I purchased my first buy an hold investment property last year. I'm wondering is there a real difference when it comes to CPA'S. Is there really a huge benefit to having an astute CPA on my team opposed to going to a box company like H&R Block? Even from CPA to CPA is there one that can master the manipulation of tax loop holes and the construction of creative tax strategies more than the next? I mean aren't they all following the same tax law? I'm paralyzingl myself trying to analyze this stuff because I feel like I need to find the guy who knows to tell me to plant a lemon plant in my backyard so I can claim my property as an agricultural production facility and get a million dollar tax benefit for that year. Does anyone have any suggestions on questions to ask when interviewing a CPA? I'm looking for someone patient, will put tax language into dummy terms, works with investors or invest themselves, can give recommend sources of simple education on what I can do from a tax standpoint to improve my business's financial efficiency.
There's a HUGE difference in CPAs. Just like there is in attorneys, contractors, inspectors, and any profession.
And, the difference in CPAs can mean thousands of dollars (even hundreds of thousands) to you. No, H&R Block and the box store accountants are not sufficiently educated to handle real estate investing (and they're probably not CPAs). There are more tax codes than any one human being could ever know, much less understand, so you want someone who specializes in what you do - no matter what that is. Tax strategy for a bakery or dry cleaner is not anything like tax strategy for real estate investors.
That being said, perhaps the best places to start looking would be:
1. ask real estate attorneys for referrals
2. ask around at real estate investor groups
And know that, if you stay in this business, you will more than likely change CPAs as your business and experience grows.
You're asking good questions. Tax strategy and how you structure your corporation makes all the difference in how much of the money that make you becomes money you are ultimately able to keep.
Hey @Troy Walcott
I do think that all investors should strongly consider hiring a competent CPA/accountant well versed in real estate taxation. Having a solid CPA is going to be valuable to your investing career.
I've had clients whose returns I've reviewed that were previously prepared by big box tax prep places where the quick and cheap tax prep job ends up costing them literally thousands of dollars in mistakes.
Feel free to ask any questions you may have.
I don't think 1 buy and hold SFR is really all that technical and probably doesn't require a brilliant CPA. As your business grows you may find the need for more tax planning compared to preparation. Generally speaking my experience tells me the larger the firm and higher the bill rate the more competent the accountant. The bigger firms (think Big 4) devote massive amounts of resources into training their employees and as national firms devote time to thought leadership in the industry. Also, the accountants tend to be more well educated (more likely to have obtained a masters in acctg) compared to middle size firms as these jobs are highly selective and recruit from top universities. You can expect to pay anywhere from 300/hr for newer staff (under supervision of a partner) or as much as 1,000/hr for direct access to a partner. That being said there are many sole proprietors that are ex Big-4 and may serve you well for less cost. I am probably biased coming from Big-4 but have worked with tons of accountants in the entire vertical of big and small firms and those are my general observations.
My experience is that you need a CPA and the big houses like H&R Block just fill out the forms and do not give you advise. You need a CPA who has the experience to help you structure your business aggressively, who can represent you if you are audited, and who knows what you can and shouldn't do to avoid audits. When you start a business you need to know what you can write off. Don't start doing things that are illegal or unethical but do get all you are deserved. A CPA is like a Doctor or a lawyer - you wouldn't go to a poor Doctor or a half time lawyer.
Check out Amanda Han who is active on BP she does excellent blog posts.
Thanks for the advise everyone. That's what I was thinking there is no secret sauce for finding a CPA ZEN MASTER. I'm going to take some recommendations from some other investors and agents, pull some good interview questions from online and start interviewing potential candidates.
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