Death and taxes – Life’s twin unavoidable realities. We are not going to talk about death today and not even taxes so much. But we are going to talk about something that will help you at tax time – better records. Learn how to use Quickbooks Online today with Nick Baldo.
Nick Baldo is a cool guy with quite a portfolio of real estate in Buffalo NY. He is comfortable with a lot of the tech we use in our businesses and has developed informative courses about using them. His website is incomedigs.com and today he’s going to talk to us about using Quickbooks Online.
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Starr Has Questions:
The rental market is going up drastically for the consumer…why?
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Expected Air Date: Mon 8/8/2022
Guest: Nick Baldo, email@example.com
[0:00] Death and taxes.
[0:26] Wherever you are whatever your situation there is an opportunity for you. And now here’s that flipping America guy Roger Blankenship,
Thank you Kelly Curtis. Hello, America. Hello, Star.
I I told her I’d always been cool because you know it’s just first thing I popped in my head but the truth is she has and then and then Selena went on to say,
Were you cool in middle school and actually the trees I wasn’t cool in middle school or elementary school,
I like to take a myself as a pretty cool guy and I’m glad your daughter thinks I’m cool and.
My wife thinks I’m cool but my wife also thinks I’m a nerd.
He is a cool guy.
[1:50] But he’s also comfortable with all of the tech we use in our businesses and he’s developed a bunch of courses how you use the technology.
He’s he’s really good at it.
And I’ve had him on the show several times and I had him come speak to the Flipping America Rhea a while back about using QuickBooks online ahead him come right after tax time,
And basically, we were saying, you know that headache you just went through,
I’m gonna play some of that interview for you a little bit later on in the show today and we will have time for all of it but if you want
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Okay so star we’re having sorry now we’re having a conversation offline,
About what’s going on with recession and inflation and prices going up and you know prices in the rental market are going up. Again, it’s a law of supply and demand thing.
The rental units are filling up and rental prices are going up so tell us tell us a little bit about.
What’s going on in your building.
[6:07] Pretty much,
Tenants are now who have been paying maybe 2500. Literally are now having to pay $4000.
Making people pay the market rate most landlords will ease,
So they’re easing it up and I know some of you are out there thinking wait the flipping America guy rent.
[6:52] We’ve got good financial reasons for it. I’ll be glad to explain to you some other time but not now.
[6:59] I can see it now though we’re gonna get some questions I am gonna have to explain that it’s been a year two since I’ve taken that one on but anyway.
[7:10] What they’re doing is they’re they’re basically.
Mistreating the people in your building. I mean, they’re not gonna get any trouble with for housing or anything like that. Because they’re discharging the market rate and they’re not showing any discrimination about that. But you wanna know what’s really going on?
[7:26] They’re getting ready to sell the building.
No way. Yeah. Their positioning and they make maybe a year away. It things move slowly in this thing. But their positioning that building to sell because commercial real estate is especially apartment buildings.
The value is based on net operating income. It’s not based on any kind of comparable sales or anything like that. So,
They show the net operating income to be as high as possible. Wow.
To curry favor with you to keep you locked in for another year they will keep the rent rate high but they may give you 2 months free.
Yeah. So that way when they the net operating income is one thing the other thing that they will show to perspective buyers are the rent rolls. So they could see that the rents may be even a little bit higher than the NOI.
And so that next the future forecast look good.
[8:32] 95% of the American public don’t know this what happens.
[8:47] To watch the transition but yeah there there positioning that building to be sold that’s why the raising and the other reason they went they raise their rents they know they get away with it yeah the people that are paying 2500 probably can’t afford 4000 or don’t want to,
If you like a slap in the face they’re mad. They’re moving out. Blah blah blah. Management doesn’t care. They know that there’s 10 other people lined up. That will pay.
[9:15] So, that’s good. Well, we’re gonna take a quick break and then we’ll get back. I’m going to do the interview.
[9:30] Set goals especially at the first of the year and most of us know the pain and maybe the self-inflicted shame of not reaching those goals.
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So there may be some people here probably are a few people here who don’t really know about you so do the old 3060 second introduction
Yeah thanks a lot so Nick Baldo I live in Buffalo New York I came out of college went right into the corporate world that I
Found that wasn’t for me so I started flipping houses kind of on the side doing one off flips 2014 or so
I went full time into flipping into multi property or multi-family rentals.
And at that time, I started to learn how to put systems into my business and technology and so I started teaching others how to do that as well. So, through YouTube and through private courses, one of which we’re gonna talk about today. I teach other business owners mostly real estate investors how to use software to grow and scale
[12:21] And we’ve improved the way we,
Put on the little show here since that time but we also recently had you talking about Asana and that was
That was really an insightful lesson and I was appreciate you and what you have to say in the way that you bring it to us so what I wanna do right now,
Take over and you tell me when you wanna share your screen alright here we go.
[12:51] Yep so yeah we could actually share my screen right now would be would be great. Okay.
Yeah, perfect. Yes, so what what we’re gonna focus on right now today is
One of the courses that we have available is real estate accounting boot camp and I wanna talk to you about three quick wins so the course is extremely comprehensive we’re gonna get into that but,
Ultimately when it comes to.
Doing the books for your real estate investing which is in its essential part of the business. There’s three key things that I think you’ll be able to take away from this and and get value right away. So.
[13:28] When we think about real estate accounting,
We have to think about the idea that it’s not just for taxes notice there that I put that growing and scaling your real estate investing business is the main reason why we need to get good at accounting in in managing that financials of our real estate investing.
Okay? Of course, we need to file our taxes, right? And be compliant with the IRS. But to me and to my students in the philosophy we have, that is secondary. If we can establish,
The processes to understand our financials. We do. We know what decisions we can make to grow and scale our,
Quick books online should be a tool to help you make business decisions first,
And formost okay so if you’re getting into a situation where your accountant or your tax professionals telling you to do something one way or the other for tax purposes.
Tell them hey quick books online is for me first and foremost it’s for me to make key decisions about my business.
[14:22] Okay? Establishing a maintaining a structured accounting architecture. It means you’re no longer guessing about the financial health of your business instead you can make real time decisions to help you grow,
Right? With that, let’s jump in. We don’t have tons of times. So, I wanna make sure we hammer out these three quick winds from the boot camp coming directly from the boot camp to establish those fundamentals to help you on the path to success with QuickBooks online
I think I just made an adjustment Nick and I think it it.
So that’s why things changed if you’re on the Zoom call that’s why things change briefly every moment but we’re back.
The first is what I call a two dimensional chart of accounts and this is one of those really eye opening light bulb type ideas I had back in 2014 when I established my own books and I wanna share that with you.
[15:14] A chart of account so chart of accounts is really the list of categories to which each transaction is a science. If you sign up for QuickBooks or any accounting software, you’re going to be given this list of accounts this chart of accounts, right?
It makes up what I call the architecture of your accounting book. It’s really the essence, right? When you have a transaction come in, you have to categorize it, two an account, which.
[15:35] So, where most get it wrong is that we get quick books online. We just start adding transactions. We end up adding too many accounts too quickly. We say, this is
For taxes and this is for closing costs and we add a bunch of these different accounts that really thinking about it
Remember it in Raj was talking about this about flipping generally. There’s a one 1 million ways that we can,
By their nature, different. So, there is no one way. So, just consider that that you can and you should add it to your chart of accounts. But the most,
The biggest problem that we see with real estate investors is that we specify different accounts for each property which extremely hampers our ability to grow and scale. So, if we bring this into a two dimensional chart of accounts, we have the ability,
To do just that. So, I’m gonna show you that in QuickBooks. I do all my teaching quick books. I don’t love to do slides but obviously, we have to set the stage. So, I’m gonna go over a quick books and show you what I mean.
[16:39] So, the way that we do it wrong and I’m gonna show you my my chart of accounts right now. Let’s say I have a couple properties, okay? 122 Buffalo St 264 Union,
And let’s say that those are two like rental properties, whatever.
The way that most investors will start to set it up is I’ll create an account and I’ll create sub accounts for each of those properties.
Intuitively that makes sense for us, right? We have a property. Let’s add it to our chart of accounts. The problem is that it hampers our ability to grow and scale.
So, I’m gonna demonstrate here is kind of how we can do it. The old way and how if we do it with that two dimensional way, we can really grow in scale. So, I’m gonna add,
The purchase of a property and I’m gonna do this as of 2019 just so it kinda lands on the balance sheet I wanted to land on.
So, we do a kind of the old way. We would go in and say that we have 122 buffalo street. This is one of the properties that I have. I have the land. I have the building. And don’t worry about, you know, if you don’t know how to record the purchase of a transaction,
Yeah I’m getting into that,
Demonstrating is more on the difference between one dimensional versus two dimensional. So, let’s say that I have land worth 25 1000 building worth 45 1000 then we have some closing cost as well.
[17:54] Simplicity let’s say that we have a mortgage on this property and we finance the whole thing so 75 1000.
Okay? Now, in the same exact transaction, I can record the purchase of 264 union. Remember, I have two rental properties that I’m demonstrating with. So, I have my land for that one. I have my building for that one.
And I have my closing cost for that one as well. This one’s worth a little bit more.
[18:17] Whatever again don’t worry about these numbers they don’t mean anything right now I’m just gonna get it on the page so that we can demon,
$105 and okay? So nice and simple. I can record that transaction and this is a typical way that,
I real estate investor might think about adding a property to their books. You can see that I have one. Two buffalo street. I have 264 Union. I have the mortgages
Okay, fine. However, let’s think about this. This is a mimicking kind of the start of a business. This is the only thing that I have on my balance sheet. I’ve made one transaction,
And i have eight lines on my balance sheet okay I’ve got all of these for the for 120 buffalo for 264 union and for the mortgages
I haven’t added any bank accounts, any credit cards. I haven’t added any additional loans. I haven’t added any equity and I only have two properties so far
Of course, if we’re gonna be successful, we want to have more than two, right? We wanna be able to grow and scale.
So, we can’t let this list continue to grow and grow. We’re at eight lines with one transaction. You can see that it’s going to explode.
[19:23] So, the solution is to make use of the idea of a two dimensional chart of accounts. Can we have the chart of accounts grow in two directions instead of one,
The answer is yes. How do we do that? Step number one is we use generic chart of accounts. So, instead of 122 buffalo street 264 union we keep it very simple,
Buildings, right? We don’t put the address there. And then we bring in that second dimension with another field within QuickBooks. And that would come from either class tracking or customer tracking
I’m going to show you how to do it with class tracking. So, we need to open up the ability to do it with another field. So, we’re going to turn on in quick books online
Class traffic. So, I’m going to my settings. I’m going to advance and I’m going to categories. I’m turning on classes, okay? Now, people use classes for various different things. If you’re a real estate investor,
I almost guarantee you the best thing to use classes for is to track property specific transactions that’s typically where we find it successful,
Okay, so I’ve turned on class tracking. I haven’t made any edits yet. The other thing that I’ve done and I’ve done this already is I’ve made a generic chart account. So, instead of 122 buffalo.
[20:28] I got this generic land building closing cost and then cap improvements as well. So what I’m gonna do is I’m gonna make this quick edit to that exact same transaction that I demonstrated on before,
I’m gonna edit this because I’ve turned class tracking on. You see another field shows up here. Alright, so what I’m gonna do two things. First, I’m gonna make this account generic. So, instead of it being 122 buffalo streetland, I’m going to have it be land,
Okay? How do I know that it’s 122 buffalo? I’m gonna go over to the class. And indicate it there.
But I’m putting it into two separate fields which turns on for me two different dementias.
[21:12] Just as well.
Also could you so you can have like a conventional loan first position and then we’re attributing it to our property over here
Accounts that I used up above.
[21:39] I have no need anymore.
[21:51] Hey now I’m gonna put in my class here.
Now you can also use customer okay so class to me is a little bit cleaner class requires quick books online plus or above which you should probably have anyways but you could potentially use customer.
Okay. So, I’ve made that edit. Now, notice what it does to my balance. First thing that you probably notice is the lot shorter, okay? Now, we only have four lines instead of the eight.
So, we see that we have a generic list here. I have land buildings closing cost and it’s giving me instead of. And we’re gonna fade back out because this interview takes longer than an hour,
And I know I can get a little dry trying to visualize this. So, if you wanna see the entire interview, head on over to flipping America. Net.
And click on the weekly wit and i’ll have the video linked down there in one of the blog posts you’ll be able to find it.
And you are gonna wanna take advantage of this course if you need quick books online and now let’s tune in and catch the last part of the presentation,
[23:03] Okay let’s just see what it is and I don’t even know what it was it was something I wasn’t interested in yeah I think it was.
[23:10] But what yo to your point writing to about.
You wanted to see the the real time info. I think that’s one of those areas. Like I kinda maybe naturally had that which is a little bit odd like I want to see the financials.
I think a lot of business owners and investors are waiting till tax time.
[23:30] Wouldn’t we be able, you know, that’s 12 months away, right? Can’t we see things a little bit quicker so that we can potentially pivot. Things are changing so rapidly, right? So, are we gonna wait until,
12 months from now to decide if we should have changed 12 months ago I think that’s really essential and it it doesn’t need to be you in there every single day again,
I want you to use VA’s I want you to use bookkeepers to do the data entry but I want you to be able to understand it so you can come in and get the reports you need to turn around the,
If you guys have questions you want me to throw to Nick put him in the Q&A tab here in the Zoom call,
And I do have it open now.
[24:15] You know, I I am fitting this into, you know,
The way that we already do things and I’m not gonna be able to change the way we are to do things I’m sure.
But I think it would be it’s it’s worth $500 to me just to brush up on my awareness of what’s going on you know and we get,
Financials printed out and report.
And I basically hire him,
But it’s cheaper than having a cheap financial officer on the payroll
And what I have, you know, happening in the future and what we’re are expectations are and he tells me that, you know, if we keep doing what we’re doing, we’re maybe just a year away from having to have a full times.
I’ll hire him once a quarter and so that’s kind of how we do and I think that if I had a little bit more of an awareness of the day to day.
[25:31] Nah, I’m not gonna give myself.
I don’t have time.
[25:50] That is a completely valid, right?
Yo, hi there. Are in the weeds vine, necessity, whether it’s they’re just not, they’re just, no, not there to hire people yet, or that is their nature and they want to be doing it, but they’re doing it so wrong that they’re driving themselves,
They think oh QuickBooks online it’s the industry leader out of the box let’s go quick books wasn’t created for real estate investors,
Right? Right. As general a business you know profile as possible. And that’s not a bad thing necessarily. It’s still is the best.
However, we need to know how to tweak it into mold it to fit our business which as we’ve been talking about always, really, really unique.
Yes so so we do AA few others so podio is is definitely one that we use one of the I would say that real estate investors are probably the biggest industry using podios so we have a podio crash course available,
Podio if those who aren’t familiar is kind of a build it yourself database automation.
Add tool, okay? And it can be a powerhouse. So, you know, investor fuse built off of podio.
A lot of those, you know, kind of out of the box type real estate investing. Softwares are built out of podium. So, what we do with podio crash course,
Coming out of the fact that I’ve worked with a you know a bunch of you’re probably 30 40 clients building their podium I pretty much packed everything I know about podio into one course.
A lot of people get podio,
And they get these different systems but they need to customize and don’t know how. So, that podio crash course shows you how to build and customize your own.
So, that’s the other real big one that we have. We have some templates available.
The big one that we’re actually working on right now that I really excited for cuz people have been asking about like crazy is a how to use a virtual assistant.
[28:02] In your real estate investing business. So,
Yeah. So, I make use of a couple virtual assistants I’ve been doing that for a couple of years. It’s gone really, really great and so, actually with her my my head assistance help. Her name is Vivian.
She’s helping me create this course and we’re gonna have kind of two sets of audiences. We’re gonna have the investor side. And Viv is actually gonna help teach,
VA’s, you know, how to be a good VA for real estate investor and so, you know, back to both parts of the course and if you were,
Yo, if you buy the courses, the business owner, your VA can have access to. So, we’re working on that right now.
And and I know you and I were talking a little bit offline.
About this and you’re in between bookkeepers and looking for a solution right now. I am. Do you think that this after you after you hear this, you think you could,
Maybe come up with courage to try it yourself. Yeah, of course. I I actually feel, I feel comfortable doing. Yeah, yeah, maybe I take that course. Yeah. Alright, you know what that music means? It means we’re out. Okay. So, I have a quote of the day. This is another Rogerism.
The creator made 12 notes and seven colors.
And just look what we’ve done with 12 notes and seven colors.
[29:27] Something to think about. Alright, sorry. Take a selfie.
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