Tax and bookkeeping fees

Investor · Trumbull, CT · Member since 2017 · 59 posts · 9 votes

I've been shopping my local area in Wilmington, NC for tax and bookkeeping services, but most fee structures are quite high for the 3 properties I currently have in my portfolio. Separate from their tax filing fees, They charge a $175 monthly retainer for tax consultation and review of financials (whether I use their services or not), and $125 a month for bookkeeping. These fees increase based on volume. Does anyone know if these prices are reasonable?

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Paul Allen

Financial Advisor · Virginia Beach, VA · Member since 2017 · 502 posts · 508 votes

Originally posted by @Account Closed:

The $125 seems just about right.

The monthly retainer seems rather high especially if it does not include the actually filing of the return. I would expect a separate real estate return to be somewhere in $800-$1,000 range with ongoing planning. Obviously, all depends on your specific situation.

I'm not sure if I should raise my prices or link all my clients to this post so they appreciate me more.

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Caleb Heimsoth
Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
8y
Depends what you are having them do. I pay my cpa a one time fee to file my taxes. He answers any questions I have in the mean time
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Andrew Pappas
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Investor · Trumbull, CT · Member since 2017 · 59 posts · 9 votes
8y
Yeah I paid the tax filing fee, but then they say if there's too many questions than they have to charge a fee. That's understandable, but I only asked 2-3 questions in 6 months. $175 a month just doesn't make sense with the amount of income my properties are bringing in.
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Natalie KolodijBusiness Member
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Tax Strategist| National Tax Educator| Accepting New Clients · Member since 2014 · 3k+ posts · 4k+ votes
8y
@Andrew Pappas
It's weird to have the $175 retainer fee structured like that. But overall- this fee is far less than average for monthly bookkeeping work I'd say.
Are they adding any value for you? Or just keeping things compliant? Are they saving you money, discussing strategy, ect?
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Michael PlaksPro Member
Tax Accountant / Enrolled Agent · Houston, TX · Member since 2014 · 5k+ posts · 6k+ votes
8y
@Andrew Pappas
The key is your note of "whether I use their services or not." Regular consultations and review of financials can be a huge benefit and save you thousands of dollars. They can also be of little to no value if you're staying small, simple and not growing. Same for bookkeeping.
The prices are very reasonable - provided you DO use these services.
If they only offer the packaged deal, and you do not use the services packaged - then it's a mismatch. Look elsewhere and find someone who charges for tax preparation only, once a year, and nothing else.
Here's my analogy: you do not need a gym membership if you're only playing couple pick-up basketball games once a week. This can be done in a park. But it you want to work out regularly and professionally...
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Account Closed
Tax CPA · Charlotte, NC · Member since 2014 · 215 posts · 186 votes
8y
The $125 seems just about right.
The monthly retainer seems rather high especially if it does not include the actually filing of the return. I would expect a separate real estate return to be somewhere in $800-$1,000 range with ongoing planning. Obviously, all depends on your specific situation.
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Paul Allen
Financial Advisor · Virginia Beach, VA · Member since 2017 · 502 posts · 508 votes
8y
Originally posted by @Account Closed:

The $125 seems just about right.
The monthly retainer seems rather high especially if it does not include the actually filing of the return. I would expect a separate real estate return to be somewhere in $800-$1,000 range with ongoing planning. Obviously, all depends on your specific situation.
I'm not sure if I should raise my prices or link all my clients to this post so they appreciate me more.
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Steve GarnerPro Member
Investor · Wilmington, NC · Member since 2014 · 128 posts · 38 votes
8y
I use a great local CPA that works with numerous local RE investors. I pay him to file my taxes and advice. We meet usually 2-3 times a year and I call with with any questions throughout the year. I've never used bookkeeping services because I automate my payments through my bank. My system is pretty simple and if I can help just let me know. (I can't answer if the fees are high or not since I haven't used those services.)
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Brian Schmelzlen
Accountant · La Mesa, CA · Member since 2017 · 477 posts · 476 votes
8y
While the fees themselves are reasonable, I agree with @Michael Plaks that the issue is that you are charged the fees whether you use them or not. It seems that they have fairly low fees because they bank on the fact that most clients will not consult with them on a monthly basis. I am not really a big fan of tax and accounting firms operating like your local gym.
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Alan Rohrer
New to Real Estate · Indianapolis, IN · Member since 2017 · 102 posts · 74 votes
8y
@Brian Schmelzlen is right- the fees would be reasonable if you use them.
An accounting firm operating like a local gym in this case isn't the best option in your case. There are a lot of benefits of a monthly "retainer" but that's when you have more ongoing/complicated activities that require ongoing accounting and tax work.
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Simon W.Business Member
Real Estate Consultant · Lehigh Valley PA & New York City · Member since 2013 · 1k+ posts · 659 votes
8y
Is it me or $125/month for bookkeeping is just way too low?
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Andrew Pappas
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Investor · Trumbull, CT · Member since 2017 · 59 posts · 9 votes
8y
It seems everyone’s opinion on the rates varies a lot, but the responses have helped me realize this structure is not beneficial considering my low volume. Thanks for the feedback!
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Marina Draper
Accountant · We serve all 50 states · Member since 2015 · 90 posts · 50 votes
8y
Hi Andrew,
Overall, CPA's are not cheap. If you need their professional tax advise, high prices are a back side of it. You just need to decide for yourself about how much value their tax advise will give you, if it will save you money in taxes and will give you a peace of mind.
The bookkeeping fees, on the other hand, seem very competitive to me.
In general, I think that real estate investors should not forget about indirect expenses associated with having a business. Most people do calculation of profitability based only on direct expenses, like utilities, repairs. While owning a business incurs general business expenses, such as legal, bookkeeping/CPA fees, minimal annual tax, education and training expenses, etc.
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Jana CainPro Member
Enrolled Agent · Richmond, CA · Member since 2016 · 225 posts · 148 votes
8y
@Simon W. The bookkeeping fees are definitely low if that is the recurring monthly amount.
@Andrew Pappas If you don't have ongoing work/questions, I recommend against signing on with someone who will charge a flat rate per month in perpetuity. It sounds like you'd be better off with someone who charges by the hour, or by the project/deliverable.
Looked at another way, with what you've stated you're all in for $300/mo, or $3600/year, for tax consultation and support exclusive of any tax filings. If the tax filings are also low-balled, lets say that you're at $4k/year to take care of your personal and real estate tax matters (which includes 3 properties). I'm sure many here would argue that's a steal; others may consider that to be highway robbery. "Reasonable" often comes down to one's willingness to pay + value to you of the output.
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Andrew Pappas
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Investor · Trumbull, CT · Member since 2017 · 59 posts · 9 votes
8y
Can anyone advise on the value of hiring a bookkeeper? I could pretty easily make an excel spreadsheet with income and expenses by property and category, and then file the receipts electronically. I suppose it may get a lot more time consuming with more than 3 units, but is there any other value to hiring a bookkeeper beyond what I could track myself in excel?
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Ben DayBusiness Member
Accountant · Oklahoma City · Member since 2017 · 80 posts · 64 votes
8y
Hey Andrew! So a good bookkeeper will do more than just put the numbers in the right place. A bookkeeper that understands real estate investing should be able to fill a number of CFO advisory level roles, including working with bankers and lenders, scaling your business, and long term strategy. All of this in addition to being “tax-ready”.
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Andrew Pappas
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Investor · Trumbull, CT · Member since 2017 · 59 posts · 9 votes
8y
Thanks Ben. It'll probably make more sense for me when I have a steady flow of volume. I'm also just not convinced of the value this company offers.
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Ben DayBusiness Member
Accountant · Oklahoma City · Member since 2017 · 80 posts · 64 votes
8y
No problem! Always happy to offer up some expertise
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Michael PlaksPro Member
Tax Accountant / Enrolled Agent · Houston, TX · Member since 2014 · 5k+ posts · 6k+ votes
8y
@Andrew Pappas
What @Ben Day described (CFO advisory, working with lenders, strategy) is the role of an accountant, not a bookkeeper.
Bookkeeper keeps books - i.e. records everything you spend, assigning each expense to the right category and the right property. Why is that important? Because most investors suck at that, frankly. They never track anything until the tax time. Then they're trying to figure out why they paid $195 to some XYZ LLC eight months ago and cannot remember. Or worse - begin searching for receipts and invoices and cannot find them.
If you're recording everything in Excel, and there is not much to record at this stage of your business - then you probably do not need bookkeeping service. Not yet at least.
Accountants provide higher level services, as Ben described. At this point, you probably do not need these services, either.
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Joe SplitrockPro Member
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Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
8y
@Andrew Pappas we manage 8 properties do not have a bookkeeper. We just use Excel and track all our expenses and file receipts in order by date per property. We track mileage too. At the end of the year we give everything to our CPA in a very organized manner. His time is minimized due to our excellent organization. I can call him with random questions and he doesn't charge extra for the calls, but I assume some of that is figured into our tax bill.
Whether an amount is fair really depends on what they are doing for you. My accountant works with many businesses and told me some people just come in with a box full of receipts at the end of the year. He said in those cases, the time (and charges) are way more. So this partly depends on how organized you are going to keep things. If you had a monthly bookkeeper, their job is to keep it organized.
The other piece is tax planning strategies. H&R Block will do your taxes, but knows nothing about planning. Trust me, my cousin worked for them. She was psychology major who went through a 4 hour training session to do taxes. They can do taxes for the average W2, but you want someone that specializes in strategies for businesses and specifically rental properties.
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Linda WeygantPro Member
Investor and CPA · Arvada, CO · Member since 2015 · 2k+ posts · 3k+ votes
8y
Originally posted by @Paul Allen:

Originally posted by @Account Closed:
The $125 seems just about right.
The monthly retainer seems rather high especially if it does not include the actually filing of the return. I would expect a separate real estate return to be somewhere in $800-$1,000 range with ongoing planning. Obviously, all depends on your specific situation.
I'm not sure if I should raise my prices or link all my clients to this post so they appreciate me more.
Ditto!
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Andrew Pappas
OP
Investor · Trumbull, CT · Member since 2017 · 59 posts · 9 votes
8y
Originally posted by @Joe Splitrock:

@Andrew Pappas we manage 8 properties do not have a bookkeeper. We just use Excel and track all our expenses and file receipts in order by date per property. We track mileage too. At the end of the year we give everything to our CPA in a very organized manner. His time is minimized due to our excellent organization. I can call him with random questions and he doesn't charge extra for the calls, but I assume some of that is figured into our tax bill.
Whether an amount is fair really depends on what they are doing for you. My accountant works with many businesses and told me some people just come in with a box full of receipts at the end of the year. He said in those cases, the time (and charges) are way more. So this partly depends on how organized you are going to keep things. If you had a monthly bookkeeper, their job is to keep it organized.
The other piece is tax planning strategies. H&R Block will do your taxes, but knows nothing about planning. Trust me, my cousin worked for them. She was psychology major who went through a 4 hour training session to do taxes. They can do taxes for the average W2, but you want someone that specializes in strategies for businesses and specifically rental properties.
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Andrew Pappas
OP
Investor · Trumbull, CT · Member since 2017 · 59 posts · 9 votes
8y
I agree-great advice, thank you
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Jamie Engledow
Boca Raton, FL · Member since 2015 · 249 posts · 52 votes
8y
sounds reasonable to me. It is time consuming keeping accurate books.
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Jamie Engledow
Boca Raton, FL · Member since 2015 · 249 posts · 52 votes
8y
If my job would allow I would post here and offer a lower fee, however, I do believe what you were quoted fell within FMV.
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