Wow…It has been a while since I have posted an article here! I’ve been a bit busy with life and being a Real Estate Agent.
I just wanted share an update on how my real estate sales business did this year.
This was my first full year as a real estate agent, so it has allowed me to look over my numbers and performance to establish a baseline to grow from. Here are the highlights.
In the past year, I added 398 contacts to my database. What is the big deal about that? For every fifty people that you market to at least 12 times a year, you can expect one sale. So that allowed me to add four potential additional sales a year going forward.
Out of those contacts, 275 were potential buyers or sellers. That lead to a total of 87 sales opportunities, with 24 being listing opportunities and 63 being buyer opportunities.
I closed 16 total units with a production volume of $2,464,390. That was 7 listings at $880,500 and 9 buyer sales at $1,583,890. The average sale amount was $154,024.
I ended the year with 5 pending deals carried into 2022. 4 listings and 1 buyer. As of today, 17-Jan-2022, one of those listings has closed and buyer sale should close this week.
Remember, if you have a real estate need, whether buying or selling, give me a call or shoot me an email. It doesn’t matter if you are outside of my area, I can connect you with a Rockstar Real Estate Agent!
Clint C. Galliano, REALTOR® 985.647.4479
Now for the business breakdown…I had a Gross Revenue of $81,468. This included $68,581 of Gross Commission Income, $9,574 in referral Commission, and $3,308 of sales of oilfield testing equipment liquidated for a client.
Out of that, I paid $20,502 in “Company Dollar”, (split of my commission to the brokerage), $4,115 in Royalties to Keller Williams Realty International, $1,624 COGS, (client split of testing equipment sales), and $9,397 in operating expenses. OPEX includes advertising, training, dues, professional fees, etc.
Overall, I had a Gross Profit of $37,720 before taxes.
Not a bad start for my first full year! AND, this was while also serving as the Market Center Tech Trainer, in addition to the whole area shutting down for the whole month of September due to Hurricane Ida.
If you are interested in becoming a real estate agent, get in touch with me. It’s a really cool career and much more enjoyable than my previous career.
And, as always, let me know what you think in the comments. Ask questions, tell your story.
If you like my posts, please share them with others and subscribe to this blog.
Clint C. Galliano, a native of Lafourche Parish, has lived in the Houma-Thibodaux area for over 36 years and is currently a REALTOR® with Keller Williams Realty Bayou Partners in Houma, La. He has been involved with real estate investing since 2017 and hosts the local Real Estate Investment Association. Real Estate is his passion. Clint previously worked in drilling fluids and drilling fluids automation for 28 years. He lives in Bayou Blue with his wife and two daughters.
Howie Bick is the founder of The Analyst Handbook. The Analyst Handbook is a collection of 16 guides created to help current and aspiring Analysts advance their careers. Prior to founding The Analyst Handbook, Howie was a financial analyst.
Things To Keep In Mind When Starting A Business
Building or creating a business is an endeavor that incorporates a variety of different factors, and touches upon multiple different topics. Within the building of a business, there are lots of ideas to think about, like the amount of capital you may need in order to begin, the type of overhead or expenses you may have on a monthly basis, the type of market or demographic you’ll be catering to, and the type of competition that’s out there. The business landscape is one that requires business owners or managers to manage and handle a variety of tasks and wear multiple different hats at once. Keeping these things in mind, and having a good idea of what’s ahead, will be beneficial for anyone trying to build or create a business.
The Market or Demographic You’re Catering To
Each business or company has a particular demographic or market that they are looking to cater to. The market or demographic a company or business is looking to cater to, is often a group of people who have something in common, like a problem, an issue, or a desire they’re looking to solve. It can be something they need, desire, or want, but the business is looking to provide a solution or deliver the type of results their customers are looking for. Figuring out the market or demographic you’re looking to cater to, is a great place to start. That way, you can get an idea of the types of services they may be looking for, the type of products that may interest them, or the type of solutions they may be looking for. The way a business positions themselves, with their offerings to their customers, plays an important role in the way potential customers view them, and the way they’re viewed within the marketplace.
Competitive Advantages or Competitive Edges
Businesses that are able to carve out a particular niche, or area where they’re successful, often have a competitive edge, or a competitive advantage over the competition. A competitive edge is something that a business does better or more effectively than their competitors, or something that allows them to differentiate themselves within the marketplace. It’s an important element to any company or business, that’s looking to compete in a market where there are lots of options, and many parties looking to fulfill or satisfy their customers desires. Companies can develop competitive advantages through their prior experiences, the type of packages or services they offer to their competitors, or the type of knowledge or information they may have that others don’t. It’s something that’s important to keep in mind, when you’re evaluating whether you may be successful in a certain market, or whether you’re capable of differentiating yourself among the competition.
The Initial or Upfront Costs Associated With Starting
Every business requires a certain amount of investment, or capital in order to begin operating. Whether it’s getting a space and signing a lease, or acquiring the type of machinery you may need to operate, the costs associated with creating or building a business depend on the type of company you’re looking to build, and the types of products or services you plan to offer. It’s important to have a sense of the amount of capital or investment it may cost to create a business. It’s a tough situation when you decide to start a business and invest the capital or resources you do have, to later find out that you don’t have enough, or need to obtain more. By having an idea or a sense of the type of investment a certain business requires you can prepare or plan in advance or prior to creating the business and be better situated to develop or create the business you were looking to build.
The Monthly Costs or Expenditures
Similar to the amount of capital or investment you may need in order to start or build a business, having a sense or an idea of the types of costs or expenses that your business may accrue or cost on a monthly basis is an important metric to keep an eye on. The age-old business equation is revenue minus expenses equals profit. By having an idea of the type of expenses you may accrue, you’re able to get an idea of how much business you need to do, or how much revenue you need to generate in order to make money in a month. You’re also able to have an idea of how much capital or money you need to keep on hand to continue operating and continue running the business. The monthly costs or expenditures associated with a business is an important figure to keep an eye on, and to monitor during the operations of a business, and prior to starting or creating a business.
Personal Expenses Continue to Accrue
Whenever you’re starting something new, a new job, a new company, or a new business, it’s important to keep in mind that your personal expenses continue to accrue. In the beginning stages of building a business, it often takes a bit of time to get going, and to start making the type of money you’re looking to make. That’s why, it’s important to consider that even though you may be starting a new business or a new company, which is great and congratulations, that you’ll still need to find a way to pay bills and provide for yourself. It’s something that’s a bit of a struggle for a new business owner, who’s truly looking to build a business to support themselves, or to generate the type of income they’re looking for. Preparing and planning in advance is something that can be very beneficial to lightening the load and making the transition an easier process or ordeal for you financially.
Building a business is something that comes with lots of different ideas to keep in mind and brings in to play lots of different factors as well. The market or demographic you’re trying to cater to, is an important part of any business, as it’s the group of people or companies you’re looking to interact with and find a way to provide value to. The competitive edge or competitive advantage a company has, is important in a company’s efforts to stand out within a marketplace or find a way to differentiate itself among its competitors. By having a sense of how much capital or investment you might need to start a business, you can have an idea of whether you have enough to begin, or whether you need to wait longer, or figure out another way. Having that sense of how much investment it might require, can save you spending lots of your money on something that may not be feasible just yet, or a bit out of reach. The monthly costs or expenditures that a business requires, is important to know how much revenue you need to generate, and the type of capital or money you need to keep on hand in order to continue operating. A lot of what corporate finance is, is managing the finances behind a business, making sure that the business has what it needs to continue operating, and finding ways to continue to grow and develop the business as well. Even though you may be starting something new, and you need time to bring it into fruition, personal expenses are something that continue to accrue, and are important to keep in mind when building a business. All in all, creating a business is something that comes with lots of different factors, a lot more than the few we were able to highlight. We hoped this helped and shined light on some of the important factors to consider when starting or creating a business.
And, as always, let me know what you think in the comments. Ask questions, tell your story.
If you like my articles, please share them with others and subscribe to this blog.
I hope everyone is doing well. I am learning the ins and outs of being a REALTOR®. The kids are preparing to go back to school with a staggered schedule and a blend of virtual and in-person learning. AND, no extracurricular activities such as marching band, various band and choir competitions, etc.
This will be far different from what they are used to. They hesitant about their ability to do school work consistently outside of a classroom environment. We will have to help them to develop new habits to successfully reach their goals. Which brings us to our topic: Habits and How to Change Them.
Habits & Productivity
I recognized that habits are responsible for productivity at a young age. I grew up with undiagnosed ADHD and had trouble focusing on any given task. I would generally get bored and move on to something more exciting.
My maternal grandfather, whom I am named after, recognized this and pulled me aside to tell me a story one day. He told me of Bethlehem Steel and how they worked and worked, but just couldn’t seem to make progress. After continued diminishing profits and increased backlogs, the CEO brought in a consultant to tell him what the problem was. The consultant studied the company’s business and reported back to the CEO. His findings were that across the company, tasks were started, then paused, to jump to other tasks. This happened over and over again, delaying production.
His recommendation was to prioritize the tasks needing to be accomplished, with the most important task at the top of the list. But the biggest change was that they could not move on to another task until the current task was completed.
This practice was implemented and Bethlehem Steel went on to become the second largest steel company in the US.
This story had a big impact on me in that it drove me to develop the habit to focus on a task until either it was completed or nothing more could be done with it.
In researching the details of the Bethlehem Steel story, I discovered some interesting things. This happened over 100 years ago, (1918), Charles Schwab was the CEO, and the practice that turned things around is called “The Ivy Lee Method”. While Mr. Schwab may sound familiar, the ILM did not, but I recognized it as the basis for a lot of time management programs. Making a prioritized list is now a common approach for productivity.
The ILM requires that at the end of each day, you make a list of the six most important tasks that need to be accomplished the next day. Then you complete the first item before moving on to the next item. Any leftover items on the list move to the next day’s list.
This method is lauded as being simple to follow, so that makes it effective when practiced. But sometimes, having too many “To Dos” becomes daunting. It can become an impenetrable wall discouraging you from doing more.
Gary Keller ran across this when he was building Keller Williams Realty. What he realized, is that your list should only be comprised of one thing, as described in his book, The One Thing. That method involves doing the one thing that makes everything else in your day easier/better/more productive.
Knowing vs. Doing
Based on the ILM, The One Thing, and various models, it seems we have many models to follow to accomplish our daily goals. We know what needs to be done. Or at least can easily find out/figure out those things.
Some people find the real struggle is actually doing them. I find that it all boils down to what you are willing to do to achieve your goals. Excuses get made as to why you aren’t, can’t, or won’t do something. But they are just that: EXCUSES.
Here is something else that stuck with me from when I was younger: a Stephen King short story called “Survivor Type”. The story is a bit disturbing and somewhat gory, as Stephen King stories are want to be.
Synopsys: A doctor is stuck on an atoll after some bad decisions that ruined his life. He is determined to live. He then proceeds to do disturbing things to survive.
When I read this story, the question that kept running through my mind was “What would you be willing to do to accomplish your goals?” To me, that is the take-away.
If you are in the habit of staying in your comfort zone and your focus changes like a leaf blowing in the wind, it will be hard to accomplish your goals.
The first step is to have a goal.
Then have a heart- to- heart with yourself to determine what you are willing to do to achieve your goal.
Start practicing a model that will help you reach your goal. Do it daily.
Eventually, the practice of the model will become a habit. This is how you succeed.
And, as always, let me know what you think in the comments. Ask questions, tell your story.
If you like my posts, please share them with others and subscribe to this blog.
We are still doing fine and have been able to go back to the gym, so that is a nice expansion on our workout routine from the lockdown.
I have completed my 90 Hour Real Estate Salesperson training course and will be taking the national and state exams this week. #WishMeLuck
Today I wanted to talk about outsourcing. As a real estate investor focused on expanding, you continuously search for properties. There are numerous ways to accomplish that on your own, whether it is “Driving for Dollars”, (drive around looking for vacant properties), searching the MLS, tax sales, or any of the other numerous ways to find properties.
There is an issue with all of these methodologies in that if you are doing them, what aren’t you doing to work on your business?
So, why not outsource your search for properties?
Put in a little effort to document your criteria in a Property Search One Sheet and share it with anyone and everyone. This allows other people to identify properties that meet your criteria and bring them to you, thereby increasing the input into your funnel.
The people you share it with can be family, friends, acquaintances, and even property wholesalers.
The oil and gas industry is in turmoil and service companies, in particular, are reducing their footprint in an attempt to weather the double-pronged attack of oil price wars and pandemic lockdowns.
Until yesterday, I worked for one of those companies, as some of you long-time readers may know.
I received a phone call from my manager, and HR, telling me that due to the current environment, my position was being eliminated.
It is not a bad thing. I only took the position back in January because I was unsure of what I wanted to do when my regional position was eliminated. I figured that they went through a lot of effort to keep me in the company and I didn’t have an immediate alternative plan, so I worked the job in Houston.
Then the pandemic hit and everyone was on lockdown. Luckily, I was able to continue working, from home.
BUT, during this time, I realized that I did not want to go back to Houston for work. We decided that I would continue working, as long as I could do it from home, and as soon as I was told that I needed to show up in Houston, I would resign.
It seems things have worked out for the best, because instead of just resigning, I am leaving with an early retirement severance package!
Because of this, I am now free to explore other opportunities…One will be to continue to be involved in real estate, but to a larger degree. I will continue to invest, but now I am pursuing a realtor’s license.
I will also be available to consult on any innovation projects that might come my way. This will allow me to flex my mental muscle “coming up with cool shit” as a colleague is fond of saying.
I will also look for small businesses that the owners are preparing to retire with no one to take them over. I will only pursue them if they are profitable. It should be easy to make a good deal on something like that when the options are sell at a discount or shut it down.
How are you doing? How are you handling the mis-named “social distancing”? We are going a bit stir-crazy. I am probably more used to the isolation and not being able to go anywhere from when I worked offshore in the oil and gas industry. This is a lot nicer than sitting on a floating rig that you have to fly for one to two hours in a helicopter to reach.
Feel free to reach out if you need to talk to someone. It actually helps with the isolation.
Now, on to the content…
Due to the statewide Stay at Home order here in Louisiana, our local REIA are not able to get together for our monthly meeting. So, I’ve decided to move it online, replacing it with a livestream. Since it covered topics that I think are relevant to a larger audience, I’ve decided to share it with this community, too.
In this video, Tim Blanchard, of Allegiance Home Lending, discusses how mortgage rates work, what the impact is from the Q1 2020 FED Interest Rates on mortgages and regular loans, and gives advice on utilizing SBA Coronavirus relief options.
Things you will learn in this video:
What affects mortgage rates.
What mortgage rates are based on.
What drives a change in mortgage rates.
How Lenders’ Credit Score Criteria have changed in this environment.
SBA Coronavirus relief opportunities for businesses.
Today, we are going to continue where the last article left off. We are going to go over the lessons learned from my experience buying a business with partners. I will list them out with short descriptions. There is no particular order to the list. Any names mentioned other than my own have been changed to protect the innocent…
Partners (The Team) –Our team consisted of four partners. Bob and Carl are the majority investors and took out an SBA loan to acquire the business. John and I are minority partners and not party to the SBA loan. Because Carl, John, and I all have full-time jobs and at the time Bob did not, the plan was that Bob would learn and operate the business until we could afford to put someone else running the business, leaving Bob to pursue his personal interests. See my last article for how that all turned out.
Be transparent about
individual drivers. Becoming your own boss and becoming wealthy eventually
become competing interests for an entrepreneur.
is critical. Tolerance is listening to every idea quietly. Professional respect
is availability, transparency, punctuality, and preparedness.
Autonomy must be
earned, never assumed in a partnership.
Bad habits are hard
to break in others.
Operating Agreement/Bylaws – Depending on whether you have a Limited Liability Company (LLC) or a Corporation (Co), you should have either an operating agreement or bylaws to govern how the business will be run. In our case, since we had a corporation, we had bylaws. We deliberated on what to include in these bylaws to ensure smooth operations, but did not go far enough. They did not spell out the duties of each partner & role, because we thought that all of us being adults, we would do what was needed to be successful. What we realized was that we each viewed the word through a very personalized lens and what seems obvious to one, (or two, or even three), is not obvious to everyone and if the fourth person feels strongly enough about it, they just will not go along unless forced to. And even then, although begrudgingly agreeing in discussion, they will still fight and obstruct the wishes and decisions of the group. If we had, as a group, decided on the duties for each role and assigned responsibilities for each role to each member of the group, then documented it in the bylaws, it would have made things a lot clearer.
The operating agreement or bylaws should also include a
defined exit strategy that everyone has agreed to and is committed to
following. It should have defined triggers that initiate the exit strategy.
These triggers should be something that the partners can easily monitor and
It should also be spelled out how to handle decisions and
requests. In our case, decisions initially required unanimous board approval.
We amended the bylaws later to only require a two-thirds majority due to the
one partner asking for a solution to a problem, but not liking the board
recommendations, then never implementing the solutions.
Due Diligence – Nowhere near enough due diligence was done on this business or partners. We did not understand enough about how either operated. The revenue the company was making included the previous owner doing work on weekend “off-book” to get jobs out & keep expenses down. It also relied heavily on promotion via owner visits with distributors and their personal relationship. We had no relationships.
Additionally, having a partner who tells the group he agrees
with the intention of not taking any profits for three years, but assigns
himself a $100,000 per year salary and in the first week of operation directly
violates the ground rules we set up for operating the business. We, (the other
three partners), realized that the fourth partner had pursued the investment
deal to set himself up with a kingdom where he was king. #AvoidDat
Know how the business operates prior to purchase.
Calculate how much revenue you need to make to break even.
Have a budget that takes into account ALL costs to operate.
Unless you are laundering money for drug cartels, whatever
starting capital you have isn’t enough.
That much isn’t enough, either.
Planning to grow? Triple the previous statement.
Financials –While we started out with modest working capital, we had no understanding of our run rate, break-even point, or runway length. In other words, we did not know how much it cost us to operate, how much we needed to make to break even, or how long we could operate with the amount of working capital we had. We eventually figured those things out, but not until it was too late. Also, another point to make, as referenced in a previous article, you have to pay attention to Cash Flow to stay on top of your business finances. We utilized the accrual method of accounting, but did not regularly look at the cash flow reports. Because of this, we would account for interest paid on our loan from the Income Statement (P & L), but did not account for principle repayment in any of our break-even or forecasting exercises until almost two years into the business.
The person managing the business needs to have a fundamental
understanding of basic accounting and business / financial principals. This is
a KEY point and will lead to many headaches if not followed.
Know your costs to operate, to the penny! AND, make sure you
Cash is King! When you run out of working capital, that is
pretty much the end of the business.
Gross margins should be higher than thirty percent. If not,
this will lead to a death spiral for the company.
Sales – The business we purchased operates, (soon to be preterite or past-tense?), conducted sales via a convoluted structure. The products are sold via distributors to building supply centers for builders. So if an end user wants to use our product, they get their builder to point them to their preferred building supply store, where they can look at brochures or in some instances, floor models to decide on what they would like. They then request a quote. That request comes to our operation, is processed, and returned to the building supply store salesperson. That salesperson has limited information on the product nor incentive to sell it.
From our end, we pay a commission to a sales agent to
promote our products to the distributors, who in turn make them available in
building supply stores. This is too far removed from the end buyers and in my
opinion, not an effective spend.
Agencies DO NOT replace effective sales people! Agencies
represent a large portfolio of products and do not focus on pushing your
It doesn’t matter what your product is if you and your team
cannot sell the product(s). No sales = No revenue = No profit = bankrupt
It does not matter how much you cut costs or control
spending if you and your team cannot sell the product(s). (See equation above)
Operations / Efficiency – Prior to closing the deal on the business, since Bob was going ot be operating it, we requested that Bob create a budget and document processes for what the business would need to run. He never gave us a budget, nor processes, even after being in the business for a couple of years. His initial excuse was that he had to be working IN the business to understand how the business operated (for processes) and that we, as the board, should be giving him a budget that he could spend. These were two more missed #RedFlags in our journey that should have told us to run, not walk, to the nearest exit. As of today, there are still no documented processes. We kind of have an idea what our budget is through reviewing financials, but we don’t trust the numbers because they are constantly being adjusted. So, we only have an idea, and nothing from Bob. Ultimately, there are still a lot of inefficiencies in the way the business is being run.
expensive and cripples or kills a company. From the start, focus on efficiency
of process, capital, communication, and decision-making.
Be deliberate and
realistic about growth rate. In projections and practice. Year over year
revenue and product volume increases have to be realistic and managed to avoid unmet
expectations and quality issues. It’s nice to have targets, but remember that
you need sales to support targets (see Sales section below). And it is much
easier to have a customer wait for quality than to apologize for a sparkly
piece of crap.
Product Management –This business has about eight main products with practically infinite levels of customization, not counting special-order material types. Every order is a custom order with many options to choose from. There are forty-five different options to choose from when requesting a quote. This leads to decision fatigue and indecision in customers. Ultimately, our quote/win ratio was very low. We suspect that most customers that requested a quote had already decided on something else by the time they received the quote back. Additionally, “Bob” was continuously wanting to add new products to the portfolio because they were the latest hot thing selling.
Have IP, a unique desirable product, or both. If you have
neither, shoot it in the head, kill the deal, pull the plug, or whatever
euphemism you want to think in. Unless your goal is to be your own boss, then
feel free to limp along for eternity (or until your cash runs out).
Keep or reduce your product line to your top sellers. Based on the Pareto Principle, roughly 80% of your business should come from your top 20% of sales. (Just a note, it will not be exact. This is a rough guideline) So, find out what products make up the majority of your revenue if you already have a large portfolio of products and focus on selling those products. If you only have a few products, keep this idea in mind before adding new products. Which leads to the next one…
Before adding a new product to the portfolio, always write
up a business case and do sales/cost impact projections. In fact, this should
also be done for any request or change to a product or portfolio.
Product customization is less important that total customer
buying experience. If you make it easy for your customer to buy your product,
you will have more sales.
As of right now, the business is still operating. I do not
know how much longer that will be the case. It continues to limp along, hanging
by a thread.
Stay tuned for further updates…
And, as always, let me know what you think in the comments. Ask questions, tell your story.
If you like my posts, please share them with others and
subscribe to this blog.
Wow, it has been a while since I’ve written anything here.
Things have been busy, to say the least, between my regular job and family. My
oldest started high school marching band as a freshman and her schedule is
brutal! (Translation: Lots of after-school practice, football games, and
Today we are going to talk about when things don’t go right
in a business, from a finance perspective based on a business I am involved in.
The names have been changed to protect the innocent.
In March of 2017, a group of former colleagues, with me as a
minor investor, purchased a door manufacturing business. At this point, none of
us had ever been involved in that industry, but we thought that between the
four of us, we could figure everything out and grow the business.
Prior to the purchase, we examined the prior owner’s books
and he seemed to be making decent revenue and profit. We tried to analyze Cost
of Goods Sold (COGS) and Expenses to get a good handle on what our potential
revenue could be.
Because three of us were working full time jobs, the fourth partner, we’ll call him Bob, was going to run the business initially, until we could grow the business enough to hire someone to manage it.
We attempted to get Bob to put together a pro forma operating expense projection, but he kept claiming “he would not be able to accomplish this until he was actually working IN the business and understood everything”. RED FLAG #1 (In hindsight, this should have shut down the deal for us.)
Once we purchased the business, Bob assigned himself a $100,000 per year salary because that was what he “needed” to survive on. We, the other investors, had not begun to understand the business’s key financial benchmarks at this point, so let it slide. RED FLAG #2
After six months or so of this, we begin to realize that our working capital was steadily draining. In addition to Bob arguing against every suggestion the board, (other three investors), would make to improve things, agreeing to implement the suggestions, then never acting on them. We slowly started to realize that even though we all agreed at our initial gathering that this was an investment to grow and either sell it for a profit or, after three years of profit reinvestment, provide cash flow and dividends, Bob was acting as if he was setting up Bob’s Kingdom. He wanted to run the business exactly as the previous owner had run things. RED FLAG #3
We made changes. First, we reduced the salary to $50,000, a
figure more in line with the position. Then we removed him as President. We
attempted to replace him with a salesman we brought on and moved Bob into the
sales role, but since Bob was still involved and also trained the salesman, he
was set up to fail. Bob did not teach him everything and did not say anything
when things slipped through the cracks until after we noticed a couple of
months down the line.
The business continues to limp along. We have not put any
more capital into it. Bob occasionally takes out small invoice-secured loans
when the bank account gets too low. He is working at another job and has the
lead employee mostly running the business.
We other investors have mostly given up on expending more
than just a nominal effort to expand the business since no advice given is
followed. We came up with plans and strategies on how to streamline the
business and improve revenue, and presented them as a means to grow the
business, but they didn’t sit well with King Bob, so they went nowhere.
The best I can hope for is that I can harvest some capital
gains from other investments when this business eventually fails so I can
offset the losses on my taxes.
In a future post, I plan to lay out the lessons learned from
this experience and hopefully it will help you, the reader, to avoid some of
Post in the comments about your things that didn’t go right.
And, as always, let me know what you think in the comments.
Ask questions, tell your story.
If you like my posts, please share them with
others and subscribe to this blog.
Today I am going to do a review of Stessa, an online rental
property accounting platform.
But first, a disclaimer:
***This review may contain affiliate links that compensate me for user
registrations of this product.***
As I have detailed in a previous article, I started using Stessa
last year to track accounting for our rental portfolio. Previously, we used
Google Sheets, tracking rental income and expenses for each property on
different tabs. This would involve me going in to the first property’s income
tab, entering the collected rent, then checking all of my receipts and accounts
to verify I hadn’t missed any expenses and adding them to the expense tab for
that property. I set up expense categories and put in a section to summarize
the expenses by category and by month. While not ideal, it insured that someone
at my CPA’s office was not classifying an expense in the wrong category or for
the wrong property. It was not hard to do, just more a matter of remembering to
Around the middle of 2018, I started seeing advertisements for a product called Stessa on Facebook. As per my SOP, I ignored them, other than taking note of the name. A few weeks after first seeing the ads, I heard an advertisement for it on The Bigger Pockets Podcast. This was more effective, as they pointed out how it was free for rental property owners and individual investors and involved some automation to keep track of your accounting. They also pointed out how the product was developed by real estate investors for real estate investors and the name was “assets” spelled backwards.
I went to the web
site and registered for it. I was able to set up our properties and import
bank & credit card histories to the transactions section, allowing me to
categorize each expenditure. It took maybe 10 minutes to set up two properties.
And, once numbers had been entered, the dashboard populated with portfolio
metrics. Way nicer than my spreadsheets!
Individual tracking for each property:
Header – Address, Acquisition Date, and Cost.
– (Year built, neighborhood, parish [county, for those of you outside
Louisiana], number of units, bedrooms, bathrooms, square footage, and lot size,
all pulled from Zillow, based on the address.)
Valuation – Provides
for multiple options: Custom Valuation, Zillow Zestimate (automatically polled,
user choice to update property valuation), Gross Rent Multiplier, or Capitalization
Rent Roll – Allows
entry of Bed/Baths, Square Feet, Tenant names, Rent, Market Rent, Deposit,
Move-in Date, Lease Expiration Date, and notes.
section – Freeform note space for property.
Monthly Expenses –
Allows for Pro-Forma expense entry and pulls in categorized expenses from the
Transactions section to show actuals compared to Pro-Forma.
Shows location on a Google map, with a Walk Score and a Bike Score for the
Pulls in assessed value and property tax amount (I’m assuming from Zillow), and
allows you to add missing assessment/tax details.
Capital Expenses –
Allows for entry of Date, Description, & Amount of Capital Expenditure.
Shows a chart with LTV percent, Property Value, Debt (principal balance), and
number of loans.
Mortgage – Details
the Lender, Principal Balance, Payment Amount, and Interest Rate.
Displays the Carrier, Premium, Policy Number, and Renewal Date.
As I mentioned above, Stessa
allows you to link bank accounts and credit cards to the Transactions ledger.
It lets you initially import all transactions and gives you the option to
review them to either categorize each one correctly or, in my case, the credit
card I use also has personal charges, so it it allows me to delete those
Stessa does not store your credentials on their servers and
use bank-level encryption to secure the transfer of information. It also does
not allow changes to your bank or credit card accounts. It only pulls a copy of
your transaction information.
The Transaction Ledger Menu allows you to review new
transactions, view ALL PROPERTIES transactions, view individual property
transactions, or add a new property.
The main Transaction Ledger display shows all transactions, filtered,
based on the menu selection. It additionally allows you to search by keyword
and/or filter by Date, Category, Amount, or Account.
There is also an export function, allowing you to export
filtered transactions to a *.csv file.
You can manually import *csv and *.qif files from accounting
software, in addition to adding individual transactions by hand, such as
Reporting – Reporting is one of the reasons I was interested
in trying out Stessa in the first place. It provides you with standard reports
such as Income Statements, Cash Flow, and Capital Expenditures, with options to
select a date range, property/portfolio, monthly breakout, and whether or not to
show Category Details. The report is downloaded as an Excel file, allowing you
to customize the report title and report formatting, if needed.
The other reporting option I have mentioned before is the
Tax Package. This contains everything needed to hand off to your CPA at tax
time. And it sure makes it easier on me!
The dashboard is the main page you see when logging in on a
computer. It allows you to show the total portfolio or to select individual
It contains the following sections:
Portfolio Value – Options to see Market or Purchase Value.
Asset Return – Either Appreciation or Levered returns.
Occupancy – Detailed in percent.
Debt – Total
Net Cash Flow – A chart detailed by month & Category
Location – Google map showing all properties in Portfolio
View or a single property in Property View
Compare Properties – Rental Income, Market Value, and Square
Feet. Available in Portfolio View only
Property Highlights – Property picture from Google Street
View, Income, Expenses, LTV, and Occupancy. Available in Property View Only
I think that Stessa is a great automation tool for rental property accounting. It’s free, cuts down on time spent doing bookkeeping, and makes tax time easier. On top of that, their user support is outstanding! Early on, I identified a couple of bugs and they were fixed within a couple of days. Amazing!
If you are interested in trying out Stessa for your rental properties, please click on the link below:
This week we are going to go over
some myths regarding taxes for small businesses. I get a newsletter from our CPA
each month that covers tax-related topics. The articles are written by other
people and I am assuming his website subscribes to these articles from a
I found the topic of this one
interesting, so I searched for the title on the web and found the original
is the original article, by Juanita Farmer, CPA, of Germantown, Maryland.
There are a lot of myths &
misconceptions around what you can and can’t benefit from with regards to taxes
in the US. Below we are going to cover seven of the most common ones.
– I am not a CPA and DO NOT Offer tax advice over the internet or otherwise.
Please consult with your CPA for tax advice. This article is for informational
Business start-up costs are the costs incurred prior to the
business actually beginning operation. They range from advertising and travel
to surveys and training. Organizational costs such as these fall under capital
Just like you can amortize depreciation of equipment, when
you start a business, you can amortize some business start-up costs.
You can deduct up to $5000 of business start-up costs and up
to $5000 of organizational costs. For start-up or organizational costs that
exceed $50,000, the $5000 deduction is reduced. The remaining balance must be
Overpaying Taxes Makes
From a business perspective, the IRS is only worried about
if your documentation matches your deductions and that your deductions are
legal and legitimate. Properly document expenses and follow the advice of a
good tax accountant to “Audit-Proof” your business.
You Can Take More
Deductions for an Incorporated Business
You don’t need an Incorporated Business to deduct business
expenses. Plus, depending on the corporate entity, you may have more tax and
tax filing burden.
Home Offices are an Audit
Home offices used to be a common audit flag, but with so many
people now utilizing home offices, the IRS issued a a simplified home office
deduction that is easy to claim, with proper recordkeeping.
No Business Expenses are
Deductible If You Don’t Take a Home Office Deduction
All business expenses such as travel, business supplies,
equipment depreciation, etc. Are deductible, regardless of if you take a home
office deduction or not.
Filing an Extension
Delays Your Tax Payment Due Date By 6 Months
Regardless of whether you file for an extension or not, if
you owe any taxes, payment is due on the original due date, typically around
April 15. All an extension does is allow you a six month extension to this deadline to turn in all
of your paperwork/documentation.
Part-Time Business Owners Can’t Have Self-Employed Pension Plans
Even if you are working a full-time job with 401k benefits
and you start a small business, you can
still set up a SEP-IRA for that small business