All Forum Posts by: Daniel Reyes

Hi Jenna,

Thank you for posting and joining the conversation, we are happy you are on BiggerPockets!

Yes, effectively, you are correct. In general, real estate investors, and investors in the single-family space in particular have either a "go-to" contractor/inspector, or a contracting/inspection company that will walk the property and provide a scope of work. This scope will include the specific renovations recommended, cost, and time to complete. Whether or not you purchase the asset, this service can be provided for a a few hundred dollars ($100-$250) per property. This would be a company or person that, as an investor, you maintain an ongoing professional relationship.

Please let me know if I can provide you with anything else, and welcome again to BiggerPockets!

All the best,

Daniel Reyes

Hi Matt,

Thank you for posting! This is a good accounting question, allow me to help:

The balance sheet is the financial statement where we can properly track escrow reserves. According to US GAAP - these are considered assets. In your chart of accounts setup - leave room in your GL numbering convention to add escrow reserves in the current assets section. Take a look at a balance sheet example below:

Assets

Cash

1000-000 Operating Cash

1001-000 Security Deposits

Total Cash

Restricted Cash

1100-000 Capex Reserve

1101-000 Replacement/Repair Reserve

1102-000 Etc etc etc..

Total Restricted Cash

Liabilities

2200-000 Current Liabilities (Bills and Expense Accruals, etc.)

2300-000 Long Term Debt

Total Liabilities

Equity

3000-000 Contributions

3100-000 Distributions

3200-000 Etc etc etc.

3300-000 Retained Earnings (etc)

In the scenario you presented, you can establish the bank accounts that your mentioned. You can also do what I would call a "self escrow" into your restricted cash. For example:

Debit 1100 Capex Reserve, Credit 1000 Operating Cash. This way you are accounting for the available operating cash and considering the designated reserve allocation (15%). This way you don't need to necessarily establish physical bank accounts, you just rearrange the "geography" on the balance sheet and track the cash, as it is still an asset. This may be an option if you are disciplined in reviewing and your spend decisions are being informed by your financial statements.

Please let me know if I can assist you further, I am happy to help.

All the best!

Daniel Reyes

Hi Mike,

Thank you for posting!

We may consider: homebuyers in the US typically work regular jobs. I believe there would be value in understanding who major employers are in your area and the business hours of their operations. Also, in this case, it may be helpful to do research on the demographic in your city and county. You may discover certain indicators of your potential market such as:

1) Average family income

2) Family size

3) Largest employers in the area

4) Otherwise pertinent information regarding the home buying landscape in your MSA

You can also take/make calls during your lunch break at work, make trips, visit clients :). Our ability to maximize our time can make a significant difference when pursuing another career in tandem with our "day job".

I'm happy to connect! I wish you much success in your new endeavor; believe me, you can do it.

All the best,

Daniel Reyes

@Marcos Torres

Hi Marcos,

Thank you for posting! This is a great question.

Firstly, congratulations on your education and making these investments! You have been proactive with your resources; kudos to you. There are of course several ways to analyze this situation; allow me to offer a few:

1) We may consider refinancing this loan to acquire a more favorable interest rate. This debt has given you leverage in your knowledge-base, so herein lies the benefit. Much like our economy is able to expand by leveraging credit provided by the banks, I imagine you too have achieved some form of benefit from your education. We might consider requesting an amortization schedule of this loan (in Excel preferably), and consider the impact of a refinancing and increased payment towards principal. After this, we may consider the lifecycle of your investments, and the returns you have underwritten, to see if this makes sense with your personal investing goals.

2) Sell the house and pay off your debt. A hallmark of the economy is that it is dynamic. In short order, you will have the opportunity again to regain a single-family asset. This is an option if you are reasonably uncomfortable with the college loan.

You have options, and it sounds like good friends :).

Best of luck to you, Marcos! Please feel at liberty to connect and reach out if you would like.

All the best,

Daniel Reyes

Good evening BiggerPockets!

I'm impressed by how active everyone is on this forum! Thank you for the reception.

By way of introduction, my name is Daniel Reyes - I live, work, and play in the Tampa (Bay) area in Florida. What a great time to be here, too! For those of us in town, Sparkman Wharf, one of the most prominent and vanguard real estate developments in the US, is having a grand opening this weekend, starting tomorrow 11/30/2018. Come check it out! I am a real estate professional focused in the asset management industry, currently in the multifamily community sector. My goal is to add value and provide insights to new and current members on BP and build a great network of colleagues and like-minded people. Please feel at liberty to connect with me or send me a message if you'd like to start a conversation. I've never met a stranger.

Take care, and happy posting!

All the best,

Daniel Reyes

Ah, so this is your cup of tea! :)

This is good, Steven. Let's watch the treasury rates and make sure you rate-lock a good interest rate then ;).

I am encouraged by your courage!

All the best,

Daniel Reyes

Hi Kevin,

This is a fantastic question, thank you for sharing. You may read a spectrum of feedback types, so here is mine:

This is an opportunity for you to inspire confidence in your wife's heart. The essence of her desire to cultivate your home with memories and time together, is a GOOD, good thing. This is no surprise to you because you married her. Okay, you will have to get creative in how you help her see your long-term perspective, because her perspective is logical. And so is yours. As with anything in our marriages, the compromise is not about give a little, take a little. This is about becoming one, particularly in major decisions like this one.

In the end, like my wife, the women we've been blessed to cherish must feel secure. Her insecurity is not about investing. Your wife is smart, she knows there is empirical evidence suggesting good investing creates wealth for the future. So... you, in particular, will have to work a bit harder than men who are married to what we may call "entrepreneurial" women. But this is okay, you married her and she is worth the fight. So take courage, be strong, and fight for your futures!

Take care,

Daniel Reyes

Hi Steven,

Thank you for your question! 

In a broad reply to your post - this decision will ultimately be driven by your risk appetite, so there is no right or wrong here necessarily. In investor relations and the world of capital raising, there is an NBA player who is young and has just come into considerable wealth and wants to invest, and there is the teacher who has worked 30 years on a decent salary and is looking to invest retirement money. Both are potential investors, with presumably different risk appetites (high risk/high reward, low risk/low reward). In this scenario, perhaps you may ask yourself, "where is my risk tolerance on this spectrum?"

In conservative fashion - I recommend analyzing comparables in the area to help inform your decision (similar 4-plex, nearby or same neighborhood, similar condition, etc.). Assuming there is no rent control here, it may be appropriate to increase rents as quickly as the law permits after close. It is a 4-unit property, so it would be good to perform your underwriting of the deal before you provide a letter of intent, etc. This underwriting can provide you a glimpse of KPIs, and help better inform your investment strategy in your market.

I encourage you, most importantly again, to take inventory of your personal risk appetite, and then make your capital allocations accordingly. 

Please feel at liberty to reach out to me directly should you want to continue the conversation. Happy to connect!

All the best,

Daniel Reyes