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This Week’s Dream Home
Thinking big and dreaming big is how you get into something like this. Of course you should run the numbers before you buy and make sure it fits your budget. This pad is on the market for a mere $13,500,000. Your 20% down payment would be $2.7MM. This leaves you with 10.8MM Financed. The monthly Payment at 6.5% on a 30 year principal and interest is only $68,263.35. So based on conventional thinking, your income in order to afford this has to be approx 4X that amount, or $273,053.39/month. This means you need to be comfortable earning $3.3MM annually to think about a home like this and you had better be able to maintain that level of income on a consistent basis because these homes do not sell fast at these prices. The photo links to the website we grabbed it from (www.dreamhomes.us)
Nice huh?
The Outline So Far
This will likely change, but this is to give you an idea of what we are developing as we develop it. Your comments and suggestions for what you might like to see covered here are very welcome!
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Table of Contents |
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Chapter 2 – Rental Real Estate Buying Your Rental Property Setting Up Your Company File In QuickBooks Recording your purchase in QuickBooks Setting up and recording Security deposit and 1st month’s rent Setting up, recording, and memorizing rent going forward Late Rents Additional Security Deposits How to handle a move-out Calculating, recording, and refunding the security deposit |
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Chapter 3 – Property Management Setting Up Your Company File Setting up your Properties Keeping track of Payables by property |
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Chapter 4 – Construction Accounting |
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Chapter 5 – Selling Your Property Your Basis Recording the sale in QuickBooks |
The QuickBooks For Real Estate E-workbook project has resumed!
We have officially resumed this project! There have been many demands for real estate accounting / QuickBooks instruction. You can also get a great deal of information on how to do things in QuickBooks at our sister Blog – http://www.quickbooksnerd.com. We’ll post up the current outline for the E-Workbook shortly.
Chapter 2 – Buying your rental property
Chapter two goes right into rental real estate. In the previous chapter we talked about buying a home and the “right” approach to determining how much of a home we can afford by starting with the monthly payment we can afford as well as how much of a down-payment we can come up with and then going from there to figure out what price range we should be looking at. Well since the first step in owning rental real estate will of course be to own a place we are going to talk about that a little bit more in the beginning of chapter 2. In this case there will be more dynamics to consider and we will go through how to lay out the financial plan to figure out what we can afford and also to make sure how it works. We will talk about syndicates – many times rental properties are purchase by groups who usually will form an LLC. Generally the membership is made up mostly of people who just put up the money and then there will be one managing member who handles the property management. Otherwise you have a single investor who puts up the money. Finances it with the bank and manages. Finally when the property is substantial enough you hire a property management company, but that’s chapter 3.
By the end of this chapter you will know how to plan your purchase and how to know how to make it work in terms of rents, expenses, debt management and maintenance and once again there will be links in the chapter to video tutorials demonstrating how to use MS Excel to plan everything and how to set up your property in QuickBooks so that you can do your own bookkeeping for your rental property. We will demonstrate how to book the journal for the purchase of the property using a sample Final Settlement Statement just like what you get from the escrow company.
Chapter 2 – Rental Real Estate
I’ve begun writing this chapter while I record the video tutorials for Chapter 1. When you have the final product you will get the PDF and you will be able to click links to watch video tutorials which will demonstrate the things we are discussing in QuickBooks and Excel. With my voice as your guide in the video you will see step by step what to do and how to do it.
More on the content of this chapter shortly.
This Week’s Dream Home
Oh my God I completely forgot! Here is this week’s Dream Home:
Figure 1- Los Altos Hills, CA click to go to the site
Chapter One renamed
I’ve re-named the chapter to “How to get into a home you can’t afford”.
This is really about what happened to many people who got themselves into situations where they just didn’t know better. We show you how the balloon payment works as well as the neg am loan. People got in way over their heads, which was fine as long as property values kept going up. When that stopped, people got into trouble and then.. foreclosures. The banks have themselves to thank for not doing a better job of informing lenders of the risks on some of these fancy financing options they offered. Of course the borrowers could have done more due diligence!
In the chapter I walk you through how the numbers work and I show you a few difference scenarios. When I am finished there will be a place where you can click to watch a video tutorial on how to set up your effective interest table in Microsoft Excel so that you can calculate your own payments. I use this to demonstrate what people were really getting into financially when they took these financing options. If people in the past had shown you the numbers the way I am showing you now, there is a good chance many people would not have gotten into these situations and we may have been able to avoid this mess we’re in. Of course if you have the money, now is a great time to buy, but no more 100% financing, balloon payments, or negative amortization loans!
In the first video tutorial I walk you through a Microsoft Excel Tutorial on how to set up your effective interest table.
- This lets you calculate you interest and payments for the entire term of the loan.
- I show you how to set up the table.
- How to write simple formulas in excel – nothing more complicated than addition, subtraction, multiplication, and division.
- We will also show you how to format the table to look nice, which makes it easier to read and understand.
- Finally we will demonstrate how to use the powerful goal seek command to calculate the monthly payment.
In the last section of this chapter we illustrate the following using a link to an interactive video tutorial embedded right in your E-book:
- How to set up your books in QuickBooks as an individual home buyer.
- How to record the purchase of your home – we’ll look at a sample purchasers final settlement statement and book the entry in QuickBooks.
- How to calculate your monthly payments (a review of the previous video)
- How to record your payments in QuickBooks.
- An analysis of the Mortgage Payable and Interest expense.
It’s a GREAT first chapter walking you through the basic financial part of buying a home. Can’t wait to release this!!
Chapter 1
The first chapter of the book will be on purchasing your first home. I’ll go over some of the important things to know about how to determine what price you can afford by looking at your income and going from the monthly payment you can afford to the total price of the home. This will help you narrow your search down based on knowing the total price of the home you can afford. I will also talk about some important things you should know about inspection – what the inspector knows and what he or she doesn’t know. We’ll set up a template in Microsoft Excel that will enable you to do the math on the costs and then I will show you how to record the purchase of your home in QuickBooks. This will of course include how to set the property up on a set of books and how to track any improvements you make to the property.
In Chapter 2 we will start to see what this looks like in the context of renting out that home.
Real Estate Accounting 