Does a newbie need a RE focused CPA up front?

Question

Looking to by one or two LTR props prior to year-end.  Working on building my team around me and trying to decide if a RE focused CPA is needed for "Tax Strategy" at this point.  We are W-2 employees with pretty straightforward tax filing at this point.  Eager to learn about RE tax write-offs, how to document/keep up with expenses, what can be written off, etc. at this point...However, the 3 RE focused CPA's I've visited with want $5,000 annually for a couple hour sessions a year and a few recorded classes and other resources, which does not include tax preparation.  I'm having a hard time justifying this cost when I'm only getting started.  Thoughts?  Recommendations?  Any resources out there that anyone highly recommends?  TIA!

Nathan Gesner · Answer

I use a professional CPA firm to handle my taxes and they are great with strategies. I have five LLCs, a holding company, and a trust. It costs less than $5,000 a year and I spend more than a couple hours with them.

Nathan Gesner · Answer

It's a local firm.

Sarita Scherpereel · Answer

For your first 1-2 properties it might not make sense to go to a Tax Strategist. After that time it might make sense. It really depends on what types of rentals you hope to keep, if you're house hacking and flipping, etc. Different strategies might make it more complicated for a basic CPA. But if it's as straight forward as it sounds than I don't think so.

Peter W. · Answer

CPAs are supposed to save you money, not cost you money. The IRS has lots information on how to fill out your taxes. The most important thing right now is developing good bookkeeping skills—which your CPA won’t be doing for you.

Markus Shobe · Answer

$5,000 for a couple of hours per year is absurd. The best way to keep up with expenses/receipts is to use something like google drive or dropbox. If you are using accounting software attach the receipts to the transactions as well. Just keep reading on bigger pockets, their is a lot of good information on here.

Mitch Messer · Answer

@Ashley Campbell You are wise to engage an accountant who understands real estate and who has a significant percentage of RE investor clients.

That said, it shouldn't cost anywhere near $5K for you to get answers to basic questions!

The key to having great financial systems is the setup and systems: If you get everything structured properly up front, you avoid most of the ugly problems many RE investors face later on.

I'm not an accountant nor a bookkeeper, but I have great recommendations for both!

If you reach out to me (my BP profile explains how), I'll gladly share!

Bob S. · Answer

No, you do not even have a deal yet. You do not need a CPA, do one or two 1st, Your 10 months to a year away from doing anything,

Good luck

Basit Siddiqi · Answer

It is hard to justify an expense that would eat up all of a majority of your cash-flow.An investor doesn't necessarily need 'any' professional but it really depends on your knowledge/amount of time you have.For example, technically, most people may not need a painter as the tools are available to them in Home Depot or most stores. However, a painter will know how to do the job efficiently and effectively. It also saves you the time from having to do the task so you can have time to do other things that generate a higher revenue / per hour.

V.G Jason · Answer

That's great. Who do you use?

Bonnie Low · Answer

I don't think you need one before you start buying investment real estate, but as soon as you do, you're absolutely going to want one who specifically has a real estate background. Most CPA will say they work with investors who own real estate all the time and that is probably technically true because so many people do have one or two properties, but that doesn't mean they treat their properties like investors, nor do those CPAs necessarily know how to take advantage of real estate tax rules. So find one who specifically works with real estate investors and can help you maximize your taxes.

Does a newbie need a RE focused CPA up front?

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