Real Estate Blog

Maintenance is an important area, particularly if you’re new in the business. This is an area where I see a lot of mistakes being made by investors.

I spend a lot of our time in our property management business time coming in for new investors fixing or trying to overcome some of their maintenance issues and problems, particularly if they’ve done rehab. If they’re new in the business, maybe the contractor takes advantage of them and overcharges them or doesn’t do enough or too much. We see this all the time. continue reading…

One of the things you’re going to learn is always make sure you are behind the contractor in the amount of work. Let’s say the contractor does a $1,000 repair. What I suggest is that you only give that contract $200 or $300 to start.

Make sure he goes out and buys the supplies and all that stuff. He starts the work and gets about 50% done, so then in theory he’s done about $500 worth of work but you’ve only paid him $200-300. That’s fine. If he wants to wander off and go do something else and not show up on time you can get out of that and you haven’t lost any money. continue reading…

Tax accounting

We’re going to talk about that real quick. We talked already about cash or accrual. You have to pick one and go with it. If you file an individual tax return and you own the properties in your individual name, you are most likely going to be filing a Schedule E. That is where you would itemize your income and expenses. Then it would flow through to your normal tax return as either passive income or passive loss, depending on the situation.

If you have an LLC you’re going to file a Schedule 8825. Basically it’s the same form, but it would be a part of your LLC schedules. continue reading…

Section 32 provides all the attachments. Then there’s the signature area. You date and sign it. All parties must sign the lease. If you have three tenants, all three tenants sign.

You don’t want to get into an argument with the judge later saying, “I understand you put three up front, but only two signed it so those are the only two I’m going to allow you to go after.” Don’t do that. continue reading…

We are going to talk about financial reporting or how to handle your cash, keep accurate accounting records, and tax issues.

Financial Reporting

The whole accounting issue is an important area. It’s one that if you make some mistakes it can really cost you, particularly if you were to do something wrong in terms of tax returns. There could be some real implications here if not done properly.

What I want to do – what the whole course is designed to do – is to upgrade you guys. If you’re already managing a few small properties, I want to upgrade you to a more professional standard. continue reading…

When there is war inside a community association, there are usually several sides-the owners, the board of directors, management, and sometimes, lawyers. Each brings their unique perspective to the dispute, and each may distrust the views, or worse, the motives of the other. That they should all be working together to manage a project that is inherently unmanageable is beside the point-when there is a lack of trust cooperation goes by the boards and issues that should be open to easy solutions instead become a battleground. Why are we wasting good ink to discuss disputes that are often inconsequential in the scheme of things? Because lack of trust can paralyze a community association just when economics require unprecedented cooperation.

Examples? Board members who are convinced (by themselves or others) that they must follow the dictates of a statute, may pursue enforcement measures that are too rigid for the situation. Owners who lack an understanding of the history of an association, its economic condition, or the legal authority under which it operates may believe that rules can be ignored. Attorneys who lack sensitivity to the emotional side of a dispute among board members may try to resolve the issue with formality when flexibility and consideration of human nature is required. Owners with short-term interests may reject the needs of longer-term residents. Managers who lack the confidence to confront wayward board behavior with strong leadership may fear losing favor and perhaps the account. continue reading…

Structurally how do you set up your accounting or your financial model? In my business we have four primary accounts. I’m going to go through each one of them.

Operating Account

We have a primary operating account. That is where the rent money comes in and the bills and expenses are paid from. That is your fairly traditional checking account statement. We try to reconcile that account at least once a week, if not two or three times. Early in the month when all the rents are coming in we reconcile that a lot. continue reading…