Author Topic: SYTE - Enterprise Diversified  (Read 162971 times)

bizaro86

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Re: SYTE - Enterprise Diversified
« Reply #580 on: November 07, 2018, 02:05:33 PM »
I read the update, and my only comment is this:

On behalf of property owners everywhere, I want to thank Jeff for installing 1/4 turn ball valves on his plumbing shut-offs. I've replaced so many seized gate valves over the years (roughly all of the ones I own!) that hearing someone else with a practical bent to real estate makes me very happy. Plumbers love gate valves for reasons that make no sense to me, and I've had them installed in properties I own after I explicitly specified 1/4 turn ball valve (by plumbers that no longer do work for me). That type of attention to detail is key for small scale real estate investment. It costs an extra couple bucks, but it is basically guaranteed to save a $100 service call within the next 10 years. And once in awhile it will save a $10,000 flood issue when something is leaking and the crappy gate valve can't be closed. I doubt that level of attention to detail is available from an outsourced property management firm, but I sincerely wish this company the best.


ragnarisapirate

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Re: SYTE - Enterprise Diversified
« Reply #581 on: November 07, 2018, 02:17:23 PM »
I read the update, and my only comment is this:

On behalf of property owners everywhere, I want to thank Jeff for installing 1/4 turn ball valves on his plumbing shut-offs. I've replaced so many seized gate valves over the years (roughly all of the ones I own!) that hearing someone else with a practical bent to real estate makes me very happy. Plumbers love gate valves for reasons that make no sense to me, and I've had them installed in properties I own after I explicitly specified 1/4 turn ball valve (by plumbers that no longer do work for me). That type of attention to detail is key for small scale real estate investment. It costs an extra couple bucks, but it is basically guaranteed to save a $100 service call within the next 10 years. And once in awhile it will save a $10,000 flood issue when something is leaking and the crappy gate valve can't be closed. I doubt that level of attention to detail is available from an outsourced property management firm, but I sincerely wish this company the best.

Thank you. That comment made my evening! It also guarantees that a floor joist wonít rot out when the gate valves in a washer box go bad and the tenants donít tell you about it. Prolly because they canít see the problem thatís occupant behind their washer, wall, and floor.

Iím even crazy about the specific type of wire nuts our electricians use, and how they install them. Seen too many melt off electrical connections before!
« Last Edit: November 07, 2018, 02:31:28 PM by ragnarisapirate »

bizaro86

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Re: SYTE - Enterprise Diversified
« Reply #582 on: November 07, 2018, 02:49:46 PM »
I read the update, and my only comment is this:

On behalf of property owners everywhere, I want to thank Jeff for installing 1/4 turn ball valves on his plumbing shut-offs. I've replaced so many seized gate valves over the years (roughly all of the ones I own!) that hearing someone else with a practical bent to real estate makes me very happy. Plumbers love gate valves for reasons that make no sense to me, and I've had them installed in properties I own after I explicitly specified 1/4 turn ball valve (by plumbers that no longer do work for me). That type of attention to detail is key for small scale real estate investment. It costs an extra couple bucks, but it is basically guaranteed to save a $100 service call within the next 10 years. And once in awhile it will save a $10,000 flood issue when something is leaking and the crappy gate valve can't be closed. I doubt that level of attention to detail is available from an outsourced property management firm, but I sincerely wish this company the best.

Thank you. That comment made my evening! It also guarantees that a floor joist wonít rot out when the gate valves in a washer box go bad and the tenants donít tell you about it. Prolly because they canít see the problem thatís occupant behind their washer, wall, and floor.

Iím even crazy about the specific type of wire nuts our electricians use, and how they install them. Seen too many melt off electrical connections before!

Glad that made you grin, as I was definitely grinning when I read that in your letter. Those valves are one of my number one pet peeves in life.

I agree you can't reasonably expect tenants to keep an eye on things, so installing the low-failure version definitely makes sense.

matts

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Re: SYTE - Enterprise Diversified
« Reply #583 on: November 07, 2018, 03:23:33 PM »
I appreciate the full update from Steve. I bet going forward they will take this approach. Lesson learned.

I'm a bit confused about why the accounting burden is so much heavier as an SEC reporting entity. Mt Melrose has to do all the same tedious accounting work (many small purchases, depreciation schedules) to file its taxes no? They might only have to do it once a year, all at once, but is that really an improvement over doing it on an ongoing basis? It's still the same number of invoices for screws and bolts.

Any accountants around that could enlighten me?

Tim Eriksen

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Re: SYTE - Enterprise Diversified
« Reply #584 on: November 07, 2018, 03:48:53 PM »
I appreciate the full update from Steve. I bet going forward they will take this approach. Lesson learned.

I'm a bit confused about why the accounting burden is so much heavier as an SEC reporting entity. Mt Melrose has to do all the same tedious accounting work (many small purchases, depreciation schedules) to file its taxes no? They might only have to do it once a year, all at once, but is that really an improvement over doing it on an ongoing basis? It's still the same number of invoices for screws and bolts.

Any accountants around that could enlighten me?

The comparison is to if everything was sub-contracted where Mt Melrose gets a single invoice per job and the sub buys all these things.

To do all or most of it in house results in a multitude of invoices, vehicles that have depreciation, inventory that must be audited for shrinkage, excess & obsolescence, utility bills, etc.   Segregation of duties means one person can't handle it all or you have a material weakness.  So you need one person to write up a purchase order, a different person to approve it.  One person to make the journal entry and someone else to approve and sign the check. 

Tax accounting has depreciation, but not the same as GAAP which has to be audited.  No segregation of duties is necessary if not audited.

matts

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Re: SYTE - Enterprise Diversified
« Reply #585 on: November 07, 2018, 04:11:46 PM »
I appreciate the full update from Steve. I bet going forward they will take this approach. Lesson learned.

I'm a bit confused about why the accounting burden is so much heavier as an SEC reporting entity. Mt Melrose has to do all the same tedious accounting work (many small purchases, depreciation schedules) to file its taxes no? They might only have to do it once a year, all at once, but is that really an improvement over doing it on an ongoing basis? It's still the same number of invoices for screws and bolts.

Any accountants around that could enlighten me?

The comparison is to if everything was sub-contracted where Mt Melrose gets a single invoice per job and the sub buys all these things.

To do all or most of it in house results in a multitude of invoices, vehicles that have depreciation, inventory that must be audited for shrinkage, excess & obsolescence, utility bills, etc.   Segregation of duties means one person can't handle it all or you have a material weakness.  So you need one person to write up a purchase order, a different person to approve it.  One person to make the journal entry and someone else to approve and sign the check. 

Tax accounting has depreciation, but not the same as GAAP which has to be audited.  No segregation of duties is necessary if not audited.

So there are 2 different comparisons here that I don't want to mix up.

1) Jeff seems to imply that the accounting burden got much worse when mt melrose became part of ENDI. That was the focus of my question, independent of an external manager. And yes ok, so a second person has to sign off, what else? because that doesn't sound like a dealbreaker.

2) There is less accounting if you just outsource management. Makes perfect sense. But the manager now has to do all the shitty work and that would factor into what he charges ENDI. So are you really saving that much? Yes, the manager might have some scale efficiency but since it's just the nature of the industry to have a million different accounting entries I don't see how those costs won't get expensed to ENDI, one way or another.

If someone can convince me in 1) that accounting for a private property manager is FAR easier than a public one, then I'll be more inclined to concede on 2).

« Last Edit: November 07, 2018, 04:24:21 PM by matts »

ragnarisapirate

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Re: SYTE - Enterprise Diversified
« Reply #586 on: November 07, 2018, 06:19:20 PM »
I appreciate the full update from Steve. I bet going forward they will take this approach. Lesson learned.

I'm a bit confused about why the accounting burden is so much heavier as an SEC reporting entity. Mt Melrose has to do all the same tedious accounting work (many small purchases, depreciation schedules) to file its taxes no? They might only have to do it once a year, all at once, but is that really an improvement over doing it on an ongoing basis? It's still the same number of invoices for screws and bolts.

Any accountants around that could enlighten me?

The comparison is to if everything was sub-contracted where Mt Melrose gets a single invoice per job and the sub buys all these things.

To do all or most of it in house results in a multitude of invoices, vehicles that have depreciation, inventory that must be audited for shrinkage, excess & obsolescence, utility bills, etc.   Segregation of duties means one person can't handle it all or you have a material weakness.  So you need one person to write up a purchase order, a different person to approve it.  One person to make the journal entry and someone else to approve and sign the check. 

Tax accounting has depreciation, but not the same as GAAP which has to be audited.  No segregation of duties is necessary if not audited.

So there are 2 different comparisons here that I don't want to mix up.

1) Jeff seems to imply that the accounting burden got much worse when mt melrose became part of ENDI. That was the focus of my question, independent of an external manager. And yes ok, so a second person has to sign off, what else? because that doesn't sound like a dealbreaker.

2) There is less accounting if you just outsource management. Makes perfect sense. But the manager now has to do all the shitty work and that would factor into what he charges ENDI. So are you really saving that much? Yes, the manager might have some scale efficiency but since it's just the nature of the industry to have a million different accounting entries I don't see how those costs won't get expensed to ENDI, one way or another.

If someone can convince me in 1) that accounting for a private property manager is FAR easier than a public one, then I'll be more inclined to concede on 2).

Let me give an example from our onboarding audit earlier in the year:

We were needing to give documentation of our historic revenue. Fine. I get that. You want to verify stuff. I support that, and think itís a good thing.

We gave our quickbooks/appfolio records for documentation... Not enough.

We then gave our bank deposit slips... Not enough- they needed to see a breakdown of every propertyís rent, on the deposit slips.

We then referenced the quickbooks/appfolio files, that had both the rent amounts, and the serial numbers on the money orders... Not enough.

We reconciled these records to ensure that they MATCHED THE DEPOSIT SLIPS. Not enough.

I offered my tax returns, you know, because me lying about revenue on there, would do a good job of getting me in jail. SURELY, that, with the records we had (keep in mind SERIAL NUMBERS OF EVERY MONEY ORDER, and documentation where all those numbers reconciled with our bank deposit slips...

Nope.

We had to get our bank to go through THEIR deposit records, and print off a photo copy of EVERY rent money order (I stopped taking checks years ago because of them bouncing) that we had received during the period being audited... I had to call in a favor to get it done under the time that we had to get it done in. When I picked the copies of what I am guessing was in the thousands of money order photocopies, I hugged my banker because heíd done us such a solid.

This occurred... I want to say within the last 5 days of our deadline for the audit to be finalized, and 2 of those days were on the weekend. That monday may have been a holiday too. Canít remember. What I do remember is this: It was stressful as hell, Jenn worked literally til 3 AM several times, Marie (her assistant) was booked like crazy, and there were others that were helping as well. I was pissed off because of the absurdity of it, and we almost didnít get a clean audit opinion because of something that was pretty stupid in my mind. That said, I get it. People need to have faith in the capital markets.

_______

And no, the manager doesnít have to do all the work that we did in terms of bookkeeping. They literally send a statement. It could consist of whatever they want it to, and be pretty simple. When audited, thatís pretty cut and dry for corporate. The auditors donít go through and audit the records of your property manager... what could take them 15 minutes to do could have taken us an hour, just to cover all our bases.

Monthly reporting for corporate also becomes easier with a manager. Re-read what I said about the cutoff dates in our software. If a tenant made a payment on their late rent, that could really throw things off, and would require adjustments to be made, and took time to figure out exactly where problems were happening.

This was not insignificant...

Also, a lot of the various entries that were so time consuming were from the FIX UP operations. NOT the rental ones. At one point, we had more than 30 active house renovations going on. Once our stuff was rented, our maintenance expenses were generally pretty low because of how we went about fixing the houses.

As Steve and I said, this make so much more sense in the way that it will be, going forward. Both in terms of the public entity, and me doing stuff privately. A fund setup makes sense as well.
« Last Edit: November 07, 2018, 07:10:40 PM by ragnarisapirate »

Spekulatius

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Re: SYTE - Enterprise Diversified
« Reply #587 on: November 07, 2018, 06:54:34 PM »
QuickBooks is not going to cut it for accounting /tracking when you are a public enterprise. I am no expert on this, but there is a reason why companies employ accountants Larger ones run ERP systems that integrate several functions and you have independent  auditors and internal controllers poking around stuff. Itís a whole different league to run the same outfit in a public company vs private.
To be a realist, one has to believe in miracles.

Schwab711

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Re: SYTE - Enterprise Diversified
« Reply #588 on: November 07, 2018, 07:03:22 PM »
I appreciate the full update from Steve. I bet going forward they will take this approach. Lesson learned.

I'm a bit confused about why the accounting burden is so much heavier as an SEC reporting entity. Mt Melrose has to do all the same tedious accounting work (many small purchases, depreciation schedules) to file its taxes no? They might only have to do it once a year, all at once, but is that really an improvement over doing it on an ongoing basis? It's still the same number of invoices for screws and bolts.

Any accountants around that could enlighten me?

The short answer is the management company isn't audited so they don't have these expenses

maybe4less

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Re: SYTE - Enterprise Diversified
« Reply #589 on: November 07, 2018, 09:30:20 PM »
A fund setup makes sense as well.

Does this mean you are contemplating an RE fund?