and if you spend it instead or use it for ANY other purpose you have just stolen from the property. Transfer all Security Deposits directly into this account.. and absolutely discourage you from taking cash out of ANY Commercial Property at the Close!
That is because all of this Money has a dedicated purpose.
Reserves Account always keep your reserve account topped up (we recommend at least one month of operating expenses)...
We recommend you raise enough money from investors to fill the Reserve Account at the Close of your Purchase . This is your rainy day fund and can be an interest bearing account as well.
We strongly disagree .
We know of other Commercial Property Educators who advise you take this money at the close and use it to purchase additional Property.
Pro rations and Credits . you will take with you several different piles of cash you don t see in a Residential Real Estate Purchase....
EXAMPLE Link Clamp2:
If you buy the property in the middle of the month and the Seller has already collected the rent you will get a prorated share of the rent collected ..
Always use this cash wisely and Only for its intended purposes. leave it set aside in your operational account for use when the bills come due. don t steal from your own Property!
.. This cash is spoken for... Set up an interest bearing account for them and transfer the appropriate amount of money directly from the closing table.
If you buy the Property on July 1st you will receive a credit from the Seller for 1/2 the year s Property Taxes..
When this occurs your only recourse will be to ask your investors for more money .
They come in the form of
Tenant Security Deposits
And in a larger Property these can easily total # hundreds of thousands of dollars. simply transfer all Closing Table funds into the appropriate account. AND there is nothing worse for your reputation as a Project Sponsor than a quick Capital Call.
With these accounts set up ..
Are money already set aside for operational expenses and need to be kept off to the side until these expenses are actually due. They crow about Cash Back at the Close as a major reason to move up to Commercial Property....
Are to be returned to the Tenants when they move out..
Tenant Security Deposits . in this case, 1/2 of it.. you are literally Stealing it from the Property and your Investors.
If you siphon off any of these funds for yourself or other investments, you are setting yourself up to run short of operational cash very quickly..When you purchase a Commercial Property and leave the Closing Table . this is called a Capital Call.....
We recommend you open three bank accounts when you take over ownership
Operations Account for the monthly in and out of income and expenses
Security Deposit Account best if it is interest bearing. This money has been generated this month to pay next month s bills .... this way you will not need to make a Capital Call if the furnace goes out in the first 6 months of your ownership. Taking this money can and will sabotage the success of your investment..
If you use this money for anything other than its intended purpose in this Property .
AND whatever you do . This money is dedicated to paying the taxes when they are due
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