Real estate investors need quality help to support lasting careers. Unfortunately, while beginners in real estate investing are often tempted to take care of everything on their own, there are very few investors who can claim to be good at everything required for long-term success.
The best way to start investing in real estate is to have the right people around you. Some people won’t always have the best intentions for you, but if you can find reliable real estate investment team members who are experienced in areas where you don’t quite have the skills, you have the support you need for long-term success. Here are some reasons why hiring a real estate CPA is a smart addition to your team!
What is a CPA?
First of all, you might be wondering what a CPA does. A certified public accountant (CPA) helps balance your books and manage things like employee payroll and yearly investment property taxes. As an investor, keeping up with tax deductions, paying employees, income, and expenses might not be something you should handle without experienced help. The right CPA can help keep track of these items (and more) so that you never miss deadlines, payments, invoices, or tax deductions.
Not only are there CPAs that specialize in specific fields, but some accountants specialize in real estate. This means that they’re familiar with the ins and outs of real estate finances along with the investing side of things. In some cases, the best accountants can also serve as financial advisors to help you manage budgets and review potential new investments.
Other than tracking expenses, income, and deductions, what else can a CPA do for real estate investors? They’ll earn a place on your real estate investing team with the following benefits!
Save on Real Estate Investment Taxes
Taxes can be complicated for real estate investment properties. Without the right insights, a real estate investor could miss crucial tax payments or miss out on valuable tax deductions. A CPA can help keep track of income and expenses to correctly calculate taxes owed on a rental property or other investments. Getting in trouble with the IRS is a quick way to lose money from your property investment business. When a CPA helps an investor capitalize on more legal deductions, they enjoy better returns!
Run Business Reports
As an investor, it’s essential to keep a close eye on rental properties, fix-and-flip homes, and any other investments in your real estate portfolio. Staying up to date is easier with a capable certified accountant to run business reports for you.
A business report analyzes the financial aspects of your investment properties. Running and reviewing these reports throughout the year helps investors keep track of money going out, money coming in, and how this money is being spent to improve returns and meet long-term income goals.
In addition, an accurate business report can easily identify weak points in your business strategy. For instance, if you’re paying an employee to research potential properties and deals, but you don’t have enough payroll cash flow to buy a new property if it’s a perfect deal for your goals, a business report can help you identify where you’re losing money and plan for the future.
Real estate investors must take notice when trends start to form in the market and with their investments. A CPA can recognize financial trends for income and expenses and help you keep an eye on these trends to monitor your business success. They also see which types of real estate investments are most profitable and can help you stay prepared to buy or sell more properties, depending on your cash flow. Money can be evidence that something is (or isn’t) working for you. With a skilled CPA, it’s easy to track when you’re onto something really good or need to shift real estate investing strategies to something else and minimize financial loss. Having a capable advisor can help you determine how much to put in for a down payment on a new property and help you gather paperwork to secure financing.
An experienced CPA can also help you know when not to invest. It can be tempting to throw your money at something that seems like a good deal. However, with the insights of a certified accountant, investors can avoid investing in something at the wrong time or that isn’t a good fit for return on investment goals.
Structure Your Business
Many people don’t know the importance of structuring a real estate investment business correctly. Your business structure affects your tax payments and how well you and your investment properties are protected from liabilities. Knowing which business entity is ideal for your rental property or fix-and-flip investments and how to set them up properly can be challenging without the right insights. Your CPA can help you analyze an LLC vs. a sole proprietorship or an S Corporation to set our investment business up with legal protections and the proper structure.
What’s the Difference Between a CPA and an Accountant?
Will an accountant be enough to manage your real estate investing finances effectively? It’s important for investors to understand the differences between an accountant and a CPA.
While an accountant can perform many of the same functions that a certified public account does, a CPA must pass rigorous tests to become “certified.” Choosing a CPA can be a better option for serious real estate investors because most certified accountants have greater knowledge that can benefit your long-term success. In addition, a CPA can do more tasks for your investing business than an accountant without certification can do, including acting as a taxpayer or company representative in discussion with IRS officers or preparing an audited financial statement.
CPAs are recognized by the government through their certification and must follow a very strict code of conduct to maintain their licensing. Choosing a CPA vs. an accountant is an excellent way to add credibility to your real estate investment business and have a true partner in the success of your investing career.
The Best Way To Start Investing In Real Estate Is With a CPA!
If you’re not sure where to start investing in real estate, we recommend starting with a solid team of expert support. A CPA can be one of your most significant assets when choosing the professionals to help shape and manage long-term real estate investment success. To find a CPA that meets your needs and understands your goals, connect with your networking groups and look for someone in your area that’s familiar with real estate to find the best resource for your investments.
In addition to having an experienced certified public accountant, a real estate investor also needs the best tool for finding properties and making good deals. With Privy, property investors get deals delivered to their inboxes daily! Our software analyzes your criteria and goals, then searches the MLS for investments that meet your preferences and plans. We also help investors expand their knowledge and see how other successful investors make deals that add value to their real estate investment portfolios. If you’re ready to learn more about the Privy Advantage, reach out to our team for a demo!