4 Tips for Hiring the Right CPA for Your Real Estate Business

by | BiggerPockets.com

There’s nothing wrong with a do-it-yourself mentality. And while there are plenty of things you can do on your own in your real estate business, taxes and accounting aren’t among them. In this case, you need the assistance of a qualified CPA.

How to Pick a CPA for Your Real Estate Needs

There’s a difference between being good with numbers and knowing how to organize financial documents and numbers in a manner that’s both accessible and approved by the IRA. Just because you can run some computations in your head and know which documents need to be archived for future reference doesn’t mean you’re cut out to handle your own accounting and tax needs.

A qualified CPA does a number of things for your real estate business. For starters, she helps you stay organized by neatly gathering and storing all financial documents into the appropriate files and spreadsheets so that you have an accurate outlook on the money that’s coming in, the money that’s going out, and what your current real estate holdings look like. Secondly, a CPA offers some legal protection in the sense that she’s trained to understand the stringent rules laid out by the IRS and can increase your chances of staying within the law.

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Finally, the right CPA should be able to save you some money by helping you move money around in a way that’s advantageous to your bottom line. In fact, a good CPA should save you a lot more money than he costs you over the long haul.

Related: Why Your Tax Strategist Should Probably Be a CPA

The question is: How do you pick the right CPA for your needs? There are lots of CPAs out there; you can increase your chances of choosing a good fit by adhering to the following four tips.

1. Look for real estate specialization.

You could argue that a CPA is a CPA, but there’s something to be said for finding a professional who specializes in real estate. This specialization tells you that they’ve seen the same problems you’re facing and know how to deal with them in the most efficient and cost-effective manner possible.

2. Research credentials and accreditations.

Specialization is one thing—but does the CPA you’re considering have the appropriate credentials and accreditations on his resume? Lots of people pass the CPA exam each year and are technically certified to practice accounting, but you don’t want someone who barely squeaked by. You want a CPA with a pass rate that’s higher than the national average. It’s also smart to look for CPAs who have gone on to pursue other accreditations even after passing the exam. This shows that they have a commitment to learning.

3. Ask around for referrals.

Do you have friends and connections in the local real estate market? One of the best tips is to ask them for referrals. If they have a good CPA, they shouldn’t have any problem passing his information along. They may also tell you not to use someone, which is equally valuable advice.

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Related: Hiring a CPA: the Pros & Cons (& How to Find One for Your Particular Needs!)

4. Read online reviews.

Always do your own poking around when it comes to hiring a CPA. In addition to asking for referrals from friends, it’s smart to read some online reviews and check out independent rating sites to see what clients and peers think of CPAs you’re considering. You’ll see red flags and glowing recommendations, which will hopefully add some clarity to your vetting process.

No Need to Rush

There’s no need to rush into hiring a CPA. Assuming you aren’t up against some important tax or financial deadline, you should have time to sort through your options and make the best possible choice.

What qualities do you look for in a CPA? How do you go about finding the right one for your business?

Comment below!

About Author

Larry Alton

Larry Alton is a professional blogger, writer and researcher who contributes to online media outlets and news sources. A graduate of Des Moines University, he still lives in Iowa as a full-time freelance writer and avid news hound. In addition to journalism, technical writing and in-depth research, he’s also active in his community and spends weekends volunteering with a local non-profit literacy organization and rock climbing.

3 Comments

  1. Adam Bezark

    As a CPA I appreciate you blog post. I’m new to BP and at least once read that CPA’s are a waste of money. While the poster may have been over-billed and under-serviced by a CPA it’s a reckless statement.

    Having said that, I have read a great RE tax blog post by a CPA/BP blogger a few days ago and a few replies by RE savvy CPA’s on the forums. These guys/gals knew their stuff! The suggestion for asking around for referrals imo is the most important one. From what I’ve seen thus far one can probably get some very good recommendations from the BP community.

    Couple other comments:

    Regarding #2. Realize passing the CPA exam and being licensed are two different things. Furthermore, someones scores on the CPA exam are not readily available. They can also be confusing because some may “condition” parts of the exam and pass the other parts at another time. I happened to pass all the parts on my first attempt. At that point in time the pass rate in IL was only 18%. However, that is NO indication of how good of a CPA I’d be for a RE investor (it just means I studied hard and am a good test taker). A RE investor should want a good CPA who has a grasp of RE tax laws, not a brilliant CPA who does not.

    You are looking for a fit, good service as well as RE specialization. RE tax law is not the most complicated part of the tax code, but it sure isn’t the simplest either. Know what you need and you’ll have a better time knowing if you found a fit. A big or medium sized firm may “specialize” in real estate, but if that means they do a lot of work for larger partnerships/LLC’s, that means a little guy will likely be overcharged and barely get the attention of a partner level CPA there. Do you want monthly accounting? tax planning? tax returns? cash flow and other projections? integrated estate planning?

    Hope that helps!

  2. Bill Hampton

    Good post, but you don’t have to be a CPA to be a good real estate accountant. I have a former IRS Agent on my staff and I believe she is just as qualified, if not more qualified, than a CPA. I just want everyone to know that you don’t need to be a CPA to be a good real estate accountant.

  3. Ben Raygor

    Points 1, 3 & 4 are good. I have questions about #2 though:

    1) If a person is a CPA, they have a 4 year college degree, plus 30 college credits on top of that to total 150 at least, plus they average 40 hours of NASBA approved continuing professional education credits every year to help make sure they are up to date on accounting and tax laws. And, oh yeah, they’re a CPA.

    “but does the CPA you’re considering have the appropriate credentials and accreditations on his resume?”

    Please tell us CPA’s what credentials and accreditations are “appropriate”. And what benefit do these provide? What credential do you want to see on a CPA’s resume that shows you they are real estate savvy? Should CPA’s be taking some guru’s real estate course so we can hang a $5,000 certificate on our wall? No potential client has ever asked to see my resume. Who does that? People look at LinkedIn profiles, so that’s a little insight at least.

    2) “but you don’t want someone who barely squeaked by. You want a CPA with a pass rate that’s higher than the national average.”

    Are you talking about the score the CPA got on each of the four exams, or the “pass rate” percentage that indicates how many CPA’s passed the exam on the first, second, or third try? In the accounting world, most CPA candidates are told by their professors, potential employers, and current employers that all they need to focus on is passing the exams. They don’t ask for their scores, they just want them to get it done quick. The exams are huge. So every potential CPA is faced with the decision making dilemma of when to take the test based off of how much free time they have to study for an exam. A CPA who passes all 4 exams with a 75 on the first try is heralded as the test taking kind of the accounting world. They did just enough to pass, and passing is ALL that matters. In college, passing means very little in accounting – most larger firms require a 3.0-3.2 GPA to get in right out of college.

    I passed Audit the first try, passed Regulation and Business the second time, and Financial the third time. It took me less than 12 months. Most people say, “way to persevere and keep trying!”

    3) “It’s also smart to look for CPAs who have gone on to pursue other accreditations even after passing the exam. This shows that they have a commitment to learning.”

    What are some examples? If 40 hours of required Continuing Professional Education isn’t a “commitment to learning”, then what accreditation is going to show a commitment to learning? I know that CPA’s can breeze through CPE courses and not retain much if they don’t want to. But I could also take courses, pay a bunch of money, and pass an exam to get my CFP license and still end up not retaining everything well. It depends on the individual – which brings many back to the reality that the individual matters far more than the licenses and letters behind their name.

    There was a great BP article about having a tax strategist being more important than having a CPA. I agreed with what was said. There was a great follow up BP article about why your tax strategist should probably be a CPA. I agreed with what was said. Both authors would agree that CPA’s demonstrate a commitment to learning when they choose to know their client well, take time to research tax and accounting issues that apply to their clients, and then strive to deliver that counsel/service in a way that is understandable to the client and saves them a bunch of money.

    I don’t think the CPA license is a must, or any credential for that matter. If you find an accountant or tax guy who rocks and works well with you, don’t worry about their credentials. Enjoy the good relationship. Those relationships aren’t common enough in the business world. There are far too many businesses saying “Look at all of our credentials!” and not delivering the value their clients need and deserve.

    Would love to hear from other BP investors about whether or not they care about CPA’s, EA’s, or general accountants having other credentials.

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