What Are Appropriate Bookkeeping And Tax Costs For Real Estate?

What Are Appropriate Bookkeeping And Tax Costs For Real Estate?


What’s up my friends? Kris Krohn here.
Today, we’re talking about real estate and we’re talking about accounting.
Because a lot of people want to know, “What should I expect and what are good
appropriate costs when it comes to doing real estate?” So, first of all, the reason
why you’re probably watching this video is because you’re saying, “Okay, if I’m going to
own real estate, I want to know what my real cash flow is what kind of really
expect and what are those unexpected costs?” Because listen, honestly when you
hold real estate, you have some additional costs that you do need to be
aware of. And when it comes to accounting, guess what? Every day, every month that
you hold that property, you need to be doing a number of things. You need to be
logging expenses. You need to be depreciating the property and
recording the mortgage interest. And some of your like, “Whoa, Kris. That’s going
around over, man.” So, what I’m going to do is I want to actually break this down for
you. What I’m going to do is I’m actually gonna step into my office I’m going to
invite you this is my cute cozy… You cute, little, cozy, little office. And what I
want to do is I’m gonna actually break this down for you and I actually want to
help you understand what this looks like. So, check this out. Accounting. What are
the things that you need to be aware of? What are the real expenses? I got my
cheat sheets here. A lot of people are like, “I own this
property. What should I be paying per property to make sure that all of the
expenses mortgage, everything are basically properly logged?” At one point, I
was paying in a bookkeeping from like, 40 to 50 dollars per property and
when you have a 200-dollar cash flow and you have a 50-dollar cost,
it’s like chokehold. But if you also have a property and you can and you can get
that number down and so the question today is “What’s reasonable?” Before we
talk about that, I actually have a team of freaking CPAs. For my partners, those
of you partners that are watching this, I have professional CPA that actually runs
this for me. So, I want to break this down to you. First of all, number one, there’s
going to be mortgage. Your single month when you’re paying your mortgage, a part
of that actually goes towards principle reduction and then a part of that ghosts
actually interest which you can offset right off against the property. But more
than that to make sure you really fully get all the tax benefits, you need to
depreciate the property. Now, depreciation to help you understand what that means.
Properties for example are allowed to be depreciated over a 27 year period of
time. Which means that if a property costs $100,000 and I divide that by 27,
it’s like $2,700 a year is what I get it right off. That means it’s possible for
you to actually have 2,600 dollars of cash flow that’s positive.
Take the depreciation of negative 27 and on paper, it looks like you lost $100
that year. But guess what? You’re actually up $2,600. The accountants need to know how to write that depreciation off. Number 3, you’re also going to have
expenses. This is a part of the game. You need to be able to take like things like
property management fees. Everything into account. And this is what I was paying 40
$50 a month for. These days, because I buy a property pretty much every single day.
I have a team of CFO with their accounting team and what they do is they
step in and they actually do this. Check this out. They charge $50 on the first
property but then they charge $10 for the second. They charge $10 for the third
and right now bottom line is by the time you get up to 5 homes, it’s 50 for the
first then it’s 10, 10, 10, 10. It’s essentially $90 for managing 5
properties in an LLC. The costs on that for the bookkeeping is $18 a month. Now
look at this for just second. This right here is crazy. You buy 10 properties and
18 drops to $14 month. I’m just telling you, $14 a month. If you were paying an
inexperienced bookkeeper, it would be a good rate. But when you’re paying a team
of professionals and this is what they do,
it’s astronomical and it’s entirely different. So by the way, there’s a link
below. Some of you are my partners that are actually watching this and I want
you to know that when you click that link you get more information about my
track record on 4,000 homes, having done hundreds and millions in real estate. And
this is the system that I’m referencing right now that I use that makes all of
this possible. If you’re doing this on your own, let’s actually step back for a
second and say, “What should you be doing if you’re actually trying to figure out
how to do this entirely on your own?” If you’re stepping into this world of real
estate and you have only maybe 1 to 3 properties, I don’t think you need
a CFO. There not going to be $50 on the first property in $10 each.
I have volume control because I do a lot of volume. The secret to winning huge in
real estate is when you start playing the game really big. So, you got to
actually ask yourself, “How do I maintain my standards but lower that price?” And
you’re gonna do that by finding a bookkeeping firm. These are people that
don’t even have to be certified accountants. They don’t even have to have
degrees in it. But you should look for someone that has experience in real
estate so hopefully they don’t goof it up or goof it up too bad. Because I’m
going to tell you, I went through 4 different bookkeepers, accounting firms
ramping up before I realized I’ve been doing it wrong all this time. I haven’t
been tracking it. These days by the way, time out. Just something I want to give
you that’s really important is that when I do the game of real estate, I actually
have my accountants do the accounting and P&L –profit loss statement statement
of cash flows on each individual property even though they’re all in one
LLC. So, you set up your LLC. You dump your properties into it until you got about a
million dollars and then you do individual accounting on each property.
And then at the end of the year, you got to pay taxes. You got to pay for your
accountant to produce your K-1. That’s like your business is social security
number status saying, ‘Oh, I have an LLC. It has a tax ID number like I’m a human
that has a social security number. I need to do taxes on me.” The accountants the
IRS says you need to do taxes on your entity. And basically it’ll say, “Wow, you
bought five properties. You brought in all this income. These are your expenses.
This is how much money you made. Oh! And because your accounting team properly
recorded all of the tax benefits and write-offs, du,du,du,du,du,du! Looks like you
guys actually lost money.” They’re going to say, “Here’s a K-1 to you and your partner.”
So, I get one that says, “You lost money.” You get one saying, “You lost money.” And
then we file that with the IRS with their personal returning guess what? The
IRS says, “Wow, you owe less in taxes even though your bank account technically
went up.” By the way, how mind blowing the awesome is that? For just a moment, just
think how freaking cool it is. Some of you you’re making too much money. That’s
your problem. In fact, if you’re paying more than a dollar your taxes, you need
to own more real estate. One of my partners that just came to one of my
events here the studios in my Event Center. And we had hundreds of people
show up at her last event. And he came up to me he says, “Kris, I’ve bought all
these properties. Guess how much I paid in taxes last year?” He says, “For the first
time in 2 decades, I didn’t pay a penny in taxes.
Thank you for helping me do this real estate.” Because it’s one thing to make
money but it’s another thing to save money. And in real estate, you should
absolutely 100% be doing both. As a wrap-up something for you to be aware of,
if you’re considering partnering with me, there’s a link below that you can click
and you can actually get with my team and be vetted to see if that’s a fit. You
might be in that process where I’m like that’s why you need to watch this video.
And what you’re gonna find is that it’s 50 bucks on the first property, 10 for
each one after and literally that is a pass-through cost from a third-party
company. We don’t make any money on that. It’s stupid cheap and that’s really my
philosophy in all real estate. There’s fees everywhere in the game. I got to pay
my realtor, my loan officer, my acquisition team, my research team, all
these people so the game is play volume, pay as little as possible win as big
as you possibly can. Thank you so much for watching today. Click that link if
you want more information on partnering. For the rest of you, hopefully that
helped really enlighten your mind on what you need to know about accounting
and taxes in the game of real estate. Share this video. Subscribe. I’ll see you
tomorrow.

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