As you begin your real estate business, you need to begin thinking about securing your financial future. What I mean by this is you need to surround yourself with the people who can give you the best financial advice possible in order to save money for your future and keep more of your profits right now.
The first person you need to find is a good CPA (certified public accountant) who specializes in real estate and who will help you structure your business in such a way that you are able to get the most value and profit legally out of each property you buy and each deal that you do. For example, a good CPA will guide you on how to buy property so that you don’t end up with a “dealer” status. If you end up being considered a dealer, the tax ramifications are much greater. I will tell you up front that not every CPA is educated on real estate and you need to make sure you find one who specializes in this field. When it comes to tax preparation, real estate is a different animal and you need to have a CPA who can get you all the tax advantages that you are entitled to.
How are you going to find this person? Well, one way would be to interview some CPAs and ask some questions. Do they deal in real estate on a regular basis? Are they familiar with the deductions and the entities for real estate investing? Are they familiar with tax law regarding real estate transactions? Another way to find the right CPA for your business would be to visit your local real estate club and ask around. Who are the other investors there using for their businesses? Does your local real estate club bring in speakers? Who is the tax accountant or asset specialist they recommend? These are good ways to find the person you will want to work with. Once you find this person, you still need to ask a lot of questions.
You also want to be working with a CPA who can help you learn about all the tax deductions you are entitled to as a business owner, such as advertising, vehicle mileage for business use, home offices, education expenses, supplies, office furniture, charitable gifts and repairs to rental properties just to name a few. They will help you learn what expenses you are entitled to deduct and how to keep track of them so you don’t miss anything. Your CPA should be able to help you to structure your business deductions in order to get the highest allowable amount of tax benefits.
For example, instead of taking a client to dinner (this is only a 50% deduction) give them a gift certificate to their favorite restaurant which is a 100% deduction. This is the kind of advice your CPA should be able to give you in order to help you get the best tax advantages possible. Your CPA should be able to give you advice on which entity to make a purchase in or whether it should be a company expense or a personal expense. For example, should you buy your automobile through your business or personally? Should you buy or should you lease your vehicle? These are all important decisions that will not only affect your budget, but also your personal liability.
In my case, I don’t want to own anything I can own in another entity. This is a good way to prevent creditors and predators from taking what’s yours. You don’t want to own anything someone can take away from you, like your home for example. A good CPA will help you structure entities that will protect your personal wealth. To be continued…
