Wednesday, June 22, 2016

Investing in Real Estate – Building The Right Team #4: Accountant

As the saying goes, “The only two certainties in life are death and taxes.” Continuing on in your journey of investing in real estate and building your team, you’ll need a good accountant to figure out the latter. Today we are going to talk about why you need a good accountant on your team and how they can help you succeed.

Why Do I Need An Accountant?

The main function of your accountant in relation to your real estate investing is to help figure out the taxable rental income attributable to your rental properties. They will help with filing your tax return, and provide advice relative to your situation and any tax planning that is necessary. All this would also apply to your employment income (if your employed) as this would all go on the same tax return.

How Will My Accountant Help?

Outside of the filing of tax returns, your accountant will help with general tax advice and planning.  Decisions an accountant can help with include:
  • Can you expense or amortize a certain repair or renovation?
  • How much depreciation expense should you take?
  • When is a good time to sell based on tax consequences?

An accountant will also help should you ever get audited by CRA. Basically they will help you within existing tax laws to maximize your after tax rental income, which is really what investing is all about.

What Should I Look For In An Accountant?

As a real estate investor, it is a definite plus to deal with an accountant that has lots of experience with real estate investors. Ask for references from other investor colleagues. Having an accountant with a Chartered Accountant designation is also huge plus.

How Much Will My Accountant Cost?

This will vary depending on your tax situation and the accountant you use. Some charge a flat rate for a comprehensive tax return and some charge per hour. One way to lower your bill will be to have all your paperwork organized for tax time so your accountant isn’t drowning in paperwork. This can be done with bookkeeping software such as Simply Accounting or by hiring a bookkeeper to keep proper records of everything.

In the business of real estate investing, it’s not what you make, it’s what you keep. You also need to be aware of exactly how much your investment properties are making so you can make any necessary changes to ensure your success. Keep diligent records with the help of your accountant and your cheque book will be happy you did!

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