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Investing in real estate is a fantastic way to grow wealth. As an asset class, real estate enjoys many tax advantages. There are many avenues investors can pursue to leverage these advantages, from investing in short term rentals to qualifying as a real estate professional.
However, successfully adopting any of these highly complex tax strategies demands that you have your accounting in order. Without accurate financial records, it’s simply impossible to provide the documentation required to leverage these advanced real estate strategies.
To ensure that their books are in order, many real estate professionals seek guidance from qualified real estate accountants. There are various ways to do this: including hiring a full-time in-house accounting team, working with a generalist CPA, or outsourcing accounting to a specialized firm.
For reasons both practical and strategic, many investors choose to outsource their accounting needs. Accounting is complicated, and to most people, not a particularly exciting way to spend your time. But at the same time, practically every real estate investor is aware of the importance of maintaining accurate financial records.
In this guide, we’ll explore the pros and cons of outsourcing accounting to an established accounting service provider. Read on for a primer on the benefits you can realize from adopting this approach as well as details of the potential downsides you should keep in mind.
What Exactly Are Outsourced Accounting Services?
There are various types of outsourced accounting services. At the most basic level, you can outsource simple bookkeeping tasks. An outsourced bookkeeping service will set up a digital accounting infrastructure that gives you visibility into your books on an ongoing basis, and will then record transactions, reconcile bank accounts, and perform other routine bookkeeping tasks.
At a more strategic level, you can work with an outsourced CFO service that offers executive-level financial advice. These advisors help you raise capital, evaluate acquisition opportunities, and forecast budgets. Outsourced accounting services range in scope from tactical services like bookkeeping to these high-level advisory relationships, as well as everything in between.
Some generalist CPA firms offer outsourced accounting services, but if you’re a real estate investor, it’s likely you’d be better served by a specialized real estate accounting firm. These firms, including Hall CPA, have a proven track record of working with real estate investors and are familiar with the accounting standards required to be successful.
Interested in learning more about outsourced accounting services? Check out The Ultimate Guide to Outsourced Accounting for Real Estate Investors.
What Are the Disadvantages of Outsourced Accounting Services?
Let’s start by exploring the potential drawbacks of working with an outsourced accounting service. Common points of frustration include:
- Lack of Control: when you outsource accounting, you’re essentially handing over the keys to your financial infrastructure to someone else. Good partners take steps to ensure their clients retain complete visibility into their financial position, but working with an outsourced accounting firm does require you to accept a lesser degree of control.
- Requires Tech Literacy: outsourced accountants typically use digital platforms like Quickbooks Online to manage various elements of the accounting processes. If you’re not comfortable using digital accounting software, an outsourced accountant may not be a good fit.
- Virtual Relationships: many outsourced accounting arrangements happen completely online. You’ll still be able to call your accountant or hop on a Zoom call with them. But in most instances, it's unlikely you’ll be able to meet them, shake their hand, and look them in the eye. If that type of relationship is important to you, focus on finding a local firm.
With the right approach, it’s possible to minimize the impact of each of these disadvantages. Doing so requires a committed partnership with a firm that’s a good fit. This type of relationship can unlock many benefits with the potential to significantly accelerate the trajectory of your real estate investing career.
What Are the Advantages of Outsourced Accounting Services?
Outsourcing real estate accounting offers many advantages, particularly for investors who are still early in their careers. By outsourcing your bookkeeping and accounting processes, you can realize many advantages, each of which helps you reach your financial goals faster.
These advantages include:
- Access to Expertise: if you opt to work with an outsourced accounting firm that specializes in the real estate industry, you stand to benefit significantly from their skills and connections. You’ll be able to leverage best practices used by other investors, learn about advanced tax strategies, and be part of a wider community of real estate investors.
- Cost Savings: unless you have a huge portfolio, working with an outsourced accounting firm is significantly more cost-effective than hiring employees to do this in-house. At Hall CPA, our outsourced accounting services start from just $650/month.
- Time Savings: outsourcing accounting to an external provider gives you back countless hours you previously spent on menial bookkeeping tasks. Use this newfound time to work on new portfolio growth strategies, or just kick back and relax safe in the knowledge a well–qualified accounting team is taking care of everything.
Starting to work with an outsourced accounting service can represent a huge win for your real estate investing career. With the guidance, you’ll get access to advanced strategies that save you money, discover hidden opportunities in your portfolio, and optimize the performance of your investments.
Hall CPA: Outsourced Real Estate Accounting Services
At Hall CPA, our outsourced accounting team specializes in working with real estate investors. It’s our goal to help you get a firm grip on the financial performance of your portfolio so you can make better decisions and grow wealth faster.
Our process begins with an initial consultation to learn more about your business, followed by an implementation period where our tax experts set up a digital accounting system tailored to the needs of your portfolio. After that, we either hand the reins back over to you or manage the accounting process on an ongoing basis.
Interested in learning more about outsourced accounting services for real estate investors? Request a consultation today.