Evolving Paths in Real Estate

In this episode of The Real Estate Game Changers, Mike McKay dives into Nelisa’s inspiring leap from teaching to mastering real estate. Discover her strategies for bookkeeping, property flipping, and rental management, plus practical tips on avoiding financial pitfalls. Whether you're new or experienced, learn how tools like QuickBooks and Stessa, along with virtual assistants and consulting services, can transform your real estate game.

Chapters

• 2:19 Diving into Real Estate: First Steps and Challenges
• 5:35 Scaling the Business and Finding Focus
• 6:10 The Accounting Side of Real Estate
• 9:17 Overcoming Challenges and Streamlining Processes
• 19:07 Common Mistakes in Real Estate Accounting
• 24:22 Key Metrics for Flipping Businesses
• 34:12 Understanding Balance Sheets and P&L Statements
• 36:43 Borrowing Money vs. Using Own Cash
• 39:35 Managing Holding Costs and Financial Projections
• 59:02 Advice for New Real Estate Investors

Transcript

Mike: 0:00

All right, everyone, welcome to the Real Estate Game Changers show. I'm your host, Mike McKay, based in Jacksonville, Florida, and each and every week we do this show with people who are changing the game of real estate all over the country. If anyone is in the Jacksonville market and you're working in sales and thinking about getting into real estate, uh, we are looking for more sales reps, acquisitions reps for our team. So shoot me a DM on Instagram if that sounds like you. And this week on the show we have Nelisa Lee, Nelisa. Welcome to the show.

Nelisa: 0:30

Hey, thanks for having me.

Mike: 0:33

Yeah, definitely. So, obviously we know each other well and I know. A lot about your journey, but I think for today, I want to start out with a little bit of a different question. Since your journey kind of comes full circle, which is what were you doing before you got into real estate?

Nelisa: 0:51

Yeah, I know. So, before I got into real estate I actually started as a preschool teacher. So, fresh out of college, I had a family and child sciences degree. I loved teaching everything about it. So, But what I found was that I didn't love the aspects of teaching that had to do with working with the business owners and me wanting to implement certain processes in the preschool. And so I, uh, I didn't love that part of teaching. So I actually ended up going back to school to get a business degree so that I could learn to run my own preschool. That was the original goal. I was like, I want to be a business owner. I want to be the one making decisions and I want to be teaching. So went back to school for business. Ended up kind of falling into accounting and realized actually really enjoyed the accounting piece of business. So kind of continued on that path getting my CPA. I ended up starting in public accounting. I started learning about how businesses operate seeing businesses more holistically. And I really did love that as well. But what I found with that was that there were super long hours, challenging work schedules. I was experiencing burnout. And so during that time, it was actually my husband who was really interested in real estate and he had been learning, listening to podcasts just kind of following the market, seeing what was going on. And he recommended that I listened to a podcast. And so this podcast episode was literally about a teacher who ended up getting into real estate investing. So, of course, that story resonated with me. And so, I was like, let's do this thing. Like, I'm in. Like, I don't know what we need to do, but I want to do this. And so, also during that time, I started jumping around to different accounting jobs. that the grass would be greener, you know, somewhere else. At the end of the day, I just, I knew I wanted to be my own business owner and I knew that, you know, That wasn't the route for me. So, then it kind of led to us getting into the networking scene and talking to other people in the industry and learning that there was like a million different things you could do in the real estate industry. So we were like, okay, all of these people are like making careers out of this. Like we're, you know, two CPAs, we can figure this out. So, We kind of just decided to go all in didn't necessarily have a plan as most people would think that was the opposite. We kind of just jumped out of a plane without a parachute and we're like, we'll figure this on the way down. Like we just both had faith and trusted and kind of gave ourselves like no option but to figure it out. And so, then, you know, started going full fledge ahead, got lots of experience with wholesaling, flipping, buying rental properties and so, yeah, that's, uh, that's kind of the lead up to, you know, entering the real estate space, so.

Mike: 4:13

You guys got into it. Were you, what were you originally thinking of, like, focusing on when you got into the real estate?

Nelisa: 4:21

so originally we thought we would maybe flip, like, I don't know, a few houses a year. It would be a very, you know, small, like, just me and him kind of going out to the property and almost like HGTV style, uh, you know, what you see on TV. And what we realized is that, I mean, I personally don't, Love certain aspects of flipping like I'm not the person who's like an interior designer who wants to pick out colors or like You know, I'm not the one who's Excited for you know what this looks like before and what this looks like after I'm more of the behind the scenes like I like to see what the books look like before and after and you know, structuring different partnerships and how you record those different types of transactions. Like those are the things that excite me and like, you know, I find interesting. So, what I thought we were going to be doing and where we started, I mean, I started with walking every single property with Daniel. We would go to Lowe's together. We realized that we should not be the ones shopping for light switches or any of that stuff. That's just not, you know, where my time was best spent or where I enjoyed it. So, yeah, so we quickly realized, like, we needed to scale this. To make it more sustainable. We didn't just want to do, you know, three to five houses a year. We wanted to have a more volume based business where there were more transactions, where there was a business to operate so that I could, you know, thrive in the back end, so to speak. So yeah, so that's kind of. where we thought we would be. And obviously, you know, plans change. And as you start to get different experience, your plans continue to change. So, That's actually what happened with this whole next phase of my real estate and accounting journey as well was that this was never necessarily part of the plan, but what happened was, you know, as I started getting things on the back end operating pretty smoothly, I essentially like bought back my time. I don't know if you're familiar with that. The book, but I literally just kind of delegated a lot of the work that I was doing to other, you know, team members, virtual assistants. And so I had a lot of just time to think and time to really focus on. What is it that I enjoy doing and where do I want to go and where do I want to continue growing? And so that was when it dawned on me like the accounting of real estate is I've always loved and obviously with teaching being in my background, I've always loved that piece as well. So, so with the starting of seeds, which is my, you know, accounting for real estate investors, new business, I've been able to really just mesh all of those things that I love all into one. So, yeah, it's been quite the journey and kind of unexpected, but that's what life does to you. Kind of just happens.

Mike: 7:35

Yeah, and like, I mean, I, You know, I know you've kind of went through that journey quickly, but you guys were doing like quite a lot of real estate deals, right? I mean, do you want to kind of share with the audience, like the amount that you got up to at the high?

Nelisa: 7:53

Yeah. So at the height of our I guess investing journey was, you know, obviously when the market was on fire, everyone got to a high. I think a lot of people who were already in the space and kind of took advantage. We ended up doing, like, 170 plus deals in one year and we grew our rental portfolio to over 100 properties. We ended up scaling back a little bit selling off some of that stuff just Trying to, you know, refocus on where we wanted our investments. And and so now we're kind of in a little bit of a sweet spot where we're at. We're still actively flipping doing a little bit more wholesaling. And and, you know, still have our rentals just kind of doing their thing. But, yeah, so I'm still very much involved with ownership of the business. So I'm, you know, reviewing our financials and I still manage our VA who's overall of our accounting, but from that perspective, like I. Don't spend much time in my real estate investing business just because everything has kind of been spread out to other team members. So, yeah

Mike: 9:05

what were some of the challenges that you faced, like getting up to that kind of deal volume, because you are. You guys are a very small team. It's only a handful of people. Yeah.

Nelisa: 9:17

with kind of scaling very quickly with a very small team was that our books got a little messy. So I was doing them all myself. And I just didn't have any help. So if I took time off or did my own thing, no one was keeping up with everything. And, you know, when you're buying a house every couple of days it's, uh, it's a lot of work and a lot of transactions. So I actually spent a very long time. We got to the point where I was like, I told my husband, I'm like, you need to stop buying houses for a minute so I can catch up on the back end. And, uh, so then I ended up. You know, putting a process in place. I started coaching up our VAs to help. We, you know, really just took a step back to say, let's look at the bigger picture and let's get, you know, let's get things in order because the more you do, the more chaotic it gets if you don't have. A process in place. So, so yeah, after kind of going through the headache of cleaning up messy books, which is just funny that, you know, you expect a CPA who, you know, who should know what they're doing to not get in that situation. But there I was. So then once I got out of that, I, you know, realizing that what I had kind of taught myself and built for our own business could be useful for a bunch of other real estate investors because I knew what it took to build that for me and myself and our business. And I was like, I have the skillset, I have the knowledge, I have that foundation that Most investors don't. So I, you know, kind of took my own issue and created a course out of it. You know, here's how I should have done it from the start to have avoided the. very long headache it was to clean up. So, uh, I think I took, it took us months to get through reconciling everything. And I was like, I don't ever want for tax season to feel like a burden again. I don't want for like this to be a thing. I, yeah. So since then, I've, you know, I'm not doing it. I'm mostly reviewing reports, but we have, you know, all the processes in place and the work being done. And so it, yeah, it's a lot better.

Mike: 11:55

Was like, as you were going through and like catching up on those transactions, like, did you notice any like interesting trends or maybe things you wouldn't have done if you knew you had, I don't know. I don't know. Let's see. I can't speak the language of books. Cause I don't know how to do them, but like, what did you maybe notice that you're like, if I had the books, I wouldn't have done this. Or maybe it

Nelisa: 12:15

we probably would have kept a lot more Then we sold, we, I mean, we sold a lot of really great properties that like, you know what, we probably should have kept that one had we had books that to look at. Cause we didn't, you know, when you don't have something to look at, you don't know where you're trending. I mean, you obviously see your bank account and you're like, all right, well it's growing, so things must be good. Right. But you know, your financials tell you a different story than your bank account might. Cause there's, especially with investing, there's huge ins and outs all the time. So I think for us, we would have had just the. Just that full picture to be able to say, you know, we should have kept that one or you know, or maybe did a lot more creative deals like using our IRAs or, you know, things like that. Which is what we do now a lot more of. We're able to see that full picture to really kind of, navigate that better. So, yeah, it just kind of gives you that something to base it off of besides just. A feeling. Yeah.

Mike: 13:24

Like, what are some key things that you look at on, like, whether it's a weekly or a monthly basis to kind of, like, what are some key numbers you or reports you look at to know where you stand?

Nelisa: 13:35

I mean, there's so many different reports we look at. Obviously we look at everything on a per property basis, which a lot of investors I feel like do a pretty decent job of. A lot of people, you know, know how to calculate how much they made on this particular flip or, you know, whatever it is. But we also look at the full. Business picture because that's, you know, most important because, you know, your gross profit could be something completely different from your net income. So you want to know the difference in those numbers and you know how to operate better. So we're constantly looking at our expenses to see if there's any way to cut costs or you know, we also, you know, are always looking at our balance sheet to see how many loans we have out. You know, what our escrow balances are, like, you know, to keep track of, you know, projects when you've got, you know, your rehab is up to this point, okay, let's go request money so that we can get that draw. So really just, you know, looking at all of the different reports. And then of course, because we also have a rental portfolio, it's, you know, looking at all of that. As well on a per property in addition to as a full business. So, yeah, it's, and anytime, you know, there's something that comes up and we're like, man, how'd we miss that? There's always a way. I love QuickBooks. I'm a big believer of QuickBooks. I think it's a great accounting system and it's, You're able to run reports on so many different things. So, you know, anytime you're trying to find an answer for something, there's usually a report that you can pull to, you know, figure out what that specific thing is. So, but yeah.

Mike: 15:24

Did. Did looking through the books, I know you said, you know, you guys kind of got up to about a hundred rentals and I know you're kind of downsizing some of them now did looking at the books like influence, which ones you were going to sell and if so, how did it influence them?

Nelisa: 15:39

So it's a combination of looking at the books, but also looking at, like, our just our statement in Real Estate Owned where we have, you know, What the property's value is, what what the current loan balance is, you know, basically like how much equity do we have in that property? Is it worth, you know, putting in the money to turn it and rent it out again? So, you know, looking at what The market rent is has rent gone up or down since the last time it's rented out, you know, has our mortgage payment stayed the same has property taxes and insurance increased, you know, so it's not necessarily any one thing as much as it's looking at, like, a multitude of different things. And then from there, kind of deciding, okay, this one, you know, has a ton of equity, maybe it's better right now to you know, Sell it on the retail market than it is to put more money in and, you know, rent it out because, you know, maybe the cashflow is a lot lower because of things like property taxes and insurance, which you know, have gone up. So, just kind of, you know, going through those different types of things. So we typically look at with rentals, whether or not we want to continue renting them, or if we decide that it's the right time to sell, we'll look at those anytime they become vacant. So it's a great time to just like reassess because the property is vacant anyways. So that's kind of how we determine, you know, which rentals to continue renting or to cash in at. So, but you know, everything's different, like some, You know, some investors might not mind selling a property that is tenant occupied, but for us and working with the management company and all those different things, I just, we find it easier. That vacancy kind of is that stopping point of like, okay, let's assess from here. So.

Mike: 17:26

Maybe could you share an example of like one or two of the recent ones you sold and kind of how you came to the conclusion that like, okay, yeah, we're gonna this one is. This one's going up for sale.

Nelisa: 17:36

Yeah, so I'll be honest. There are some properties that we've sold recently where we bought them originally to flip. And we put them on the market to sell and they, I mean, we just had some bad luck, you know, multiple buyers backing out. And then you get to the point where you're just like, do we really want to keep doing this? Or, you know, should we just rent it out at this time? And then, you know, revisit this later. And so. The last couple, actually, I think were originally flips that we ended up holding on to. And so when they became vacant, we were like, all right, well, let's go back to that original plan, which was to resell it anyways. So they were, you know, had they were in good areas where first time homebuyers. Are looking and they were at, you know, price points that were, you know, just great areas like that because a lot of, you know, sometimes you might have rental properties that are in areas that are just Better as rentals than as you know a homeowner Purchase so those are things to consider as well like whenever we're looking at what to keep or sell We'll look at the particular asset and if it's like, you know, what this area is much more rent heavy The, you know, the exit strategy is probably that house selling to another investor, not necessarily to a homeowner, then we also, you know, consider those things as well. So, yeah.

Mike: 19:07

What are some common mistakes that you see a lot of investors make when doing their, when on their books, besides just like not keeping them up to date or not doing at all,

Nelisa: 19:19

So the more I've been doing this and the more I've been talking to. Investors and other bookkeepers, I'm starting to see things that I didn't even think were, people were making, but One of the biggest mistakes I see is that people don't know how to record Basically the transaction that comes through the bank to, let's say, either buy a property, right? So you have a wire that goes through the bank. I have seen where people will just take that amount and put it all to one account and that is wrong. It's

Mike: 20:00

what is what does an account, what does an account mean?

Nelisa: 20:03

Like an account. So, so there's different types of accounts. So you'll probably recognize like, you know, you got income accounts, you have expense accounts, you have asset accounts. And so they will take that 12, 000 and they're like, Oh, I purchased a house. This should all go into my inventory account. And that's not how you would account for that at all. That doesn't take into consideration any of the things that make up that purchase. So, you know, if you think about, for example, I know that when we buy a house, we typically get a loan on it, whether it's a hard money lender or private money lender. You know, someone's bringing financing. So if you don't record that loan, then your balance sheet is wrong. It doesn't show, you know, that you owe someone money and you do. So a lot of times people, they don't know how to take the transactions that come through their banking feeds and they don't know how to put them into the correct accounts. And so that's a huge mistake I see all the time, whether it's purchases, sales There are some other big mistakes. Another big mistake I see is that people will record, say for example, that, you know, you're starting a business and you're putting a lot of your own personal money into your business, especially in the beginning. I mean, We all have to do it, I mean, you know, it's real estate investing, there's huge swings. So you're putting money into your business and people don't know how to categorize that money that they're putting in. So I've seen people put that to income. That is not income. You didn't sell anything. You literally took your own personal money and you put it into the business. So that's another, that would be equity. So you're, it's a contribution, you're contributing money. So it will affect your balance sheet, but it won't affect your income statement. So just stuff like that. I mean, there's tons of little things. But. Yeah, I think a lot of times, too, there's, this isn't necessarily a mistake, but it's just something that I like to challenge when people say, like, you know, why do you need books anyways, is, you know, everyone thinks about taxes, right? You're like, oh, we need to have books so that during tax time we have something to provide the accountant. And really, like, you need those books in order to. Make business decisions. You need to be able to review something to look at to you know To give yourself meaningful information so a lot of times I see mistakes in the sense of like People might hire a bookkeeper who doesn't know what they're doing or who doesn't have real estate experience And so you're getting financial statements that don't make sense to you and it's like if you're the business owner You should understand your books Cause it's your business, you know, if you look at your financials, I should be able to say, Hey, what's included in this account? And as an owner, you should know what's in that account because it's your business. Who knows it better than the owner? And so I've seen situations where, you know, I have a client who sent me their financial statements and I was started asking them questions and they had no idea any of the answers. I'm like, well, how did this chart of accounts come to be? Like who decided on all of these account? Because they're customizable. You can make them whatever you want. So I think One of the mistakes is like people not realizing that your books are for the business owner. Like that should be the main goal. It should be for the business owner to be able to understand what's going on in their own business. And so, you know, your book, your chart of accounts should look different from my chart of accounts. And my chart of accounts should look different from everyone else's because What you care about in your business might be a little bit different from what I care about. So yeah, I would say just kind of like people not realizing what they can actually provide to a business owner. So,

Mike: 24:22

If someone's running a flipping business, like what are some key numbers you think they should paint? I mean, I know you can dive super deep writing QuickBooks or other accounting software, but if they were to kind of look at something on a, well, I guess, what should they look at and like as big picture and how often should they look at it?

Nelisa: 24:44

so I would say a flipper should be looking at their breakdown of every single flip they do. So anytime you finish a project and even not just finishing a project, I mean, you should be reviewing those. Throughout the project, you know, where are you standing? Cause that's how you end up determining, you know, how much do you have left for the rest of this renovation? Are you over budget already? Do you need to cut costs somewhere else? Or, you know, do you need to kind of just rethink your exit strategy? Like, you know, you have to kind of really think about all of the different pieces. So I would say, you know, throughout the project. Especially at the end of the project, reviewing what you expected versus what actually happened and why there's variances. You know, because that's going to help you better determine estimating costs for your next project. You know, where were you off? You know, what was it that that made that difference? So reviewing those in full detail, going through you know, where can you, what can you do to help? Make those numbers better. Or if they were great, then, you know, making sure. Okay, how do we continue doing that? What did we do right? You know, if we came in under budget, how, you know, what did you overestimate? Which I don't know that anyone really does that, but so really going through, you know, each property, you know, when it's, you know, While it's in process and then also when it's done and then I mean, I think personally I recommend looking at your entire business financials at least on a monthly basis, so And the way we look at ours we look at them in different ways. So, you know, we might look at them as So let's say, you know, for looking at September or through the end of September now, you know, we might look at January through September, but then we also might look at September compared to you know, August compared to July compared to June, like on a month by month basis. So we kind of go through different ways of looking at. Your information, so you might start to see trends like, oh, we do a lot better in the spring months than we do in the winter months, or, you know, summer's our best months, you know, on a year by year basis, like we are starting to see a trend, so you can kind of look at your financials in different ways to see, okay, we might have a low month Right now, but historically, we also had a low month, you know, a year ago, this same time, or vice versa. We're like, man, this was the best month ever, and we go back and we're like, oh, okay, well, last year at the same time was also the best month ever. So, you can start to see different, like, you know, trends with your own data and the way you kind of, look at things. So, I mean, but at the very minimum, definitely looking at. You know, each project, but then also holistically as an entire business. Like, cause you know, if you're running a flipping business, I mean, depending on the type of businesses it is, you might have, you know, advertising and marketing costs to have gotten that deal. If you're doing any sort of direct to seller marketing, or you might have, you know, software that you pay for, like all these other things that aren't reflected in any one project. Those are just. The cost of the business. So yeah, making sure that and making sure it's actually done because you know what we tell ourselves and what actually happens until I started setting up automated reports. I'd be like, all right, I'm going to get to these. I'm going to get to these. Well now they come to my email. So I know it tells me to stop and look at them. So yeah, just, you know, making sure that. You're just aware of what's going on. Cause that's also going to tell you, you know, how to make changes. If you start to see your renovation costs increasing or holding costs, you're like, what's going on here. And maybe we need to start trying to raise more private money so that we can get, you know, lower interest costs or whatever the thing is your business books will give you information to look into those things to kind of, you know, get a grasp on it.

Mike: 29:02

yeah, what are you you know, so when you're kind of looking at the books in the flipping business, it can kind of be, and I'm just going to speak for myself as an amateur at accounting, I may or may not have been the person who also just handed it off to someone and said, just figure it out and send me the reports once in a while, uh, and I wouldn't have known what's in the chart of accounts, but Anyway, not anymore, but

Nelisa: 29:26

Hey, we all started somewhere. I had messy books too, so.

Mike: 29:29

yeah, but I guess like, like, you know, with the flipping business, it's like, you know, you could buy something four or five months ago and you're only finally realizing the income for that, like today, cause you know, whatever you renovated it, maybe 60 days and you put it on the market. And, you know, you had some buyers and finally now you've got the money back. So like, I guess, how do you look at that? Like, how do you, what's the best way to look at that? Okay.

Nelisa: 29:57

if you have a flipping business, the way you can record those transactions within your books, there's actually different ways to record that. So, some people, which, Some people will record it straight to your inventory accounts, which is technically what, if you think about a flipping business and the product you sell, the product you sell is your house, right? A house. That house is your inventory. So, If you're looking at your business, if that's how you record them, then you would go to your inventory account in QuickBooks. You'd be able to see, okay, here's how much inventory I'm carrying. Here's, you know, what the loans are for it. Here's, you know, what I'm into it for, basically. There are sometimes people will choose to record everything to their cost of goods sold. So, that is. Technically, like, until you sell the property, that cost of goods sold shouldn't be recognized. But the way you can account for it, you basically just, you would say, you know what, I'm gonna, on a monthly basis, or quarterly basis, or annual basis, I'm gonna go through and take all of this cost of goods sold that hasn't sold yet, and I'm gonna, you know, I'm gonna basically put it back into your inventory account. So depending on the type of business, like, you know, I've worked with some investors who've, they're flipping, you know, 30 plus houses at a time. Like they're not recording everything into inventory and then taking it out. They're recording everything to cost goods sold because it just, it's a lot less time intensive. And then on, you know, A quarterly basis or annual basis. They'll go through and kind of reallocate it. So, depending on how you record it, it's going to depend on where you look for. So, and so there are ways like that. We kind of take Almost like a projected approach of like looking at basically as soon as a property goes under contract, our VAs will go through and they basically take what the sales price is, come up, we have like a calculation where you take out, you know, your closing costs, your filter commissions, like all of that, that different, those different costs. And you're basically going to take that number and then subtract out. What do you, what the loan balance is, right? What do you owe on it? And you're going to get to a number where we kind of, we project how much cash back we're going to get into the business. So, you know, we can look at it on a, okay, in November, we have these closings that we're anticipating. And so here's how much cash And then, of course, when you look at your profit and loss statements, you can see how much you actually earned what your income was. But we kind of do a little bit of both where you can see, okay, how much cash are we getting back and then also how how much do we actually make from it? But,

Mike: 33:08

Is that done in QuickBooks too? Or is that done like outside of it? Or that cash back estimation? Is that what I mean?

Nelisa: 33:16

Yeah, it's in QuickBooks. So you, there's basically like a screen where you can kind of see what your expected cash in and cash out is each month based on any bills that are entered. QuickBooks also uses its best, you know, information to guess at what's coming. Coming up based on, you know, what they're seeing in your data. So if they see that you have the same recurring expenses every single month, it's going to be like, okay, we expect to see that same 200 charge or whatever it is coming out. So you can go in and say, Hey, we expect to see, you know, 45, 000 back in our account on this day from this closing. And of course, if closings get delayed or things go into different months, then that can kind of. You have to manage that, but yeah, that's kind of how we're able to see, like, into the future of, like, all right, where are we trending for November or December or January? So, yeah,

Mike: 34:11

Gotcha. And this sound, this is going to sound like a really basic question, but I'm going to ask it because I didn't know what this was until a couple of years into my business. And probably other people Don't either, who are listening, not everyone, but some, what is what is the difference between a balance sheet and a P and

Nelisa: 34:28

No, oh my gosh. Honestly, I wouldn't have known until you know, I went to college and learned all about all that stuff So a balance sheet is basically your assets your liabilities and so assets And say, for example, flipping business is going to be all of the projects that you have that have not been sold yet. So all of that, you know, cost associated with them. So any of your assets, your cash accounts yeah, any of that stuff. And then your liabilities, basically anything that you owe. So your credit cards, your loan balances, any lines of credit, that kind of stuff. And then basically the difference between the two. And then your and then your P& L or profit and loss statement, income statement, all the same words they, that is going to be your income minus your expenses. So that's going to tell you, you know. what you're actually earning.

Mike: 35:28

And then on your balance sheet in like the assets, is that what you bought those assets for, or that's what you think those assets are worth? Cause you might have, it's going to be worth more, right? If you're

Nelisa: 35:40

yes. And so that's what people refer to as like the book balance. So what you have recorded on your books is not necessarily the same value as what you would say that you could get it for on the retail market. Which is why, like for us, we have, you know, for our rentals, Are statement of real estate owned where you can put in those actual values of what they're currently worth, you know? So if we were to go to resell it today, what is that actually worth?'cause your book balance is not gonna be that. So yes, it's a great question and a lot of times people yeah, don't realize there's a difference.

Mike: 36:19

So it's what you, it's what you paid for that asset. Just so I,

Nelisa: 36:22

So it's going to be four flips. Yes. It's going to be what you paid for. Yeah. And then any of the, your cost incurred throughout the project. So if you're paying for a roof, that's also going to be included in your assets until you sell it. And then you would recognize the expense.

Mike: 36:40

Okay. Gotcha. And then you know, this is always like a, well, it's less of a debate that I've had now, but I've had this debate with myself in the past is like, what's your guys theory on, you know, borrowing money versus putting a lot of your own money. And like, for a while I was using a lot of my own cash. For rehabs now, as I've scaled my business, it's, but not really possible anymore. Maybe just not the smart idea, but I've, you know, kind of gone back on fourth, if it makes sense to kind of pay that interest cost or not. If you, if I have the money at the time, what's your theory on that?

Nelisa: 37:18

I mean, my theory is that's a personal decision. So there are some investors who are very risk averse to loans. They want to pay for everything in cash. They don't want to owe anybody any money. Like, that's just, you know, a personal decision. I don't know if it's Cause I'm younger and kind of just don't see that as risky just because you do have an asset that, you know, at the end of the day you can sell I, we leverage as much as we can most of the time. Just because you just always need cash. It's a cash intensive business and you're constantly have huge swings, ins and outs for new purchases, for, you know, roofs, for re pipes, for full gut rehabs. Like those are all, you know, it's a lot of money all the time. So for us, it just makes more sense to pay the interest costs. Yeah. To, you know, try to leverage as much as you can. But every business is different. Your, you know, your cash balance might say otherwise. If you're like, okay, well, we're good. Even if there's, you know, huge swings, we'll be fine. Then you might decide that, you know what, for this project, we'll just borrow the purchase price and we'll pay for the rehab ourselves. You know, but it's really just if you have your books to be able to look at, to say, okay, here's where we stand as a whole. And here is, you know, where we're trending, then you can say, okay, we should probably, you know, leverage as much as we can here, or, you know, and we do that too. If like, we might look at something and be like, you know what, there were a few projects that haven't sold yet that we thought we'd be gone by now. So we already have our holding costs at a place where we're comfortable and we don't want to exceed that. We'll bring in partners, you know, Hey, can you fund this entire deal? Like, all of it, so that we're not adding to our holding costs. We're just making sure that we're staying where we're at comfortably. But now we have to split profit on the back end, so. But your books will tell you all of those things. You'll be able to look at them and make what decision feels right for you. And where you're comfortable with, you know? So.

Mike: 39:35

Is there a certain holding cost that you guys like to stay below?

Nelisa: 39:38

Not necessarily. And it really just kind of depends on other things. So there's not like a magic number. It's not like, you know, oh, here's where we want to be. It's just what else do we have going on? What else are we purchasing? You know, how's the rental portfolio doing? Like where is everything as a whole? And where do we want to be? So, so yeah. It's really just like, it's a personal opinion you know, everyone has a different number that helps them sleep at night. Like where do you have to be, you know? And today's number might be different from tomorrow's depending on what you're anticipating. If you know that something's closing, you know, in two days and you already got the clear to close, you feel a lot differently than before. Day one of a contract where, you know, you're like, all right, well, we got to get through inspections. We got to get through, you know, a whole lengthy process. They've got to get their loan approved. Like, you know, day one of a transaction is different from closing day of a contract. So, just kind of, you know, looking at those things to yeah,

Mike: 40:40

Do you guys ever project any further out into the future than once you have a sales contract signed?

Nelisa: 40:49

Us not necessarily right now. Just because I mean, it's so hard to guess that it's a project based business when you're flipping. You know, it's different from rentals, which might be a little bit easier to kind of guess that where you're headed. But I mean, no, we're just kind of looking at. You know, as a whole where are we trending and are we, where we want to be, you know, do we need to do more or do less or, you know, do more creative things? Just kind of, yeah whatever you're able to see within that, those financial pictures that you're looking at, like where should we be at? But yeah, we're, I mean, we're not projecting like, you know, years out in the future because

Mike: 41:37

Yeah.

Nelisa: 41:38

who knows what's going to happen, you know? Markets constantly changing, shifting. So you have to shift your business along with, you know, what changes you're seeing. So,

Mike: 41:49

Yeah. What about the rental side of the business? Like what are you like looking for particularly in the books on the rental side?

Nelisa: 41:57

Rental, we're looking at like, basically depreciation and amortization, like, you know, how, what do our books show we're making versus what, you know, are actually making. So just

Mike: 42:14

Meaning with like your like meaning with like your loan payoffs and all that like what are you considering that like what you're actually making or?

Nelisa: 42:21

Yeah, like all of that. So taking into consideration like your principal pay down you know, what the value of the property is at that point just, and seeing what expense you have, so Depreciation is basically an expense that you can take, you know, across a period of time, depending on what it's for. And so we will look at basically it's an expense where you don't actually see money leaving your bank account. Let's put it that way. So, so you get credit for expense, but that expense is not actually cash leaving your bank account. So you want as much depreciation as you can for tax benefit. So we look at that a lot with our rental portfolios, like where do you want Do the books say that we're at? And then of course, you know, what's it cash flowing? What, you know, where are things at? Cause, and that is constantly changing. I mean, you know, insurance prices. property taxes rental amounts, you know, what you could rent something for, you know, three years ago is completely different in certain areas than what you can get for today. You have to anticipate longer, you know, hold time to get a new tenant in just all of those different things. So, But again, if you don't have somewhere with that information, then there's no great way to make that decision. But if you have a process for it, or you have, you know, you have your book set up, you have somewhere where you're keeping track of all of the, you know, How much rent you have, what is their security deposit, you know, all those different things. If you have a place for that, then you can see what you have and then be able to, you know, make a better decision on that going forward. So,

Mike: 44:17

Is that all done in QuickBooks too? Or that's some, somewhere different software that you have to use.

Nelisa: 44:22

So we use QuickBooks for all of the accounting piece of that, but for some of the more like administrative stuff, we're using Stessa.

Mike: 44:31

Okay.

Nelisa: 44:32

It's, I mean, it's a great tool that we found. We don't use it for accounting purposes, but we use it to be able to run, you know, reporting on that's where we keep our capital assets schedule. So at any given point in time, I can, you know, see what we have there. It's where we have statement of real estate owned. I can pull, you know, rent rolls, all of that's kept up to date so I can see who, who hasn't paid, who has paid all of that kind of stuff. So we keep all of that in Stessa, but the actual accounting for it, we do all of that through QuickBooks.

Mike: 45:11

What do you mean by capital schedule?

Nelisa: 45:13

So, so basically When you buy a rental property they're, you know, the way you report that is like, part of that purchase gets allocated to your buildings account. So it's going to be a fixed asset on your balance sheet. And then there's a part of that purchase that gets allocated to land. So, and then Anytime you make capital improvements. So basically you're, you know, you've got a big ticket expense that you pay for to improve the life of that asset. So if say, for example, you put a new roof on it, that's going to improve the value of that house, right? Cause now you have a house with a brand new roof, so it's worth more. So that roof, you know, if you have a rental, then that roof is actually included in your assets as well. It's not necessarily immediately hitting your expense account. And that's where that depreciation comes into play, where that roof, you know, item will get expensed over time. So, But yeah, so, so the the capital assets schedule is going to include all of those things. It's going to have your buildings and land when they were placed in service. So basically when was that rental property available as a rental? Like when did it hit the market when it was listed to become available for rent? And so. You know, you're at the end of the year when the, your accountant is like, Hey, when was this placed in service? We have a report or you can run instead of being like, I don't know. When do we buy that thing? When was it ready? Like,

Mike: 46:55

You don't tell your accountant just to go on Zillow and check.

Nelisa: 47:00

Yeah, I guess they could do that, but I bet you'd save money if they didn't have to. If you had them a pretty schedule, they're like, all right, well, you can only charge it so much because you've already done the work for them. Yeah.

Mike: 47:18

So you store all that kind of stuff in Stessa. And then like the book, the books themselves stay in QuickBooks.

Nelisa: 47:27

any of the, you know, anytime we get, so we actually use a property manager for all of our rentals. So anytime, you know, we get that statement on a monthly basis, we'll go in and basically take that transaction. So, you know, normally it's like, here's your cash in, but that cash in is made up of a bunch of income. A bunch of expenses, and so we have to allocate that appropriately on a property by property basis. So, you know, here was the income we received for this property. Here was the management fee we paid for this property, you know. And so we do that. And then, of course, you know, your property manager, Most of the time isn't keeping track of your mortgage, you know, so if you have a loan on a property, then we're also going through and making sure, you know, you allocate the mortgage payments to, you know, our interest to principal pay down to escrow.

Mike: 48:24

Does that like automatically get calculated in Stessa? Like, can you put that in once and it kind of does it? Or do you have to do that every month for each place?

Nelisa: 48:33

We manually do it. I'm not sure you might be able to set up some sort of automated things, but our, we have a VA that on a monthly basis, they go in and update all of that stuff. So,

Mike: 48:47

Gotcha. So there is hope we don't have to do it all on our own.

Nelisa: 48:51

oh yeah, nothing should be done alone.

Mike: 48:56

Yeah. Okay. Well, I think it'd be interesting if you talked a little bit about like kind of what you're doing now that with the accounting side of the business and you know, cause like when even just asking all the questions, it seems very overwhelming for most investors who are go, right. Worry about the ad stuff later. So maybe if you talk a little bit about what you're doing, it might give some people a little bit more peace of mind.

Nelisa: 49:22

Yeah. So it's funny. I actually had a call this morning with someone who went through my course. She was literally, she's actually a, an assistant of a real estate investor. So the real estate investor was like, Hey, can you, Take this course for me and figure this out. And she, Oh, I know. I was like, man that's my selling point. I'm more assistance to take the courses. But the she literally had no real estate experience and no accounting experience. And she was like, I feel like. So confident like she's like, I know like I get it now She's like obviously things are taking a little bit longer to click but also she literally is brand new to everything so the way, What I have, basically, is courses set up for specific to wholesaling, specific to flipping, and then specific to rental property owners. So, you know, if you're just wholesaling, then you don't need to learn about fixed assets. Like, you just need to know how to record your wholesaling income in double closes, you know? So it's very streamlined in that sense of, like, it's not meant to be overwhelming. It's meant to be very simple and very, like So I used to teach preschool. I took it and I made accounting as simple as it can be because I know it can be challenging, but it literally breaks it down for just what you need to know. Just whatever your specific focus is. And then of course, The courses have like plug and play templates where you can, you know, take a settlement statement and plug in the numbers and it'll tell you exactly what you need to put into QuickBooks. It goes through all of the different account types that actually is like a done with you kind of course. So if you don't have QuickBooks at all yet, and you're like, I don't even know where to begin. It will walk you through. Here's how you set up a chart of accounts. Here's how you should think through setting up those chart of accounts. It's really just meant to give you exactly what you need to build that confidence to be able to, you know, create your own financial statements and not find it overwhelming. What I have found is that there are some people who just don't want to do it and that's fine too. I mean, every business owner is different, you know? So. I have actually started now doing some more consulting and bookkeeping as well for clients who aren't interested in, you know, kind of the done with you, they want the done for you path. So kind of do a little bit of everything, whatever really the goal is just to help people avoid the mess I was in. So, yeah.

Mike: 52:11

And it's like, like, do people just go online and sign up for the course if they want to find more about it? Or how does it all work?

Nelisa: 52:18

Yeah, so for the course, it's literally, you just go online seedstockcourses and click on the course that you're interested in, and you can have immediate access as soon as it's paid for, and if someone was more interested in a one on one kind of, you know, more consulting or more of a bookkeeping path, then just set up a free call where we go over, you know, what the goal is and kind of put together a plan from there, so.

Mike: 52:43

What do you find? And I asked this question because I have whenever I bought courses in the past, it's always what I've asked the person who sold the course, which is what do you find is the difference between people who do your course and do it really successfully? And the people who like, what do they do differently? Okay.

Nelisa: 53:02

I would say the people who don't kind of get through it as they should, or the way I see it, is that they might already be in a position where they needed it. Like six months ago before they started. And so now they're trying to clean up something based on, you know, something that was already done which I also help with that as well. So I'm actually, I'm doing one right now, a big old cleanup for someone, you know, their entire 2023 was just really messed up. And so I'm going through and helping them clean it up. And they actually started with taking my courses and realize that, you know, They knew that something was wrong, and it was just a little bit overwhelming. They didn't know how to fix it themselves. And in that case, I would say, you know, he didn't end up finishing the course yet but now we're on track to get his stuff cleaned up so that moving forward, you know, he should be able to stay on track. So, I would say my courses are designed more for if you haven't quite gotten something set up yet. But if you learn the concepts in it, it might reveal a bigger problem. Like you need to hire a new bookkeeper or you need to go back and start cleaning stuff up. So either way you'll learn something from it.

Mike: 54:25

like it's easier if people had started with it than

Nelisa: 54:28

I like to compare it to to like preventative measures. So like I, I talk about this all the time. So I'm in like preventative performance therapy where like before you actually need physical therapy I actually do that. So like, you know, so if I do hurt myself, I'm already had a schedule where most people don't think they need physical therapy until they're injured. Right. So sometimes people don't realize that they need the accounting help until it's too late. And then they need more help to fix what the problem was. So my courses are designed to help prevent the pain. But sometimes it's hard for people to know that they need that until it's too late. So if they're in pain, I can help with that as well. But yeah, it's always. Yeah.

Mike: 55:18

Yeah. Easier to start ahead of time. Yep.

Nelisa: 55:20

Yeah, exactly.

Mike: 55:24

Cool. Well, there's always two questions I like to ask towards the end of the show. And, uh, the first one's kind of a fun one, which is, uh, what is the craziest or most uncomfortable situation that you've ever experienced in a real estate deal?

Nelisa: 55:39

So, I could answer this with a million different things, but I'll say the first one that comes to mind is a situation where we basically had gotten a property under contract and the, it was all done virtually. So, You know, we'd spoken to the seller over the phone, we had sent the contract through email, everything was signed, you know, we sent it a title, we were on track. We also actually, you know, went to the property, I didn't, my husband did, but he went to the property, the tenants let him in, he took photos. Nothing weird, you know, just your normal transaction. Well What happened was? apparently this seller was not the actual seller and We got a phone call from a friend who Knew the homeowner and he's like, Hey you know, the homeowner of this property is saying that they're getting calls from, you know, a lawyer and they're not sure what's going on and she's afraid she's gonna lose her house. And like she was just very confused at what was going on. We were like, immediately we're like, oh my gosh. Like, I don't know who we've been talking to or who signed the contract, but it obviously wasn't the true homeowner, someone. Trying to pull a scam, right? So, so that was going on and we were just like, okay, we like let title know what's going on, you know, whatever. Well, the homeowner had a friend who was very protective and who thought that we were trying to scam this woman out of her house. And he was livid, like showed up at our office. Literally busted the door open, yelling, Where is, where are the lees? Like, you know, is this evergreen homebuyers? And we're like, what is going on? Like, we're in a tiny little office, just me and my husband. Like, it's normally quiet in there. And we're like, who is that? And like, what do we do? So this is not evergreen. I know this sign on the door says otherwise, but so that was one of the scariest, like craziest things. And basically, I mean, Daniel's like, you need to leave, you know, this is private property, whatever. But after that, I mean, we had to call the cops and, you know, let them know what was going on. Cause I was like, I was legit scared. I'm like, when people are crazy, you don't know what they're gonna do. So fortunately, I mean, we were able to speak to the actual homeowner and like, squared everything away. And we're like, can you please let your friend know, like, like, everything's fine. Like, This was just a big ol mix up for all of us, like, you know, and, we wouldn't have got to closing, like, the, there was no actual seller. So, you know, everything kind of worked itself out in that regard, but it was, like, definitely A little scary.

Mike: 58:41

Sure. Put a burglar alarm in.

Nelisa: 58:51

Yeah. We already had one. It started getting turned on. I

Mike: 59:02

Well, the second question I always like to ask is if you could go back in time and give yourself one piece of advice when you were looking for your first real estate deal, knowing what you know now, what would you tell yourself?

Nelisa: 59:18

would say to just not be afraid to put your pride aside and use the help of other people. I think a lot of times we've People just try to do too much on their own, and I'm guilty of that, too. You're, you know, kind of think that you can just figure it out. And, you know, sometimes you do. Sometimes, you know, you figure it out the hard way. But I would say just, like, leveraging your network and leveraging the right people. Like, making sure that who you're taking advice to are people that are providing sound advice, you know. And just, you know, Just, you know, really not being afraid to put pride aside and start as a beginner, you know, like it's hard to do sometimes, but it'll help save you a lot of headaches.

Mike: 1:00:06

Yeah, I think that's a great piece of advice. If people want to reach out to you after the show, if they have questions, or maybe they're interested in your course, like, what's the best way for them to go about doing that?

Nelisa: 1:00:18

So best way is going to be through either social media or email. My email is nelisa at seeds. courses, pretty simple. My social media accounts are all Seeds Courses, so I'm active on there and will reply, you know, pretty quickly if you get on there. So, yeah, those will be the easiest ways to get in touch.

Mike: 1:00:40

Awesome. Well, thanks for being on the show.

Nelisa: 1:00:43

Yeah, no, thanks for having me. This was a lot of fun.

Mike: 1:00:46

Okay.