Got my First property. Do I need a REI Accountant?

Question

I have just completed my first deal. Yay. I purchased a legal duplex which I am hoping to make into a triplex (move some walls, add a kitchen, separate electrical meters, etc.). Deal closes in early July; the transformation may take 6 months or so (with renos & red tape from the municipality). The plan is to purchase more  down the road. I already have an accountant for my roofing contracting company Actually he only does my year end stuff & provides me with my financial statements for tax purposes & that's about it.  His services only cost me about $350 per year. I know that's not much.

My lawyer said that without a doubt he wants us to set up the new business as a corporation.

My Question is: Do I need an accountant specifically geared toward Real Estate Investment? or can I just use my regular accountant?

As well how much should I expect to pay for an accountant for my REI business? And what should I expect of him/her?

FYI we are in southern Ontario.

Dmitriy Fomichenko · Answer

Ralph, you should use an accountant who is not only specializing working with real estate investors, but how owns rentals himself as well. There are many intricacies related to rentals that regular accountant may not be familiar with.

Account Closed · Answer

@Ralph Noack

I'd recommend you pick up a copy of Legal, Tax, and Accounting Strategies for the Canadian Real Estate Investor... it is a goldmine of information on business structures and accounting.

I personally have a holding company (HoldCo) that owns both my day-to-day business (OpCo) and my real estate company (RealCo).  RealCo owns the property. This is a very efficient tax structure ... you can use profits from your OpCo (your roofing company) to purchase property instead of using after-tax dollars.  Have a read and welcome to the club :)

Ralph Noack · Answer

Thanks Chris. I'll look into it.

Ralph Noack · Answer

I have not specifically checked for lead or asbestos. The house is over 100 yrs old. I had a home inspection done last week, and there was no specific information given about lead or asbestos present in the house.  I would assume that some of the original walls & trim would have lead in the paint. (This however does not deal with my Accountant question.)

Stephen Masek · Answer

It is not rocket science.  However, you need to keep good records.  I see that you are in Canada.  We are in the USA.  We have a simple WordPerfect table for each house, with the columns corresponding to the lines on IRS Form 1040 Schedule E.  We have a computer directory for each house, plus a paper file.

Have you had the building checked for asbestos and lead?  Either could lead to expensive change orders and delays, or worse.

Got my First property. Do I need a REI Accountant?

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