Rental Property Investor · Nashville, TN · Member since 2019 · 58 posts · 11 votes
I am 18 years old, becoming a real estate agent once I graduate high school in May, will be attending college, and am looking at buying my first rental property within the next 6 months. My last post asked about using your car as a tax deduction as a real estate agent, and most everyone had their own view on it but then ended their comment with “talk to your CPA.” I know CPA’s can get fairly expensive and with only around $10,000 to my name, I do not think spending a large chunk of that on a CPA would be wise. My question is, at what point should I seek out a CPA? Is there a certain number of properties I should own before seeking a CPA’s advice? A certain income amount? A certain age? Just would like to hear everyone’s thoughts on this. Thanks
Rental Property Investor · Ankeny, IA · Member since 2017 · 2k+ posts · 3k+ votes
6y
@Colin Spivey
Using a cpa to file your taxes when you own rentals will pay for itself. They’ll do the deductions and depreciation correctly, and most likely it will save you more money than you’re spending on them. If you have your files in order it will be cheaper than just dumping a pile of receipts on their desk.
Real Estate Investor · Burlington, VT · Member since 2010 · 2k+ posts · 1k+ votes
6y
@Colin Spivey I started using a CPA with my first rental property with no regrets at all. He charges me about $150 per property (assuming I hand him a printed spreadsheet showing my rental incomes and expenses at the end of the year). He's pretty good about setting up the depreciation schedules, and the most value in my opinion is the gray area of what can be expensed vs what can be capitalized.
Rental Property Investor · Nashville, TN · Member since 2019 · 58 posts · 11 votes
6y
@Tom S.
Thank you for your advice. Did you seek out a CPA who invests themselves, one that is in the real estate niche, the best you could find, or how did you go about finding your CPA?
Rental Property Investor · Ankeny, IA · Member since 2017 · 2k+ posts · 3k+ votes
6y
@Colin Spivey
Using a cpa to file your taxes when you own rentals will pay for itself. They’ll do the deductions and depreciation correctly, and most likely it will save you more money than you’re spending on them. If you have your files in order it will be cheaper than just dumping a pile of receipts on their desk.
Real Estate Investor · Burlington, VT · Member since 2010 · 2k+ posts · 1k+ votes
6y
@Colin Spivey Referral, to a CPA that worked at a small tax firm with 3-4 CPA's and a few associates. The CPA does not invest in rentals but has a lot of clients that do, so is familiar with the tax laws. What's nice is that he takes all my info and if there are a few areas that are questionable, he can have an associate research it.
In the past most big items were capitalized, like a roof or painting the place. So you only get the write-off over time. With the recent tax change changes he said there's more flexibility to classify it as a repair instead, and expense it immediately. For instance, re-shingling a roof over an existing roof, he feels there more flexibility to classify that as a repair, because it's not a 100% brand new roof. Things like that I would never realize on my own.
Accountant · Slidell, LA · Member since 2019 · 382 posts · 272 votes
6y
@Colin Spivey You should consult with a CPA when you start your business. If you get a real estate agent license, then you have started a business and if you buy a rental property, then you also have started a business. I agree with @Anthony Wick that you should attend REIA meetings in your area and ask for references to a CPA. I'd recommend one that also invests in real estate, since they will have researched the tax laws for their own benefit and this will benefit you as well.
Last year, I began working with a realtor that was also flipping houses. After I reviewed her tax returns, I told her "Congratulations, you have set up your companies to maximize your taxes!" I began helping her restructure everything to mitigate the damage and to minimize her taxes in the future.
So, seeking the advice of a competent CPA when you begin in business will save you money in the long run.
Shawnee Mission, KS · Member since 2016 · 716 posts · 313 votes
6y
CPA's are like any thing else out there some good some bad.Some don't look for ways to help you with in the tax laws just pay pay .Do your home work talk to folks who they use .
Rental Property Investor · Upstate, NY · Member since 2012 · 3k+ posts · 3k+ votes
6y
I always did my own returns. But after a brutal audit on two years of my LLC returns my wife insisted on me going to her NEW CPA. We then went through a couple of them after finding errors & omissions during the face-to-face reviews. One argued with us & basically threw us out of her office, so we took the return elsewhere & she still attempted to bill us.
The next 'recommended' guy transposed one digit of a SSN & it caused havoc. He then tried to charge us $75 to amend the return to correct HIS ERROR. Next guy waited until the last week to sit down with us to review the returns. We then had to file & pay for extensions 2 years in a row. We moved on then gave up after realizing the next, also highly recommended, 'CPA' hadn't claimed the company's cell phone costs, had counted returned monies as income as well as the petty cash (although compete with receipts). We ask that it be amended & corrected but he was reluctant to do it.
The problem is most of these CPA's just employ a bunch of $11/hrs punching in the data & have no idea of the consequences & time it take to correct it. We then discovered that our attorney had used one of the CPA's we had moved on from. That CPA screwed up a lot of the Law groups 1099's & the fine was 5digit SIGNIFICANT.
We are done with CPA's & are back to doing our own returns but with a tax preparer we now trust. My wife & I both take advanced Tax prep courses to ensure we keep up with the code (& max out deductions) specific to our 'business' model & corporations. That strategy has paid of VERY well for us.