In the real estate industry, every dollar matters. Are you leaving money on the table by forgetting to claim deductions? Are you using the most effective business structure? Are you tracking your efforts to ensure you make the right decisions about operations and investments? Not sure? Then, you need a real estate CPA.
These specialists work with buy-and-hold investors, flippers, wholesalers, syndicates, realtors and others to help them lower their tax liability and boost their return on investment (ROI). To get a sense of how a real estate accountant can help you steer your business in the most lucrative direction, take a look at these benefits.
Accurate, Timely Bookkeeping
When you’re busy maintaining rental properties, looking for your next investment, or dealing with other aspects of your real estate business, accounting and tax responsibilities can easily fall by the wayside. If you forget to record expenses or lose track of your records, you may miss deductions, making your income look artificially high on paper and driving up your tax liability.
By hiring an accountant to handle your bookkeeping, you can rest assured that all the numbers get recorded timely and accurately. This simplifies tax time because you have the numbers you need right at your fingertips. You don’t have to comb through boxes of receipts, scan your bank statements for deductions, or scrabble around looking for the right records.
Quality bookkeeping also ensures that you have the numbers you need to generate reports and assess the profitability of your business.
Tax codes can be extremely complicated and the smallest mistake can cost a lot of money. To ensure your income is reported correctly and that you claim all possible deductions, you need to work with someone who understands the unique nature of the real estate industry and the tax codes related to this industry.
Accountants who specialize in working with real estate investors can also help you with tax planning to ensure that you’re structuring your investments and operations in the most efficient way possible. When you reach out for consulting services, you can get guidance on the following and more:
- The benefits of turning your real estate business into a limited liability company.
- Whether or not you should opt to be taxed as an S-corp.
- Which records you need to keep and why.
- How to save money by automating your bookkeeping.
- Reconciling bank records.
- Issuing 1099s to contractors.
- Taxation of rental income.
- How to make the most of your deductions.
- Real estate depreciation.
- Bonus depreciation.
- How to deduct passive losses.
Insightful Financial Reports
The right information is critical when you’re making decisions about your business, and to help, real estate accountants can draft financial reports that give an overview of your operational costs, expenses, and profits. They can also help you project cash flows so that you can make sure you always have the right amount of money on hand to cover expenditures.
These reports can give you the insight you need to make wise decisions about everything from setting rent amounts to deciding when to sell property to timing capital expenditures.
Help Making Decisions About Leverage
Using leverage to grow your portfolio is essential, but of course, you don’t want to get overleveraged. A real estate accountant can help you crunch the numbers.
As you look at prospective properties or try to make decisions about existing properties, a CPA can help you calculate and analyze capitalization rates, cash-on-cash returns, total returns, and other metrics so that you get a solid sense of your return on investment. Then, they can help you take into account various loans and rates to guide you toward the wisest use of leverage.
Connections to Real Estate Professionals
Real estate CPAs often have great connections with other professionals in this industry, and they can help you find realtors, wholesalers, brokers, property managers, lenders, and other useful contacts as you take your business to the next level.
At My Online Accountant, we specialize in providing accounting, tax prep, tax planning, bookkeeping, and consulting services to real estate investors and professionals. To learn more about how our services can benefit you, contact us directly. We look forward to helping you grow your business.