All Forum Posts by: Michael Chizhov

Originally posted by @Kelly Rao:

@Cameron Lam

Hi! I am also in the Phoenix metro area and have been looking to invest either in SFH here or a vacation rental in Flagstaff. What are your thoughts on the current market? The entry prices are a bit scary since housing has gone up so much! I've seen how competitive it gets in Flagstaff too.

Hi Kelly, I'm currently based in Flagstaff and would recommend waiting out the current insanity up here. For example, I looked at a home earlier this year that was going for around 270k. Had obvious drainage issues, funky layout, etc. It was taken off the market with nobody interested. It just was put back on the market in August for 320k. It's currently under contract, with no obvious changes made to the house.

The benefit of a long-term rental up here is that you have a fairly reliable rental base (students and professionals). You deal with more turnover as folks only stay in a place for a year, maybe two, but it's still a pretty good market to be in especially during these tumultuous times. Students generally have different financial situations than your average renter, which if you do proper screening, can also add stability.

@David Thompson, that's the one! That's funny. Yep, it was a perfect setup for a triplex. Had to walk away for personal reasons. Small lot though, basically just the house on it. 

I hear ya, it's a tenuous time right now. Well, feel free to shoot me a message on BP or just tag me in this thread again if you decide to move forward and I can reach out to my contractor. The neighborhood around Toho Trail is nice because there aren't too many steep roads. Some of the side streets on Kachina are impossible to drive down when it snows. I know folks that just hunker down and call out of work when it snows, just not worth trying to get out of there. Something to keep in mind if you're going to be VRBOing it during the wintertime.

Ah, gotchya. Yeah, 2500 may be quite a bit for Kachina. That area, and Mountainaire, were initially built as summer bungalos/cabins not as primary owner-occupied homes. So most are smaller and poorly insulated. That said, I did almost purchase a 3500 sq ft home in Kachina, so there's that too. Similar build-out as to what you envision (3 bedroom main house, walkout basement with one bedroom and large common areas, and a MIL attached suite). So, they do exist! It sold for ~370k back in 2017.

I do have a contractor that I would recommend in a heartbeat, but he's also in high demand (as most handy folk are in this area). How close are you to pulling the trigger on the build? Do you have plans stamped yet? I'm happy to facilitate the connection once your project is getting close to shovel-ready.

Hi @David Thompson,

I'm in Flagstaff, and have done AirBnB, owner-occupied, and long-term rental here. I'm currently in a house hack, a large house I converted into essentially a triplex. Just wanted to give you an idea of where I'm coming from.

As you may be aware, the larger the house the cheaper the $/sq ft generally gets. I would think that shooting towards the higher end of your sq ftage would be better. I think that a 3 bd/2.5 bath at 1200 may hurt you in resale, even with the sizable lot. Consider around 1400, 1500. Since you'll be building up (a loft, you say), the livable space on the "2nd" floor will be much cheaper $/ft than the first story, so may as well take advantage of that.

Do you have any specific questions about your project?

Thank you, @Gita Faust. I appreciate your input. As others suggested earlier I started with the opening balance feature, but it was throwing my equity numbers off and I was having trouble wrapping my mind around how to reconcile that balance at year end. I'll go back into my books and see about adjusting the opening balances through a deposit as you suggest.

Thanks @Natalie Kolodij, I think in the meantime I'll do as you suggested, put it all under Repairs and adjust it at end of year with my CPA. Final question (thank you again for your time!), how would you recommend I categorize the renovations in QB Desktop Pro? I'd like a way to separate the expense by unit (1, 2, and 3) and by type of renovation (flooring, appliance, furnace, etc). Would this all be done with classes and sub-classes?

@Soh Tanaka Thanks for the reply; my understanding was that the opening balance should be 0, since it's a line item QuickBooks makes up and one that should either be deleted altogether or adjusted through a journal entry allocating the opening balance to an equity/owner's capital account. Have you used it differently?

@Natalie Kolodij Appreciate you mentioning the renovation expenses, yes I assumed it would all go under a Capital Expenditure since the home is not currently rented. I'm a bit confused though as to exactly what account to file reno expenses under. Let's say I bought $2500 of flooring and installed it myself, and also bought $3000 of cabinets and paid a contractor $2000 to install them (making numbers up here). Would I create an "Other Fixed Assets" Account titled Property Improvements, create a class for my property, and categorize the $7500 under that Fixed Asset account type? And then figure out how to depreciate that cost alongside the building itself with my accountant later in the year?

Hey all, just bought my first house-hack, has the potential to be a 3-unit after renovation. I'm trying to get my books started on the right foot and while I have a pretty good understanding of how to set up my Chart of Accounts and get things categorized, I'm a bit confused as to how I account for the initial cash that I used to purchase the property and pay for the renovations.

I opened a new bank account, sold some other investments, and transferred the proceeds of those sales into the new bank account. All of my real estate expenses have been coming out of this new account. So, would I classify that initial cash as "Owner's Equity?" Or something else? If it's equity, how does this account decrease in amount? Through rental net profit I pay myself? I'll be working with a CPA towards the end of the year to make sure my taxes will be all sorted, but I'd like to get things all set up as well as I can now to make it easier later on.

Would appreciate any help in how to categorize/deal with the initial cash to purchase/remodel in Quickbooks Desktop Pro. Thank you!