Business Management

8 Ways to Vet a CPA for Your Real Estate Investing Business

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accountant

Even though it may sound like a simple undertaking, vetting a good certified public accountant for your real estate investing business takes a lot of research and effort.

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The best certified public accountant (CPA) advice for investors usually comes from one who either invests themselves in real estate (RE) or has many clients who do. These types of CPAs may also hold certified financial planning (CFP) certifications.

Although most CPAs are knowledgeable about taxes in general and can sometimes assist investors in getting the most tax advantages for their real estate investments, CPAs who invest in RE themselves do have a great advantage in firsthand knowledge of investing. (Nothing in life ever compares to the realities of being in a field yourself!)

Legalities in the RE investing field also abound, and a great source for RE advice about finding a good RE CPA or CFP can be an attorney who also invests in RE. There are more of these than one would imagine.

Since all investors should have a knowledgeable RE attorney on their team prior to investing, asking specifically for the name of their RE CPA (if an attorney is also an investor) is a great way to find a winning candidate. RE attorneys and RE CPAs seem to go together like peanut butter and jelly and do make referrals to each other.

Related: 4 Tax Strategies Smart Investors Consider Implementing at Year-End

Just picking a name online when choosing an RE CPA is worst-case scenario. Although proficient in taxes generally, proficiency in RE tax and the types of write-offs that are currently in place for investors can save you thousands of dollars per year.

Finding a good real estate CPA can also occur at a meetup event. CPAs who specialize in real estate taxes sometimes attend—or even present—at some of these. Either way, making sure that the CPA is knowledgeable may take research into previous clients.

A large RE clientele that is happy with results shows knowledge. The more years of experience and more real estate investments they have themselves does indeed make them more knowledgeable, too. Five years or more of significant hands-on experience in RE investing by a CPA or at least five years of assisting real estate investors save on their taxes is a great way to determine if you should consider speaking with this CPA.

Tax laws also change frequently, so it is important to have someone who stays current on the latest tax changes. A good CPA should provide a tax strategy—not just tax filing!

Most individuals also don’t realize that attorneys may be heavily invested in RE themselves.

spreadsheet, calculator and magnifying glass on desktop

Qualities of a Great CPA

A case in point: Joe, a local attorney in N.J., specializes in real estate law. He also offers power of attorney (POA) services to his clients who have the need for someone to handle their holdings and affairs. He has been a real estate attorney for over 30 years, and as a result, started investing in B to C+ Class properties as they came up for sale over the years. Joe is wise enough to know he can’t know everything, so he has been using the same CPA, Frank, for almost all of the 30 years he’s been in the business.

Frank has been a CPA also for over 30 years, and they met many years ago at a meetup. Frank, the CPA, has always actively invested in real estate. He purchases valuable land in good locations and upsells it. Frank only specializes in real estate tax advice, but he is also a CFP now and does offer estate planning and advice to clients on top of the tax advice he gives as a CPA.

To say these two are a dynamic duo would be an understatement! Joe the attorney owns dozens of multifamily units, while Frank the accountant owns acres and acres of prime land. Both buy and sell religiously, relying on each other’s input and advice and assisting clients with all aspects of successful real estate investing—both tax-wise and with the legalities.

Joe the attorney's clients are only real estate investors, and Frank the CPA is strictly a B2B real estate CPA and CFP. Both can assist clients with managing their overall financial affairs and planning. Both really enjoy helping others and have a keen interest in real estate and investing. This part of the equation should also be taken into consideration when choosing a good real estate investor- friendly CPA.

Related: I’m Over Paying Taxes, So Here’s How I Plan to Significantly (and Legally) Lower My Liability

A good knowledge of taxes and laws is important of course, but a great enjoyment and interest in the field will make a CPA “go the extra mile.” If a CPA is an investor themselves, they do often throw themselves into the field with complete abandon and the clients they have benefit from this interest.

Joe and Frank also chat often and alert each other to possible sales that are upcoming that would be of interest. Joe the attorney is privy to off-market deals, since he does have access to public records through courthouse visits. Both have clients for whom they manage all affairs, so both know beforehand when sales will be occurring.

Because they understand that the tax laws and legalities of real estate investing change rapidly, they also attend meetups and take courses on updates in the law, estate management, and of course, real estate tax issues.

They are also both enjoyable and courteous and make clients comfortable immediately. They both stay in touch with their clients, sending birthday and holiday cards.

interview

How to Find a Top-Notch Real Estate CPA

Finding a knowledgeable RE CPA is more than just reaching out for immediate tax assistance to anyone. It’s a process that takes time and work, as there are many factors to consider. But it is important to do to ensure you’re working with the right tax strategist—one who understands the intricacies of various real estate investing strategies.

Now it does seem like a whole lot of info to process to properly vet a real estate CPA, so let’s do a quick recap:

  1. The most crucial factor is the amount of knowledge and experience a CPA has in the real estate field. The longer they’ve been in the business, the greater the knowledge of real estate investing tax strategies. If someone’s a novice to real estate tax strategies, this is a big red flag. Investors should be careful! So remember, the more years, the better!
  2. Get recommendations from either your real estate attorney or other investors who use a real estate-savvy CPA. Going to meetups is a good way to ascertain what other investors are saying about various CPAs.
  3. The more credentials, the better. A CPA who is also a CFP and in charge of long-term financial planning for clients is a step up because of the added requirements for this certification. Note: While this is not common and not a required combination of licenses to have, it is always nice to find someone who has both. Having an enrolled agent (EA) registration is also nice but not a required combination of licenses to have.
  4. Make sure to schedule several interviews with potential CPAs and ask for references. Any good CPA will not take offense at this and will readily agree to these.
  5. Good CPAs will provide tax strategies, not just tax filing. Having a tax strategy can save money for years to come!
  6. Do not make a hasty decision. Have a list of CPAs you are considering and take your time choosing the best one for your tax needs. Although personality is not a major consideration, trust is. You will be bestowing them with the power to assist you in saving money on taxes, so having trust in your CPA can be crucial. Any CPA who does not make you comfortable should be avoided.
  7. A CPA can be a tax attorney, as well. This is less common but a very beneficial combination also.
  8. Any CPA who goes to meetups to expand his real estate knowledge and enhance his tax experience by engaging with real estate investors is also a good choice. It shows a keen interest in real estate as a field that he or she may want to stay current with.

Overall, like every other best practice in real estate investing, vetting CPAs and choosing the right one is a major decision. Do your homework, establish relationships, check backgrounds, ask for references, and then choose the right professional to support you in achieving your real estate investing goals.

What else should investors look for in a CPA? What other methods of finding these individuals would you recommend?

Leave your advice below!

Alina is the founder and managing partner of SAMO Financial, a boutique private equity firm specializing in helping a select group of people passively i...
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    Vishey Singh from SURREY
    Replied 8 months ago
    very nice post
    Alina Trigub Rental Property Investor from Glen Rock, NJ
    Replied 8 months ago
    Thank you Vishey!
    Redha Laafia Rental Property Investor from Fort Lauderdale, FL
    Replied 8 months ago
    Love it Alina! You are absolutely right, very important piece of the puzzle. Thanks for this post
    Alina Trigub Rental Property Investor from Glen Rock, NJ
    Replied 8 months ago
    Redha, Great to "see" you on BP! My pleasure to help!
    John Murray from Portland, Oregon
    Replied 8 months ago
    The taxpayer should know a few things before entering into the RI biz. AGI and how it affects your tax bracket. Rental schedules and how it affects your tax bracket. Cost of repairs vs capital improvements and how it affects your tax bracket (that 2% or $10,000 thing). Capital gains and how it affects your tax bracket (get that baseline as high as possible!). The mortal sin of tax accounting, earned income and how it affects your tax bracket. Finding a CPA should be easy after you understand how the tax system works. Understanding Earned, Passive, Portfolio and Capital Gains income is a great start.
    Alina Trigub Rental Property Investor from Glen Rock, NJ
    Replied 7 months ago
    John, I wish every investor was following your advise as it's a priceless one!
    Lynn Behm from West Jordan, Utah
    Replied 7 months ago
    Something to note: A CPA is licensed by a State. An enrolled agent (EA) is licensed by the Treasury Department of the USA. If you have holdings in more than one state, does it make sense to have an EA?
    Alina Trigub Rental Property Investor from Glen Rock, NJ
    Replied 7 months ago
    Lynn, I don't think it matters much as with the current technology, most tax accountants regardless of their licensing are preparing tax returns nationwide. What's more important is to have a CPA that understands your business and can assist you in maximizing your returns. Note, this is only my opinion and not an advice.