Why would I ever use an accountant?

27 Replies

Hello BP, I know that accountants are extremely valuable people to have in your circle, but I find outrageous titles grab people’s attention. When do you like to meet with your accountant and how frequently to you see them? How many properties would you have to have before an accountant is a must have for saving on taxes? If I am living in the property I intend to rent can I still right off improvements and costs of purchasing the property? Any information would be helpful! Thanks!

The accountant only becomes necessary when you can no longer handle your own taxes or you have special situations that you are unsure about the law.  Most people will see an accountant once per year in March ish once they have received all tax documents.

As far as living in a property and writing things off that is one of those special situations where you might want to talk to an accountant.  You cannot write off expenses for the portion you are living in.  I do not know about the costs of purchase though, you might talk to an accountant and get answers to your questions without having them do your taxes.

@Alec McGinn I guess it depends on a bit of who you are personality wise. I’m all about paying people to do things They’re better at then me, so I can focus on what I’m best at.

So I pay my account around 600 bucks to file my taxes. If I used turbo tax it’d take hours of my time and save me a couple hundred bucks. Not worth it for me.

I don’t have scheduled sit downs with my cpa. I email him questions as I have them but other than that, that’s about it. He’s in another state so it’s all done remotely.

I’ve got a few rentals and really none of this changes unless I join a partnership or something like that.

@Alec McGinn You never need an accountant/lawyer/doctor till it's too late. A good practitioner can help you avoid pitfalls and not just get you out of trouble. 

Ideally, you should consult with an accountant before you make an investment decision not after. You don't need multiple properties. Often times, the good ones will also introduce you to other folks in your community - bankers, lenders, investors, brokers, etc.

When I get new clients that have previously prepared their own tax returns, I routinely find that they had been making mistakes or missing deductions that would have saved them more in taxes than the fees I charge them (sometimes by several times).  I am biased, but I think a good CPA is able to create value for investors that goes beyond making sure the tax return is prepared correctly.  A good CPA is able to help investors find the optimal structure for their business and transactions to work for their goals and minimize taxes.

Originally posted by @Aaron K. :

The accountant only becomes necessary when you can no longer handle your own taxes or you have special situations that you are unsure about the law.  

Pet peeve alert! This is the mentality that slows down a lot of investors. I'm not only talking about hiring an accountant. Just because you can handle something does not mean you should

Other people may do it better, faster, cheaper and save you from very costly mistakes. And your time can be spent far better elsewhere. A lot of times you think you can handle it, but it's not the case. 

Examples of jobs that investors could handle themselves but often should not:

  • rehab/construction work like demo or painting
  • managing subcontractors
  • selling the property
  • marketing
  • bookkeeping
  • taxes
  • contracts
  • etc.

@Michael Plaks I disagree, especially on a small scale of only 1-2 properties especially with simple tasks like bookkeeping it literally takes 20 minutes a month.  Everything else will depend on individual aptitudes but a lot of newer investors don't have the cash to just pay someone to do everything.

Originally posted by @Michael Plaks :
Originally posted by @Aaron Klatt:

The accountant only becomes necessary when you can no longer handle your own taxes or you have special situations that you are unsure about the law.  

Pet peeve alert! This is the mentality that slows down a lot of investors. I'm not only talking about hiring an accountant. Just because you can handle something does not mean you should

Other people may do it better, faster, cheaper and save you from very costly mistakes. And your time can be spent far better elsewhere. A lot of times you think you can handle it, but it's not the case. 

Examples of jobs that investors could handle themselves but often should not:

  • rehab/construction work like demo or painting
  • managing subcontractors
  • selling the property
  • marketing
  • bookkeeping
  • taxes
  • contracts
  • etc.

This is a very good point.  I could do all the administrative work in my tax practice, but I have an office manager to handle that so I can have more clients and make significantly more money than the cost of having the help (and in general be happier because I am doing the work I enjoy instead of the stuff that just has to be done).

Originally posted by @Aaron K. :

@Michael Plaks I disagree, especially on a small scale of only 1-2 properties especially with simple tasks like bookkeeping it literally takes 20 minutes a month.  Everything else will depend on individual aptitudes but a lot of newer investors don't have the cash to just pay someone to do everything.

Of course you disagree. :)  That's exactly why I expressed my opinion. 

Thanks for the responses everyone!

I think this would be an example of “you don’t know what you don’t know”

I no longer practice public accounting but in my experience, even if you are a small investor (1-2 properties) it is worth sitting down with a CPA, with real estate experience, to at least go over your plans. Even if it cost you $1,000 I think it is well worth it. I have worked with people "Doing it themselves" that weren't taking depreciation expenses, writing loans down as income, and other crazy things that was costing them money in taxes and could open them up to major liabilities if they were ever audited. Even if you feel like you are knowledgeable enough to do your own bookkeeping and tax prep, I would still highly recommend having a CPA giving it the once over. 

Originally posted by @Caleb Heimsoth :

Alec McGinn I guess it depends on a bit of who you are personality wise. I’m all about paying people to do things They’re better at then me, so I can focus on what I’m best at.

So I pay my account around 600 bucks to file my taxes. If I used turbo tax it’d take hours of my time and save me a couple hundred bucks. Not worth it for me.

I don’t have scheduled sit downs with my cpa. I email him questions as I have them but other than that, that’s about it. He’s in another state so it’s all done remotely.

I’ve got a few rentals and really none of this changes unless I join a partnership or something like that.

 Doing ones own tax returns makes one realize how much you not making in cash flow.  

Say you expected $1,000 a month. Seeing what you actually got is best seen by doing your own taxes.

That TK you thought was giving you 12% actually gave only 7%.Happens every year to me. 

I'm not a fan of TK. 

Having an Accountant on board will help you find the things that most people miss.  We have an Accountant on site. They are great for doing prospectives that are reliable. They also have the knowledge of taxes and how to avoid paying higher amounts to the IRS. 

People use CPAs for tax filing purpose. I believe $600-1000 per year and avoid tax audit is worth the trouble.  They also give advice on heir tax avoidance and update you on the latest tax law and savings. Most Americans who have a W2 job do tax themselves.


If you have businesses, which real estate investing is, then you should have a CPA, if not to do your taxes, but as someone to consult. I've been involved in other businesses besides real estate, and for a few years, I was between accountants, the one I used retired, I didn't get a chance to hire a new one, I know enough to push forward on my own so I took my time.

Unfortunately, taxes are complicated matters, and there were deductions in some of my non real estate businesses that I was unaware of, didn't take them. Didn't lose much, but enough for me to have, use and consult with a CPA.

Some CPA's, aside from being an accountant and involved in other areas. I was in between accountants when I bought an active business and decided to be hands on in doing everything financial, including matters like unemployment taxes and workman's comp.. I was new at it, so I copied what the previous owner did, He left his files as part of the business sale. Little did I know they send auditors to check out new companies. Well, I ran into trouble.

The auditor wanted to know why I have eight people working there and only 3 people on the application, Well, I took over all his employees, and copied his paperwork for the seller from the last quarter. So, I told the nasty scowling auditor I continued what the last employer did. So she exclaimed, you mean he's been underpaying all these years. Not knowing what to do, I remembered the last owner had a CPA, found his number in the rolodex, and called him. He ask me the name of the auditor in my office. Gave him her name, and he said "yes, I know her, put her on". She spoke briefly with him, then smiled at me, handed me back the phone and told me the CPA wanted to talk to me. He got back, saying he told her for my business, he should be called first, and the audit should be done at his office because that's where the records are. When I hung up, the auditor apologized, said she didn't know this and will continue the audit at the CPA's office. 

Yes, that was a close one. One thing having attorneys and CPA's is even though you as the owner is still responsible for errors and omissions, you are relying on these people, so there is plausible deniability. In the incident I related above, both I and the previous owner could have been exposed to fines and penalties had the CPA not intervened. Yes, the CPA had a good explanation what the prior owner did, and I got off the hook. 

This year I've done almost a 2:1 ratio of 2017 return preparations.....to prior year amendments or depreciation adjustments. 

AND I'd say often- it was prepared by a "professional". Just because someone says they do taxes- don't assume they know what they're doing. This is not the situation in which to value shop. Real estate is freaking sweet, largely because of the tax benefits. Make sure you're getting a professional who KNOWS them inside and out. 

Ask their qualifications, education, experience, ect. If you're wanting your FUTURE to be financially funded by Real estate exclusively- find a tax professional who specializes in real estate exclusively. 

Another common mistake I see is "oh well, It's just my first year with a rental I can do it my self".  The first year is where everything is established, set up, depreciation allocations- this is OFTEN where the inaccuracies occur and then just keep going forward. 

A lot of tax firms just collect documents and you talk to them once a year. This doesn't help you as an investor- and really, it takes them longer to prepare it because they're putting together a whole year of activity based only on paper. I never understood this when I worked at CPA firms. Any how- find someone you can talk to regularly, talk about your potential deals, impacts. 

Also- find someone you kind of click with. There are several amazing professionals on here and we've all referred people to each other. Sometimes you just kind of connect more with one person, or maybe have similar investing experience, ect.

Originally posted by @Aaron K. :

@Michael Plaks I disagree, especially on a small scale of only 1-2 properties especially with simple tasks like bookkeeping it literally takes 20 minutes a month.  Everything else will depend on individual aptitudes but a lot of newer investors don't have the cash to just pay someone to do everything.

But what if you're un-trained bookkeeping ultimately takes the CPA 2 hours to clean up before they can do your taxes? That's now at a CPA's fee of $200 bucks an hour instead of a bookkeeper at $35. 

I agree it CAN be done by yourself- but you still need professional training or guidance. I set up my clients QBO. We do a 2 hour training session. Then I check in quarterly or so...see what mistakes...help fix em and teach them what happened. 

HOWEVER I do feel like almost any one at a point needs to choose their time. What if in that few hours a month if you'd focused on driving for dollars you could have closed 3 wholesale deals that year and netted $25k? Still worth it? 

It's all relative. There's no one size fits all for everyone. 

@Natalie Kolodij completely agree that there is no one size fits all solution and nobody should go in not knowing what they are doing.  And if someone is doing RE full time all day every day they probably shouldn't do it themselves.  But for a mom and pop investor, if they know what they are doing and want to save a few bucks I see no harm in it.

As a CPA who specializes in Real Estate with many years of tax experience, I would recommend hiring a CPA that looks over your returns and gives you advice. Even without tax reform, you are playing with fire using a do it yourself program. A typical person does not have the experience to know what is a red flag on a return or not.  I would not go to some quick place that makes their money on volume of returns. If I wanted to put in a heating system, I could watch youtube for hours on end and do it cheaper. But at the end of the day, I know I cannot do it and I will hire someone that knows how to do heating systems. 

There are many good tax breaks coming out of the recent tax reform. Best to hire someone that is a CPA with the relevant tax experience.

@Alec McGinn hire CPA to help you with your first property. It is complex and you will need help. I can tell from the questions you are asking you should not do this yourself - at least not to start until you understand how it works. 

Originally posted by @Aaron K. :

@Natalie Kolodij completely agree that there is no one size fits all solution and nobody should go in not knowing what they are doing.  And if someone is doing RE full time all day every day they probably shouldn't do it themselves.  But for a mom and pop investor, if they know what they are doing and want to save a few bucks I see no harm in it.

The two keys in our principal disagreement are in your last sentence:

#1 "...if they know what they are doing..."
Most don't. And those who think they know what they are doing are too often wrong. Taxes are very complicated, and real estate taxes in particular. By not knowing you shoot yourself in the foot, possibly costing yourself thousands in mistakes and overlooked opportunities. But it's your foot, so keep shooting. :)

#2 "...to save a few bucks..."
That's what you refuse to consider: not paying for something does NOT equate saving. You're not paying for something, but you're also not getting that something. Two of the costliest mistakes of new investors is refusing to hire GCs and Realtors, thinking that they "save" money this way. As a result, they lose thousands and tens of thousands on rehabs gone wrong and houses sitting on the market or selling below value. 

If a tax return prepared by you was the same as a tax return prepared by a CPA - then you're indeed saving money. (If we don't consider the value of your time, that is, which could be used on making deals, as Natalie pointed out.)  But unfortunately, it is highly unlikely that they are the same. You "save" by not paying $500 to a CPA, but you overpay the IRS $2,000 in the process? Only Charlie Sheen would call it winning.

I review dozens of self-prepared investor tax returns each year. Less than half of them are OK as is. And you know what's the worst part? After 3 years, it is too late to recover money from mistakes and missed deductions. That's when people slap themselves on the forehead and realize the true cost of "saving" on accountants.


I don't use one, it would be more work to supervise them, fix the mistakes caused by the fact that they just don't know all the facts as well as me or are too busy, inputted data wrong etc.   I also like that with turbotax I can prepare the return look at it, then make changes easily, all in one sitting.   Rental property tax law at my level is not that complicated.   It helps that I have an accounting degree and am an accountant myself, (but not a tax accountant), so I know what I know and what I don't know.    I have worked for other real estate professionals and as the financial accountant on staff have liasoned with the external tax accountant CPA and while I felt they were great for those businesses never felt like they would have added value for my own, smaller, simpler rental property business.    It is also a matter of meeting the right person (tax accountant) and someday if I do I may change!

Originally posted by @Paul M. :

I don't use one, it would be more work to supervise them, fix the mistakes caused by the fact that they just don't know all the facts as well as me or are too busy, inputted data wrong etc.   I also like that with turbotax I can prepare the return look at it, then make changes easily, all in one sitting.   Rental property tax law at my level is not that complicated.   It helps that I have an accounting degree and am an accountant myself, (but not a tax accountant), so I know what I know and what I don't know.    I have worked for other real estate professionals and as the financial accountant on staff have liasoned with the external tax accountant CPA and while I felt they were great for those businesses never felt like they would have added value for my own, smaller, simpler rental property business.    It is also a matter of meeting the right person (tax accountant) and someday if I do I may change!

I offer a free prior year review if you'd like to the right tax person to show you every thing you've missed ;)

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