When to get an Accountant

Question

I am closing on my first property a week from today. I have the property set up in a subsidiary LLC owned by a holding LLC and will be using the property as a mid term rental. This is my first property and I have never used an accountant before and was curious if I should get one and what is would I expect to pay? Extremely ignorant on this topic so any information helps!

Stuart Udis · Answer

@Ben Wierschem You haven't purchased your first property and a week before settlement you are concerned with whether to hire an accountant. Is your diligence complete? Thorough review of the property condition? title? zoning and permitting requirements for your MTR use? Do you have your property and GL coverage squared away and did you review the policy closely to confirm MTR use is permitted? Did you obtain the best loan and in the process build relationships with lenders who can help you grow a business? Do you have a clear execution plan on how you will manage the property? So many in your shoes get distracted focusing on details that should be secondary to the underlying real estate. Execute on the real estate first whether to hire an accountant should come secondary.

I will also add I wholeheartedly disagree with Deborah's stance that EA's provide more value than CPA's. An EA can provide value to certain real estate investors depending on their circumstances, but I see so many EA's selling tax saving strategies and in the process push clients towards buying lousy real estate just for the tax advantages. That's a problem.

Cameron Jones · Answer

@Ben Wierschem

With real estate, you want to get things done right from the start. You should start with ensuring that you have the fundamentals set. That's making sure your bookkeeping records are sound from the start, especially since you have LLCs. Your books for each the property LLC and holding LLC should be separate, with separate bank accounts. Have a system for keeping track of receipts, documents, depreciation, etc. Property related deductions, including depreciation, will count toward the rental income via the Schedule E for MTRs. Doesn't matter how little transactions there are. You want to get used to this separation from the start.

As you add more properties, you'll need to ensure they're separated to appropriately record their profits and losses.

I recommend QuickBooks, but at the start, you can use Excel but you have to be diligent since it's manual and lacks checks and balances. You can also try Baselane which is free, but limited since no balance sheet (you'd still need to use excel). This can get complicated and will take a lot of learning to get right. If you don't have the time or don't want to make a mistake, an accountant that gets real estate is a good investment, especially as you scale.

Josh Lewer · Answer

@Ben Wierschem How did the property closing go? Hopefully everything went well.Generally, with just one property, you could DIY the bookkeeping. A separate bank account and not too many expenses makes it simple to categorize. You could even handle taxes yourself if it is not too complex outside of RE.That said, if you want something completely hands off, you can hire a CPA and they should have something turnkey to come alongside you.

Richard Majkrzak · Answer

Hi Ben - congratulations on your first property investment! My recommendation would be to arrange an initial consultation with a CPA to plan your tax strategy and ensure your operation is setup for scaling and the most favorable tax treatment. Then handle the weekly/monthly bookkeeping yourself, at least for your first few properties.

Your transaction volume is probably not going to justify retaining CPA on a regular basis, but probably mainly for annual tax filing. If you would like assistance getting started at a lower cost than CPA, I'm a certified freelance bookkeeper specializing in small real estate & property mangement clients and would be happy to help get you setup for success from the beginning.

Henry Clark · Answer

OP

Stay local.  Ask a large Commercial Realtor who they recommend for Real Estate.  Then ask both the realtor and the accountant who they recommend for legal and commercial banking.  Since you’re in Texas.   Move your personal accounts to Frost bank.  Meet and start getting to know their commercial lenders.  Tell them your plans.  Also ask them for the team above.

Michael Murphy · Answer

Ben -

I think it depends on how much time you want to spend learning and what your background is.  I don't use a CPA for my personal properties because my day job involves real estate accounting.  If I didn't have that experience I would not have felt comfortable filing my own taxes.

CPAs that I know here locally bill at $200 an hour.  The bookkeepers around here are around $50 an hour.  I assume rates vary quite a bit in different regions.

Mike

Jason Malabute · Answer

You’ll want an accountant as soon as you start since it’s your first property and you’re using an LLC. They can help you set up bookkeeping correctly, make sure expenses are tracked the right way, and keep you compliant on taxes. It’s usually better to get guidance early rather than fix mistakes later.

Aaron Zimmerman · Answer

I would definitely discuss with a cpa for this year. You've added some complexity with your structure so you'll want to consult and use a cpa that knows how to handle rental properties!

Ben Wierschem · Answer

@Michael Murphy yeah I have no background or any experience with accounting or taxes, I am a recent graduate so it is all very new to me! Thanks for the info

Markus Shobe · Answer

Yes you want to get an accountant. They can help you out with bookkeeping, tax prep, and tax planning. These are things you want to get as soon as possible.

When to get an Accountant

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