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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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www.HasslefreeCashflowInvesting.com
Back to Basics BookkeepingFor Real Estate Investors
David Campbell Hassle-Free Cashflow Investing
[email protected](866) 931-9149 Ext 1
Renee DaggettEnrolled Agent / QB [email protected](408) 782-9640
David Campbell - FounderHassle-Free Cashflow Investing
Former high school band director Self-made multi-millionaire
Real Estate investor / developer / brokerFinancial educator / author / speaker
Houses, condo-conversion, multi-family, winery, resort, office, retail, medical office, production home building
Faculty Member: Investor Summit at Sea with Robert Kiyosaki
www.HasslefreeCashflowInvesting.com
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.
Disclaimers & Cautionary Notes
This educational seminar is not a substitute for getting your own professional advice. This webinar is offered with the understanding that the speakers are not offering legal, financial, tax or other professional advice. Any actions with regard to the information contained in this seminar should be undertaken only upon the advice and counsel of competent legal and tax professionals. Receiving this information does not create a fiduciary or client relationship between you and the speaker.
Disclaimers & Cautionary Notes
This educational seminar is not a substitute for getting your own professional advice. This webinar is offered with the understanding that the speakers are not offering legal, financial, tax or other professional advice. Any actions with regard to the information contained in this seminar should be undertaken only upon the advice and counsel of competent legal and tax professionals. Receiving this information does not create a fiduciary or client relationship between you and the speaker.
Disclaimer
We’re not your advisors.
You can’t sue us.
www.HasslefreeCashflowInvesting.com
ProfitMoney + Time + Hassle
ROI =
More profit with less invested
Today’s VIPs(very important points)
• Bookkeeping Vocabulary• Bookkeeping Principals• Bookkeeping Strategies
www.HasslefreeCashflowInvesting.com
RECAP: Bookkeeping Strategies
Type of Accounting What you use it for How to do it Who does it?
Cashflow Essential for daily living (budget)
Excel and Bank Reconciliation
You and your spouse
Profit / Loss Very important for short and mid term planning
Excel or Quickbooks
You and your bookkeeper
Net Worth Helpful for long term planning and bankability
Excel or Quickbooks
You and your bookkeeper
Tax Accounting
Very important for mid and long term tax planning Quickbooks
You and your bookkeeper and
tax advisor
www.HasslefreeCashflowInvesting.com
Balance Sheet+ Equity+ Assets
- LiabilitiesNet Worth
Financial AccountingBasis
GAAP Mark to Market
www.HasslefreeCashflowInvesting.com
THREE COMPONENTS = NET WORTH
Primary Home $500,000
Rental House $125,000
Businesses $0
IRAs $150,000
Cash $50,000
Stocks / Equities $20,000
Cash Value Life Insurance $10,000
Car $25,000
Personal Property $10,000
GROSS ASSET VALUE $890,000
ASSETS
Primary Home Mortgage -$375,000
Rental House Mortgage -$90,000
Business Loans $0
IRA Loans $0
Credit Cards -$20,000
Car Loan -$18,000
Loan Against Life Insurance -$5,000
Student Loans -$50,000
Unsecured Bank Loans $0
GROSS LIABILITIES -$558,000
LIABILITIES
Contributions Into a Company $50,000
Distributions Out of a Company -$20,000
Accumulated Profit / Loss (retained earnings)
$75,000
EQUITY
Assets = Liabilities + Equity
Liabilities
EquitiesAssets =
Equity $75,000
Assets $890,000
Liabilities -$558,000
NET WORTH $407,000
NET WORTH
Who cares about this?Your banker
Your creditorsEstate taxes
Personal vanityAccredited Investor Status
a type of “savings” for future withdrawal
NET WORTH vs CASHFLOW
www.HasslefreeCashflowInvesting.com
Profit / Loss StatementIncome Statement
Income-Expenses
Profit or (Loss)
Income-Profit
Expenses
Renee’s Secret Formula
www.HasslefreeCashflowInvesting.com
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
Profit / Loss (P&L) INCOME
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
EXPENSESProfit / Loss (P&L)
Deductible ExpensesEarn then Spend
$1 buying power = $1 earnings
Non-Deductible ExpensesEarn then Pay Tax then Spend
$1 buying power = $1.25 earnings
www.HasslefreeCashflowInvesting.com
Deductible ExpensesEarn then Spend$1 buying power requires $1 of earnings
Non-Deductible ExpensesEarn then Pay Tax then Spend$1 buying power requires $1.30 of earnings
SHIFT EXPENSES
Primary Mortgage Interest YES
Rental Property Mortgage Interest YES
Rental Property Expenses (non mortgage) YES
Student Loan Interest YES
Taxes YES
Car Loan Interest MAYBE
Loan Interest From Life Insurance MAYBE
Food / Clothing / Personal / Travel MAYBE
Housing (non-mortgage related) MAYBE
Vehicle Expenses (non-loan related) MAYBE
Health Care MAYBE
Credit Card Interest MAYBE
IRA Contributions MAYBE
TAX DEDUCTIBLE EXPENSES
Income $88,050
Expenses -$51,100
Profit / Loss (INCOME) $36,950
Profit or Loss (P&L)
Who cares about this?Your banker
Your creditorsIRS
YOU!!! SUPER IMPORTANT
Profit / Loss is NOT CASHFLOW!!!Profit / Loss is NOT YOUR TAXABLE INCOME!!!
Not every check you deposit is incomeNot 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 ReceivedReturn of security deposits held by YOUPrepaid items / Overpayments / Refunds
www.HasslefreeCashflowInvesting.com
Not every check you write is an expenseNot all negative cashflow is loss
Issuance of LoansOwner Draws
Investment Principal into 3rd party companiesSecurity deposits paid by YOUPrepaid items / Overpayments
Deposits into Impound / Escrow AccountsPayments to Credit Cards
Re-Payment of Loan Principal
www.HasslefreeCashflowInvesting.com
Multiple Income StatementsMultiple Balance Sheets
IRA
C-Corp
S-CorpLLC
Partnership
dividends
distributions
www.HasslefreeCashflowInvesting.com
K-1
trust orimpoundaccount
reconciliation
Cashflow Statement
Starting Balance+ Receivables
-PayablesCashflow (positive or negative)
www.HasslefreeCashflowInvesting.com
DepreciationEquipment Cost
- Non-Depreciable CostDepreciable Basis
Depreciable BasisUseful Life
Depreciation =
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Depreciation Schedule
3 year - software5 year - computer7 year - furniture
15 year - loan points / property improvements27.5 year - residential (1-4) property
39 year - commercial property
www.HasslefreeCashflowInvesting.com
Depreciation allows you to claim a loss
before you sell the asset
www.HasslefreeCashflowInvesting.com
“Phantom Income”Owe taxes on money used to pay off loans.
No cash to pay the tax.
“Phantom Loss”Tax deductions for expenses you didn’t really pay
DepreciationAuto expenses (mileage)Home office (potential)
www.HasslefreeCashflowInvesting.com
CashflowProblem
CashflowBonus
Purchase Price $300,000Land (*non-depreciable “doesn’t wear out”) $25,000Structure (*depreciable “wears out”) $275,000Depreciation Schedule 27.5 YearsAnnual Depreciation $10,000
Year 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
DEPRECIATION of Residential Property
Profit = sales price - acquisition priceGain = 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
GAIN vs PROFIT
www.HasslefreeCashflowInvesting.com
Depreciation Recapturea tax based on your GAIN not
your PROFITYou 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
www.HasslefreeCashflowInvesting.com
Taxable Income
Gross Income- Allowed Expenses
- DepreciationTaxable Income
www.HasslefreeCashflowInvesting.com
Income Tax
Taxable Income x Tax Rate
Income Tax- Tax Credits
- Tax Previously PaidTax Owed (or Refunded)
RECAP: Bookkeeping Strategies
Type of Accounting What you use it for How to do it Who does it?
Cashflow Essential for daily living (budget)
Excel and Bank Reconciliation
You and your spouse
Profit / Loss Very important for short and mid term planning
Excel or Quickbooks
You and your bookkeeper
Net Worth Helpful for long term planning and bankability
Excel or Quickbooks
You and your bookkeeper
Tax Accounting
Very important for mid and long term tax planning Quickbooks
You and your bookkeeper and
tax advisor
www.HasslefreeCashflowInvesting.com
Q&A
www.HasslefreeCashflowInvesting.com
www.AdminBooks.com
www.HassleFreeCashflowInvesting.com
www.HasslefreeCashflowInvesting.com
Back to Basics BookkeepingFor Real Estate Investors
David Campbell Hassle-Free Cashflow Investing
[email protected](866) 931-9149 Ext 1
Renee DaggettEnrolled Agent / QB [email protected](408) 782-9640