Back to Basics Bookkeeping For Real Estate Investors and Business Owners

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You can view this free sixty minute video webinar with professional real estate investor David Campbell http://www.HassleFreeCashflowInvesting.com and Quickbooks Consultant Renee Dagget, E.A. http://www.AdminBooks.com you’ll learn basic bookkeeping strategies as they relate to real estate investors and business owners. You’ll have the opportunity to learn the answers to these important questions:

1) How do I create a balance sheet, profit / loss statement, net worth statement and cashflow statement?
2) How do I use these bookkeeping tools to make smarter business and investment decisions?
3) What are the most important vocabulary terms I need to master before having a meaningful conversation about my finances?

Visit http://www.HassleFreeCashflowInvesting.com to download a free copy of David Campbell’s eBook “Hassle-Free Cashflow Investing” and Renee Daggett’s eBook “Top 20 Things Every Business Owner Needs to Know” and "Managing Rental Property With Quickbooks"

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Back to Basics Bookkeeping For Real Estate Investors and Business Owners

  1. 1. www.HasslefreeCashflowInvesting.com Back to Basics Bookkeeping For Real Estate Investors David Campbell Renee Daggett Hassle-Free Cashflow Investing Enrolled Agent / QB Pro David@HasslefreeCashflowInvesting.com Renee@AdminBooks.com (866) 931-9149 Ext 1 (408) 782-9640
  2. 2. David Campbell - Founder Hassle-Free Cashflow Investing Former high school band director Self-made multi-millionaire Real Estate investor / developer / broker Financial educator / author / speaker Houses, condo-conversion, multi-family, winery, resort, office, retail, medical office, production home buildingFaculty Member: Investor Summit at Sea with Robert Kiyosakiwww.HasslefreeCashflowInvesting.com
  3. 3. Renee Daggett• Certified QuickBooks Consultant with Intuit, Renee is also the founder and president of Administrative Bookkeeping Co., Inc. She received her bachelor’s degree from San Jose State University in 1989.• Renee has corporate financial management experience dating back to 1995 and is passionate about equipping business owners with the tools they need to run their business simply and efficiently.• Renee is also an Enrolled Agent tax preparer, enrolled to represent tax payers before the IRS. With this license, she uniquely brings peace to her clients by helping them with all the aspects of running a business.• Renee has been a certified budget coach with Crown Financial Ministries since 2004.
  4. 4. Disclaimers & Cautionary NotesThis educational seminar is not a substitute for gettingyour own professional advice. This webinar is offered withthe understanding that the speakers are not offeringlegal, financial, tax or other professional advice. Anyactions with regard to the information contained in thisseminar should be undertaken only upon the advice andcounsel of competent legal and tax professionals.Receiving this information does not create a fiduciary orclient relationship between you and the speaker.
  5. 5. Disclaimers & Cautionary NotesThis educational seminar is not a substitute for gettingyour own professional advice. This webinar is offered withthe understanding that the speakers are not offeringlegal, financial, tax or other professional advice. Anyactions with regard to the information contained in thisseminar should be undertaken only upon the advice andcounsel of competent legal and tax professionals.Receiving this information does not create a fiduciary orclient relationship between you and the speaker.
  6. 6. Disclaimer We’re not your advisors.You can’t sue us.
  7. 7. www.HasslefreeCashflowInvesting.com ProfitROI = Money + Time + Hassle More profit with less invested
  8. 8. www.HasslefreeCashflowInvesting.com Today’s VIPs (very important points) • Bookkeeping Vocabulary • Bookkeeping Principals • Bookkeeping Strategies
  9. 9. www.HasslefreeCashflowInvesting.com RECAP: Bookkeeping Strategies Type of What you use it for How to do it Who does it?Accounting Essential for daily living Excel and Bank You and your Cashflow (budget) Reconciliation spouse Very important for short and Excel or You and yourProfit / Loss mid term planning Quickbooks bookkeeper Helpful for long term Excel or You and your Net Worth planning and bankability Quickbooks bookkeeper You and your Tax Very important for mid and Quickbooks bookkeeper and Accounting long term tax planning tax advisor
  10. 10. www.HasslefreeCashflowInvesting.com Balance Sheet + Equity Financial Accounting + Assets Basis - Liabilities GAAP Net Worth Mark to Market THREE COMPONENTS = NET WORTH
  11. 11. ASSETSPrimary Home $500,000Rental House $125,000Businesses $0IRAs $150,000Cash $50,000Stocks / Equities $20,000Cash Value Life Insurance $10,000Car $25,000Personal Property $10,000GROSS ASSET VALUE $890,000
  12. 12. LIABILITIESPrimary Home Mortgage -$375,000Rental House Mortgage -$90,000Business Loans $0IRA Loans $0Credit Cards -$20,000Car Loan -$18,000Loan Against Life Insurance -$5,000Student Loans -$50,000Unsecured Bank Loans $0GROSS LIABILITIES -$558,000
  13. 13. EQUITYContributions Into a Company $50,000Distributions Out of a Company -$20,000Accumulated Profit / Loss $75,000(retained earnings) Assets = Liabilities + Equity Liabilities Assets = Equities
  14. 14. NET WORTHEquity $75,000Assets $890,000Liabilities -$558,000NET WORTH $407,000 Who cares about this? Your banker Your creditors Estate taxes Personal vanity Accredited Investor Status a type of “savings” for future withdrawal
  15. 15. www.HasslefreeCashflowInvesting.com NET WORTH vs CASHFLOW
  16. 16. www.HasslefreeCashflowInvesting.com Profit / Loss Statement Income Statement Renee’s Secret Formula Income Income -Expenses -Profit Profit or (Loss) Expenses
  17. 17. Profit / Loss (P&L) INCOME W-2 Income $75,000 Gross Rents Received $12,000 Business Income $0 Interest Income From Savings $50 Capital Gains from Sale of Stocks $1,000 IRA Income Inside IRA Life Insurance Gains Inside Policy GROSS INCOME $88,050
  18. 18. Profit / Loss (P&L) EXPENSES Rental Property Mortgage -$5,700 Rental Property Expenses (non mortgage) -$4,500 Credit Card Payments -$3,000 Car Loan -$1,800 Loan Against Life Insurance -$500 Student Loans -$5,000 Food / Clothing / Personal / Travel -$12,000 Housing (non-mortgage related) -$11,000 Vehicle Expenses (non-loan related) -$3,600 Health Care -$4,000 GROSS EXPENSES -$51,100
  19. 19. www.HasslefreeCashflowInvesting.com Deductible Expenses Earn then Spend $1 buying power = $1 earnings Non-Deductible Expenses Earn then Pay Tax then Spend $1 buying power = $1.25 earnings
  20. 20. Deductible Expenses Earn then Spend $1 buying power requires $1 of earnings SHIFT EXPENSESNon-Deductible Expenses Earn then Pay Tax then Spend $1 buying power requires $1.30 of earnings
  21. 21. TAX DEDUCTIBLE EXPENSESPrimary Mortgage Interest YESRental Property Mortgage Interest YESRental Property Expenses (non mortgage) YESStudent Loan Interest YESTaxes YESCar Loan Interest MAYBELoan Interest From Life Insurance MAYBEFood / Clothing / Personal / Travel MAYBEHousing (non-mortgage related) MAYBEVehicle Expenses (non-loan related) MAYBEHealth Care MAYBECredit Card Interest MAYBEIRA Contributions MAYBE
  22. 22. Profit or Loss (P&L)Income $88,050Expenses -$51,100Profit / Loss (INCOME) $36,950 Who cares about this? Your banker Your creditors IRS YOU!!! SUPER IMPORTANT Profit / Loss is NOT CASHFLOW!!!Profit / Loss is NOT YOUR TAXABLE INCOME!!!
  23. 23. www.HasslefreeCashflowInvesting.com Not every check you deposit is income Not all positive cashflow is profit Return of Loan Principal (on loans you made) Return of Investment Principal into 3rd party companies Proceeds of a Loan Received Return of security deposits held by YOU Prepaid items / Overpayments / Refunds
  24. 24. www.HasslefreeCashflowInvesting.com Not every check you write is an expense Not all negative cashflow is loss Issuance of Loans Owner Draws Investment Principal into 3rd party companies Security deposits paid by YOU Prepaid items / Overpayments Deposits into Impound / Escrow Accounts Payments to Credit Cards Re-Payment of Loan Principal
  25. 25. www.HasslefreeCashflowInvesting.com Multiple Income Statements Multiple Balance Sheets reconciliation trust or impound distributions account K-1IRA dividends S-Corp C-Corp LLC Partnership
  26. 26. www.HasslefreeCashflowInvesting.com Cashflow Statement Starting Balance + Receivables -Payables Cashflow (positive or negative)
  27. 27. www.HasslefreeCashflowInvesting.com Depreciation Equipment Cost - Non-Depreciable Cost Depreciable Basis Depreciable BasisDepreciation = Useful Life
  28. 28. www.HasslefreeCashflowInvesting.com Depreciation Schedule 3 year - software 5 year - computer 7 year - furniture 15 year - loan points / property improvements 27.5 year - residential (1-4) property 39 year - commercial property
  29. 29. www.HasslefreeCashflowInvesting.com Depreciation allows you to claim a loss before you sell the asset
  30. 30. www.HasslefreeCashflowInvesting.com “Phantom Income” Owe taxes on money used to pay off loans. No cash to pay the tax.CashflowProblem “Phantom Loss” Tax deductions for expenses you didn’t really pay DepreciationCashflow Auto expenses (mileage) Bonus Home office (potential)
  31. 31. DEPRECIATION of Residential PropertyPurchase Price $300,000Land (*non-depreciable “doesn’t wear out”) $25,000Structure (*depreciable “wears out”) $275,000Depreciation Schedule 27.5 YearsAnnual Depreciation $10,000Year 0 tax basis $300,000Year 1 tax basis $290,000Year 2 tax basis $280,000Year 3 tax basis $270,000Year 4 tax basis $260,000Year 5 tax basis $250,000Year 6 tax basis $240,000Year 7 tax basis $230,000
  32. 32. www.HasslefreeCashflowInvesting.com GAIN vs PROFIT Profit = sales price - acquisition price Gain = sales price - current tax basis $290k sales price - $300k acquisition price = -$10,000 LOSS $290k sales price - $230k current tax basis = $60,000 GAIN$60,000 GAIN x ordinary income tax rate = TAX OWED
  33. 33. www.HasslefreeCashflowInvesting.com Depreciation Recapture a tax based on your GAIN not your PROFIT You could have a tax bill on loss. You could have a tax bill without getting cash. GAIN PROFIT Sales Price - Tax Basis Sales Price - Purchase Price
  34. 34. www.HasslefreeCashflowInvesting.com Taxable Income Gross Income - Allowed Expenses - Depreciation Taxable Income
  35. 35. Income Tax Taxable Income x Tax Rate Income Tax - Tax Credits - Tax Previously PaidTax Owed (or Refunded)
  36. 36. www.HasslefreeCashflowInvesting.com RECAP: Bookkeeping Strategies Type of What you use it for How to do it Who does it?Accounting Essential for daily living Excel and Bank You and your Cashflow (budget) Reconciliation spouse Very important for short and Excel or You and yourProfit / Loss mid term planning Quickbooks bookkeeper Helpful for long term Excel or You and your Net Worth planning and bankability Quickbooks bookkeeper You and your Tax Very important for mid and Quickbooks bookkeeper and Accounting long term tax planning tax advisor
  37. 37. www.HasslefreeCashflowInvesting.com Q&A www.AdminBooks.com www.HassleFreeCashflowInvesting.com
  38. 38. www.HasslefreeCashflowInvesting.com Back to Basics Bookkeeping For Real Estate Investors David Campbell Renee Daggett Hassle-Free Cashflow Investing Enrolled Agent / QB Pro David@HasslefreeCashflowInvesting.com Renee@AdminBooks.com (866) 931-9149 Ext 1 (408) 782-9640

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