WS1673 - Doubling Gross Every Year | Highlights with Alex Moore

In this highlight show we feature our series with Alex Moore.

In this first episode of a three-part interview, former nurse, now real estate entrepreneur Alex Moore, talks about how she quit her 10-year nursing career and took the plunge into full-time real estate investing. She started Greywhale Capital from scratch and led the company to double year-over-year growth since. How did she do it? Listen now and get to know how Alex started and scaled a fast-growing real estate business.

Watch other episodes of this series with Alex Moore

Episode 1352: https://www.youtube.com/watch?v=KrolJpnjD7Q

Episode 1353: https://www.youtube.com/watch?v=YfRM4B1N62w

Episode 1354: https://youtu.be/3EkhRbMN2vo

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Transcript

0:00:02 - Whitney Sewell

This is your daily real estate syndication show. I'm your host, Whitney Sewell, today. We've packed a number of shows together to give you some highlights. I know you're gonna enjoy the show. Thank you for being with us today. 

Our guest today as an expert in this, he's helping lots of people do this well in their businesses. His name is Mark Kaplman. Mark brings 16 years of accounting operations real estate experience to the company Real Estate Accounting. Over the past 10 years, Mark has acquired greater than 15 million of real estate across 40 units, providing him with hands-on experience across all types of real estate transactions. He's also an active investor across numerous real estate deals as an LP. He and his wife, as you'll hear through the conversation, flipped numerous homes. His wife is also a CPA. So it's an interesting conversation. 

Just because we've been in the process, which you will hear more about in this conversation, of hiring a controller So we can gain more control at Life Rich Capital over this process and bring it in-house And really, so I can push it more right, i can drill in more to the process and take more third-party people out of the equation. However, mark, which you will hear us talk about, you know he does this third party and they do it. They seem to do it very well, and so I enjoyed this conversation, specifically because of what we are going through right now, as we speak, as we go back into tax season again And as we are pushing hard as we can to get those K-1s out on time this year for our investors, which is so important to us this year, as every year. But Mark's gonna help you to do that better today. 

Something that has become near and dear to my heart over this last year is property accounting. As exciting as that sounds to everyone, right, man, it needs to be exciting. I can just share from personal experience You better get excited about it if you're dealing with, you know, thousands of investors, right? It's so important, and it has become more and more important on our end, or for me personally, and our guest today is an expert in just that. Mark, welcome to the show. Hey, Whitney, thanks for having me. 

Yeah, honored to have you on. Looking forward to this conversation, as I've been in the hiring process now for months for a controller and really just to bring more control in-house right of this process. I'm looking forward to talking to you, Mark, about this and getting some tips and helping listeners to do a better job at this as well As we have just. We have overhauled this process over the last, i would say, six months now, as we've brought management in-house as well. And so, man, a lot of big changes and good changes, but really good ones for LifeBridge over the last six months to this degree. And so, mark, welcome to the show. Give the listeners a little more about your background. I know you've done a lot in real estate also And now you are hyper-focused in property accounting. What does that mean exactly And how did you get there? 

0:02:59 - Mark Kappelman

Yeah, I'll try to simplify it. The last I guess is 20 years now. It's seemed like we've been going at it, but a little less. 

But I went to college, wanted to be a business major, didn't know what I wanted to do, So I had some uncles that were CPAs that said, hey, go into accounting, get your CPA. You at least have this concrete designation coming out And it's the language of business, so you could go do anything after that. At least you have that concrete trait. So I'm like, ok. So I went and did that. I went to Arizona State, got my undergrad, got my master's And then, as I'm looking and trying to be now in public accounting at Ernst Young, i'm trying to be a partner And I get introduced this little book called Rich Dad, poor Dad, and I read this book And there's a quote in the book that says why climb the corporate ladder when you can own the ladder? That statement changed everything for me And I realized, oh man, maybe I'm going about this all wrong. And of course that book, he's all about real estate. So I just started diving into real estate And then I became convinced hey, i want to get into real estate. 

So fast forward about five years I'd gone from Ernst Young, actually went into PWC because I had moved to Chicago, my wife and I start flipping houses, and that was back. This was like 2013, when there was all those shows on TV of flip this house and make all sorts of profits flipping houses, and we were like, yeah, look, we're both accountants My wife actually is a CPA also And so we were like I think this could be our entrepreneurial kind of side hustle. And so we started doing that And what we quickly realized was we flipped the house, then we got a couple going and then we bought a six flat And all of a sudden this side hustle was kind of growing, and meanwhile I'm still working full time, as is she, and accounting became nights and weekends and early mornings And it was like man, i just don't have the time to do this. So we outsourced our own accounting two different times and it came back horrible. People didn't understand NOI, they didn't understand what to capitalize versus R&M, they didn't understand the presentation, gpr, all these things that I guess I was maybe taking for granted that I thought they should know. Communication wasn't good, and so that was kind of where we got the idea for and who's just focused on property accounting, who is just focused on real estate, started looking out there and couldn't really find anybody. 

Fast forward a couple of years, my now business partner who was a college roommate. He came to me and I started telling him about this problem. And he's like, well, let's just start a bookkeeping company. I'm like, really. And then he's like, well, if we're gonna start a bookkeeping company, we need to focus on real estate. And he's like, let's do it. And that was about four years ago And fast forward. Now we have over 100 accountants and we're running REA. 

0:05:47 - Whitney Sewell

Today Wow, over 100. Being frustrated about your own bookkeeping right, so having over 100 accountants employed, it's incredible. I love the growth mindset and striving to do it well, but then seeing a problem that you can fix right And seeing a niche really to dive into where you can create a ton of value for a lot of people and a great business for yourself, it's neat how you got there. So I guess I niche down on property level versus being able to say anybody any business, or do you? 

0:06:19 - Mark Kappelman

Just if I take a step back and just about business and there's those cliche lines, but I really like it because the riches are in the niches. But it's really about even when I was at PWC in Ertson Young, they wanted us all to specialize. If they wanted you to specialize in oil and gas, you could be an oil and gas guy or girl, because it's the same issue over and over again. You become a subject matter expert and you become super valuable to the layman client that doesn't know and hasn't seen these same issues. So it became obvious that we said hey look, let's become the best property accountants possible, the huge industry we love, real estate. 

I didn't really get into my background but a big reason why we always thought we would have a competitive advantage was that in my process of flipping some houses and doing these deals I have syndicated, I have raised money, I've done operating agreements and done all these different things and managed property. So I not only understand how to do the accounting debits and credits, assets, liabilities, all that stuff but I've actually operated. So it becomes a lot easier for us to empathize with our clients. 

0:07:33 - Whitney Sewell

Yeah, for sure. Are there specific areas of the business in accounting bookkeeping that you handle for clients, or how was that with clients? 

0:07:43 - Mark Kappelman

Yeah, yeah, yeah, good question. So accounting bookkeeping can be broad. There's T1s, there's 1099s, there's a host of different things generally speaking, and we support both those. I'll get into that. But really we focus on we kind of break it down to three key areas, which is bank recs, ap and the financial statement closed process. So bank recs are just what it sounds. 

Every single month you need to make sure that all the activity that happened to your bank is reflected in your accounting system. If you're a third party property manager, your local state real estate Department of Real Estate, dre, is gonna require it. If they ever come out at you, it's gonna send me your bank recs. That's the first thing they're gonna ask you. We do that for 99.9% of our clients. You literally have one client where we don't do bank recs, so we always do bank recs. The next area is AP, and so that is all the bills that your vendors are sending you. Maintenance could be anything cleaning. Those bills need to get added into the system and they need to get paid, and so that's a big area of what we do. 

And then finally, it's just the financial statement closed process And maybe we're gonna get into it, but that looks a lot different for the type of client we're working for. 

If it's an owner operator that has a bunch of LPs, that reporting package might be a P&L, a balance sheet and a cash flow compared to a pro forma, because now we're reporting out to LPs and people wanna know hey, you said you were gonna do this, what did we do Versus? 

If you're a third party manager and you're managing properties for John Doe or Jane Doe that owns a couple of single family homes, that's gonna be an owner statement that says beginning cash balance, rents received expenses distribution, ending cash balance. And so that's kinda how we see the world of accounting, ap bankrax or reporting. The one thing that I guess I didn't say was accounts receivable and that's all the tenant charges And the reason I didn't say that is really at this point and I'd be curious to know in your business, whitney. But most of our clients at this point, greater than 90% of their tenants, are paying online through the portal, and then the actual process of recording the accounts receivable and the tenant receipt and the deposit in the bank is Automated by the software. It'll only become super manual if you've got the people that are still sending you in checks And I see you smiling. 

0:10:11 - Whitney Sewell

I would say 90% and if it's, you know that, 10%, as we're still pushing to help them to do it electronically. Right It just, man takes. I guess work, i mean for everybody involved in that process. And then there's so many other people involved. 

0:10:27 - Mark Kappelman

Yeah, just by that one thing being manual right instead of electronics, If people are sending in checks and that becomes part of the bank rec process. but bank recs, ap and reporting are really the big Areas that require a ton of time, i would say yeah, that's helpful as you break those things down, because each of those things have to be thought about right. 

0:10:49 - Whitney Sewell

Who's responsible for each of those things? if you have a business number of employees, you're gonna have all those things to deal with right one way or the other. And what I do know about Numerous parts of our business is that at one time or another, my business partners have had my business partner, and I've had to do everything in the business, but anything that we are not an expert in, and I just try to quickly outsource it right, or I hire somebody That's an expert, or an expert in that thing, or that's what. That's how we've grown as fast. I think you know one of many reasons that we have is that, you know, we've just tried to find experts in places how we are not as fast as possible, and this is one of those areas that we've never had any expertise in, right and and don't claim to, but I know the importance of it. You know I'm not a CPA and some of this stuff. You know you even list these things off and I'm like, oh boy, yeah, i need, yeah, got it. So I want to dive in though, too, because because we've done this as well. You know it's like benefits of outsourcing versus hiring in-house, and let's talk through that a little bit, because that's and something we've been dealing with and I'll share with the listeners. I know we have a number of our investors that listen to the show as well, and so I'll say, hey, life bridge has has. 

Just, we have worked so hard to try to get these K ones out on time this year Because we've not we've not had the best success with that the last couple years and and I know that is a major pain point to many of our Investors but from one reason or the other and some of it completely out of our control However, it's still my responsibility We're trying to improve that process. One way, you know, i mean actually we've made many strides. It's already this year. One big way we've done that this year is to bring management in-house, which has allowed us to have so much better, cleaner books right from the very beginning, that it's off where we've, i mean all these things, all these processes that we never had before But that are giving us so much better books, faster, cleaner, all these things like you're talking about, even from that process, we're being able to automate so much and it's done faster. But I would love to hear your opinion outsourcing versus hiring and I'm happy to share. You know what we've done and are doing as well. 

0:12:59 - Mark Kappelman

Yeah, we get this question a lot And so I love this question and there's pros and cons to both. Right, i'm not just trying to make this so one-sided. So few things. One is speed of implementation. If you have an accountant quit or you're the owner operator, entrepreneur, that's just doing all the work and you need to make a change. If you call REA, we can be up and running and working on your account in days, not weeks. Right. If you go with in sourcing, you need to post a job, you need to interview people, you need to buy a laptop. 

You're telling me that we need to. We need to do all these different things and I know you said earlier You're trying to hire a controller. So that's a process. Versus you hire us, we have a call, we can get up and running very quickly Because, like I said, we're hiring four people around. 

If I didn't say that Scalability is one of the other really big ones that our clients that we've been working with a while Just love with us just because you know, they just have the confidence because we're growing at the rate We're growing. If they are at 300 units making that up and they buy a 200 unit building, they don't need to go hire another accountant. They can just say hey, guys, we just added this building. Can you allocate more staff to the team, more hours to the account each month? Yep, no problem. This is all we do. Send us the closing statement and that kind of dovetails into kind of some of the expertise, which would be what I always say to people is Property managers, owner operators, you don't need accountants, you need accounting outcomes, you need timely bank rex, need the financials done and you need all your bills inputted, and that's kind of where we Excel. 

A couple other things I would say is. There's no single point of failure. So if you hire a person in house and Let's say that's mark, if mark gets sick or mark goes on vacation, the accounting stops, whereas if you're working with us, we have almost always two, if not three betting on the size of the client four different people working on it. So it's highly unlikely, unless we've got a company vacation or a holiday, that all people are gonna be out. So the accounting kind of always keeps going. There's no single point of failure. If somebody missed an email because multiple people are working on the account, turnovers another big one. If you have an accountant in-house and that person quits, now all of a sudden you have to go out and rehire, retrain this person. Whereas on our side, since we have multiple people working on your accounting, if one person decides to leave REA, we've got all the documentation. We record every call with our clients, we take copious notes and it's pretty easy for us to just kind of slot somebody in and the client doesn't really feel that turnover. 

And then I would just say, generally speaking, we're cheaper because we're 1099 contractors. So there's no payroll taxes, there's no laptop, there's no unemployment. If for some reason you have to fire us. There's just we usually say it's about 30% cheaper to outsource versus in-source. The pushback maybe we get is well, hey, we want you just working on our account or we wanna be able to walk down the hall and just make sure when we call you're gonna pick up the phone. 

We pride ourselves on quick email response times. Everybody's got a cell phone email signature. We all pick up the phone. So I mean that to me and those are kind of the big benefits to outsourcing. And of course you can always find a rockstar in-house. But I mean, as you probably know and I don't even know what software you use each one of these softwares are very specific. They all have a bunch of intricacies and you gotta go find somebody that understands that software at a deep level and can play all the positions of adding a bill which is the entry level stuff to recording a purchase and sale in a 1031 and that stuff gets super complex And those are not easy people to find. 

0:16:53 - Whitney Sewell

That's interesting. You say you like a more junior or senior level accounting or accountant And I was gonna ask you, where would outsourcing typically play? Would it be more junior, Could it be senior? And then you have somebody junior in-house. I don't. it would seem like an odd scenario, but what does that typically look like? 

0:17:12 - Mark Kappelman

Yeah, i mean, look, we bring all of those to the engagement. So the way we're staffed in-house is we've got a team of bookkeepers that are adding the bills and recifying the banks. We've got an account manager that's reviewing the bookkeepers work and being the primary point of contact with the client. And then we have on our staff controllers that were controllers previously at property management companies or developers or syndicators that now work for us, and the differences is they're allocated a small amount of time to each client each month, because most clients don't need a full-time controller. 

Maybe you guys are different, you guys are quite large, but like a lot of clients, they only need a controller for a few hours a month. They needed just somebody to review the financials to make sure that, like, it passes the sniff test of there's not something glaringly wrong with the P&L or the balance sheet, and that's where this controller CPA accountants with 10 plus years experience come into play, and so that's kind of how we staff the engagement. So we have clients where we play the junior and the senior role. We have clients where we play the junior role, which was the example I gave before. We have other clients where they've got a junior person where we are actually the senior person on the account. So we can kind of play either spot. 

0:18:34 - Whitney Sewell

Hopefully that made sense. I know we'll probably get into some more of this, but I wanted to ask you what the communication looks like. You know you're working with that team maybe you're the junior person or the senior, either one But what does communication look like? That's been a difficulty for us, you know, with, say, third party bookkeepers, i know, and even if they do a great job and they have a system or a portal that they're putting questions into, it's like It's sometimes difficult for us to get back to them. Right, how do you all handle that, and maybe how you've seen the most successful clients handle that? 

0:19:08 - Mark Kappelman

Yep, i guess let's just take a step back. If we were engaged with LifeBridge, for example, we'd have an accounting email set up called LifeBridgereaco And we'd say hey, guys, send all of your bills that you want us to get into the system, forward to them to that system. If you have any owner questions that come in, forward them to us, we'll answer those questions. That's kind of the main gathering spot for the questions is this inbox. And then we tell people hey, look, we're going to reply in 24 hours or less. Sometimes it's 48, but if it's an urgent item, put urgent in the email and we'll get back to you within 24 hours. Right, that's kind of like the primary way we communicate. But then, addition to that, if it's a big client with a big operation, we're going to have a weekly call, weekly touch point. I always just say, hey, look, if we were an in-house accountant you'd probably have a weekly meeting with your accountant. It's no different, we're your accountant, let's have a weekly meeting. 

Other clients that don't need that. That might be a little smaller. We might do it once every two weeks. Once we get into a great rhythm, clients might say hey, i don't want to do calls, we don't need to do calls Get the bank recs done, get the bills in. Let's get the reporting done out by the 10th And let's do a call, maybe once a month, or ad hoc calls Just when we have a pain point. That's really how we handle communication. Then, like I said before, of course there's always those situations where you want to pick up the phone or, if you're in an office, you want to walk down the hall and talk to Mark or Whitney. In that case we're not in your office, but just we give all of our phone numbers to the team. Give us a call. If you don't answer, we'll call you right back And if you're trying to get ahold of your accountant in-house, Yeah, no, that's helpful. 

0:20:50 - Whitney Sewell

I like what you said too. It's like if you have somebody in-house, you're probably going to have a weekly meeting with them anyway, Correct? And so why not go ahead and have that, even if the person is outsourced, versus being somebody hired on the team directly? 

0:21:04 - Mark Kappelman

Whitney, i just, i guess, curious, if you don't mind me asking, how does that kind of compare to your cadence with how you guys are running your accounting today? 

0:21:13 - Whitney Sewell

Yeah, you know. So we've had a third party bookkeeper for a few years now and they've worked hard for us. I think they've done a good job. I think it's been, you know, i think, the call. As I was thinking about that, we've had different types of call. I knew early on we also had a pretty frequent call and then we've kind of pulled back from that. However, i do believe that that would almost help hold some accountability to our team right By having that call or if there's outstanding questions of what is this transaction or what is this supposed to be, that that right there on the spot that they could just ask us. 

Yeah, that probably would have been helpful. You know where I may not take the time or have the time every day to go in there and answer those questions. But hey, if we have that weekly call we can knock out all those questions in 10 minutes. 

0:22:01 - Mark Kappelman

Yeah, exactly What is this? 

0:22:03 - Whitney Sewell

I just, you know and me or somebody on the team, just spout out what it is and they just knock through it right then right. And so that's where I think, like that, that call continually, at least for us, would be helpful, where we put, like you said, we kind of pulled back from that when we felt like, ok, we got a good rhythm, but then I feel like it kind of hurt us probably a little bit on, not you know, keeping up with all their questions at times, but then it was more for us. Some of the K-1 issues has been on the, you know, the CPA firm side as well. Not as much keeping, but then maybe you speak to this the communication between our third party bookkeeper and our CPA firm at the time, who are not our CPA firm now I'll just say, for investors that listen, but you know the communication between those two. 

I think it was difficult, right, and so how does how is that handled? You know I'll say I'm on CPA that I want to use, but I'm using you all for bookkeeping. What does that look like? 

0:23:01 - Mark Kappelman

Yeah, that's a good question, And let me add just one more thing and then I'll come back to that, which is because you just sparked the thought is the communication works best when there's somebody internally that's deemed the accounting point of contact, right, the POC. If it's that controller we're working for, then it's kind of obvious. If it's a couple owners that have just outsourced it, it really helps if one person just takes the lead And if they don't know the answer, they'll go around the company and figure out the answer, because if nobody owns it you know, i was always taught if there's more than one owner, nobody owns it. And so I would just say I think you know the accountability piece you're talking about, but when there's one designated person, that's what we always kind of shoot for in our onboarding. Now, in terms of taxes, what I would say is and we've talked about launching a tax team group offering It's just a very different business, so we haven't done it yet, but what we do do is at this point we've got a couple CPA relationships that we refer people to, just to people that have done good work for our clients in the past. 

So I'd be happy to make a referral for you if you're actually in market. If you're not, don't worry about it. But then we've got a really good relationship with these organizations So it's really easy for them just to email us directly Hey, we need the trial balances. Hey, what is this? Hey, etc. Etc. Etc. You know where I'm going. Of course, if it's a new CPA, then we just have to be responsive and good people. You know, i used to work at CPA firms, so I understand the process and really get it, and our team does too. But obviously it works best when we continue to work with these kind of groups that we've done a lot of work with. 

0:24:40 - Whitney Sewell

Thank you for being with us again today. I hope that you have learned a lot from the show. Don't forget to like and subscribe. I hope you're telling your friends about the real estate syndication show and how they can also build wealth in real estate. You can also go to livebridgecapitalcom and start investing today.