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Should real estate investors work with a specialized CPA?
What’s the difference between a specialized CPA versus a traditional CPA?
These are important questions to ask, and whether you’re just getting into the real estate investment game or you’re a seasoned investor, you’ve made a good play:
- The National Association of Realtors is forecasting a rent growth of 10% by the end of 2022. This is up from 7.8% in 2021. The rental market has seen a major upswing post-pandemic, and work-from-homers are keeping this number at record-breaking highs.
- Short term rentals are easier than ever to benefit from, not only through rental income but because you can use the short term rental loophole to reduce your tax burden.
- PwC points out the “impressive economic staying power” of fast-growing real estate markets nationwide, making real estate a top choice for people who want to build long-term wealth.
Real estate is one of the surest bets in this or any economic climate, and finding the right accountant to handle your books, taxes, and planning is imperative to long-term success.
This article will explore the questions posed above, describing the difference between specialized versus traditional CPAs, and what considerations go into this important decision.
At Hall CPA, we work exclusively with real estate investors. This is an important differentiation from other firms. Because of that decision, we are uniquely positioned to offer elite industry insights and assist in strategic planning that sets you up for success. Should you work with us? Go here to find out.
Generalist CPA Versus Specialized CPA
A generalist accountant or CPA is someone who works across all industries. They know a little bit about a lot of things and are valuable for assisting with generic tax returns, uncomplicated bookkeeping, and other typical accounting functions.
Why People Leave Their Generalist CPA
Because we are specialized CPAs, a lot of real estate investors come our way because they are leaving a generalist CPA, and here are the biggest complaints they have about their CPA:
- They don’t give unique tax advice
- They don’t understand real estate
- They are non-responsive to my questions
Specialization has become increasingly common over the past few years.
CPA Specialization
The sheer complexity of tax laws, regulatory environments, and industry-specific considerations have made nicheing a valuable activity for some accounting firms or accounting professionals.
Specialists dive deep into a specific industry: for instance, working exclusively with restaurant owners or nonprofits or (in our case) real estate investors.
General Accountant vs. Specialist Accountant
Generalist accountants are often ill-equipped to handle industry-specific issues. They simply can’t go deep in any one area. In the world of real estate accounting, this can be a pretty big disadvantage.
Real estate taxes, deductions, and strategies are highly specific and well-regulated. A general accountant probably won’t know tax strategies, all of the deductions available to you, and how reporting works in every situation.
At the end of the day, a non-specialized accountant could actually cost real estate investors money, for the sheer fact that they don’t know what they don’t know.
Specialized Real Estate CPAs: Knowledge Base
Here are some examples of things that a specialist real estate CPA will know:
The Short Term Rental Loophole
Short term rentals can be a jackpot for real estate investors. The STR loophole is a major tax strategy that investors must take advantage of. But, there are very specific criteria you have to meet and very specific reporting processes. If your CPA doesn’t know about this, you’re missing out on huge tax savings.
Depreciation
When it comes to reporting real estate on your tax return, you have to report depreciation. Amazingly, we have a lot of tax returns brought to us that don’t even have depreciation on them. It’s a very basic principle of real estate accounting but, of course, a generalist may not know about it. Your specialized real estate accountant will.
Intricate Strategies
As you go into real estate investing to make money, part of your ability to do that is navigating things like 1031 exchanges, installment sales, cost segregation studies, using bonus depreciation, using the real estate professional status wisely, and plenty more.
Every situation is unique. You not only need an accounting professional who understands this, but one who will take time to understand you. This means ongoing advisory services: learn more about ours here.
Real Estate Accounting Specialists: Advantages
In addition to knowing more about the field, a real estate accountant will provide some strategic and tactical advantages as well.
Client Base
A specialized real estate CPA is going to have a client base that is predominantly or exclusively real estate investors. This means they’re going to always be gathering information and gaining insights into best practices and strategies for accounting in this space. It gives you a huge advantage to work with a professional who has access to all of these ideas and tactics.
Network
In addition to having a full bench of clients just like you, specialists in real estate accounting will have a network of professionals who can provide additional services. This includes relevant vendors, including 1031 exchange agents, cost segregation companies, attorneys, lenders, etc. That network could provide a benefit to your business, and save you a lot of time in vetting for services you’ll need to operate or grow.
Personal Experience
A cherry on top is the fact that many of our accountants who work with real estate investors are investors themselves. This personal experience enables them to speak your language, because they are literally operating in the same space. They can level with you, giving you personal advice based on their own work.
Hall CPA: The Real Estate CPA Specialists You Need
At Hall CPA, we are real estate specialists a cut above the rest. We are one of the handful of firms in existence that offer tax planning services (not just tax preparation). Our team of specialist accountants can help you forecast, plan, and strategize, maximizing profits and enabling you to achieve your investment goals… faster.
With our team, you get access to ongoing support. We’re responsive. We’re knowledgeable. We’re specialist accountants.
Learn how to work with us for tax planning, and so much more.