posts by: Daniel Reyes

Daniel Reyes has started 7 posts and replied 104 times.

Post: Outsourced Property Accounting

Post: Outsourced Property Accounting

Post: Help me structure my first offer. No real comps to work with.

Post: Outsourced Property Accounting

Post: Outsourced Property Accounting

Post: Outsourced Property Accounting

Post: Passive Investors - What is your minimum ROI?

Post: Outsourced Property Accounting

Post: How many properties can one person manage themselves?

Post: Outsourced Property Accounting