CPA costs to factor in

5 Replies

Hello everyone,

I am looking at creating an LLC (2 partners) to buy my first property in the US and trying to find out costs related to accounting and tax returns.

What is to be expected on this front ? I have a first offer telling me the tax return for a partnership will be 650USD and the accounting itself around 400USD... total about 1K per year.

Is this what is to be expected ? Is the accounting easy enough to do by oneself (is the ration time/effort to cost worth it ?) 

Thanks in advance

If you plan to invest in properties, proper legal entities are highly recommended (particularly with partnerships) in addition to adequate insurance. The costs vary depending on the specific accountant and the specific states in which you plan to invest. For CA, you would have $800 a year to the franchise tax board no matter how much or how little your business does. Then you have the set up costs, accounting costs and the tax return costs. Easily $2000 for CA. Other states don't have the $800 annual fee, so again, it all depends.

Regarding the partnership, I highly recommend you have an attorney draft the operating agreement!

Originally posted by @Christophe Noualhat :

Hello everyone,

I am looking at creating an LLC (2 partners) to buy my first property in the US and trying to find out costs related to accounting and tax returns.

What is to be expected on this front ? I have a first offer telling me the tax return for a partnership will be 650USD and the accounting itself around 400USD... total about 1K per year.

Is this what is to be expected ? Is the accounting easy enough to do by oneself (is the ration time/effort to cost worth it ?) 

Thanks in advance

 These are both reasonable quotes for the tax return and the accounting.  Unless you know how to do property accounting, I suggest you have an accountant do it.  I tend to quote a flat fee for this type of accounting, but if you've insisted on doing it yourself and I have to correct it, I charge by the hour to unravel your mess and redo it.  It's generally more cost effective to have an accountant do it right the first time.

Common mistakes: Not breaking the mortgage payment into PITI. (Correllary - not realizing that the loan principal isn't deductible). Not accounting for T&I paid out of the Escrow Acct. Not properly classifying Repairs & Maintenance vs Additional Capital Improvements. Not classifying payments to your subcontractors between parts and labor for easy of 1099 preparation. Many, many others. If you know how to do the above, then go for it.

Thanks both for your replies ! 

@Will Barnard : A lawyer will assist me and do all the legal stuff related to the LLC, my question was really related to the accounting part of the whole thing.

@Linda Weygant : It will be a 100% cash purchase and I will have a PM to manage the operations , repairs etc... so the PM should be able to give me the accounting properly done on whatever they have been doing on the property ? 

What is P&I ?

1K per year seems reasonnable to you ? these were costs I did not factor into my numbers when analysing properties, I was thinking it would be around 200-300$ no more...

Thanks

C

Originally posted by @Christophe Noualhat :


@Linda Weygant : It will be a 100% cash purchase and I will have a PM to manage the operations , repairs etc... so the PM should be able to give me the accounting properly done on whatever they have been doing on the property ? 

What is P&I ?

1K per year seems reasonnable to you ? these were costs I did not factor into my numbers when analysing properties, I was thinking it would be around 200-300$ no more...

Thanks

C

It depends on the property manager.  Many of them are very good at the day to day accounting for managing the property, but may not be so good at accounting for the original purchase or any rehabilitation of the property that may need to be done.  Those transactions can be fairly complex.

P&I is principle and interest on the mortgage loan.  Possibly not an issue if you are paying all cash and not taking a loan on the property.

Yes, $1,000 seems very reasonable to me.  While you might be able to shave a few hundred off, $200 - $300 is way too low.

Thanks @Linda Weygant , I should mention that the purchase will most likely be a turnkey, so rehabs would not be done once I purchase but before the purchase... I should only have to account for rents coming in, PM fees, insurance and any maintenance (and the first year should be maintenance free)...  

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