Tax Strategy for newbie investors

Rental Property Investor · Anderson, SC · Member since 2020 · 38 posts · 12 votes

BP Community, as a newbie investor in Rental Single Family properties what is something I should be starting as a foundation to my future rentals. I hear that if you wait until after a few rentals to contact a CPA and start a system, it becomes much difficult and could even cost you money (not saving money!) When it comes to tax season.

Once I started to begin my RE journey. I began tracking all my mileage and expenses via Excel Spreadsheet. Currently closing on my first rental planning to BRRRR after seasoning period.

Thank you all.

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Dave SpoonerPro Member

Rental Property Investor · Cincinnati, OH · Member since 2020 · 869 posts · 823 votes

@Jesus Sosa I would strongly recommend contacting a CPA that specializes in income and rentals as soon as you can. Consider them not just a vendor but an advisor. They'll give you tips and suggestions on how best to keep your data. They'll help with your management and acquisition strategy from a tax perspective. Their input is really invaluable and can save you thousands in the long run.

I would also agree with what others have said and look into software to help you manage the books. Rental management software can automate all the income for you and make the expenses easier. Quickbooks is also a solid tool for accounting but you will need to enter the data yourself. And of course you can rely on Excel, but you must be diligent with it.

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Bill HamptonBusiness Member
Accredited Investment Fiduciary, AIF®, Financial Planner, Tax Strategist, Real Estate Investor · Atlanta, GA · Member since 2012 · 2k+ posts · 977 votes
5y
Jesus,
Are you open to working with an accountant remotely? I recommend finding an accountant who specializes in real estate taxatiom. You may want to consider working with your accountant remotely to expand your options.
I would also recommend looking for a tax strategist who is willing to work with you throughout the year, not just when preparing your tax return. You want an accountant that can help you strategize and who is responsive when you want to know the tax consequences of the decisions you are making throughout the year.
Good luck and let me know if you have any questions.
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Aaron ZimmermanBusiness Member
Accountant · Chicago, IL · Member since 2018 · 2k+ posts · 1k+ votes
5y
I would either keep great records in excel or get an accounting software packaging that can compile reports that will be easy for your CPA to use. What I do (for my two properties) is just google sheets and keep all receipts in a monthly google drive folder. It's simple and straightforward. However, I do prepare my own taxes and am a CPA, so what works for me may not work for others.
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Dave SpoonerPro Member
Rental Property Investor · Cincinnati, OH · Member since 2020 · 869 posts · 823 votes
5y
@Jesus Sosa I would strongly recommend contacting a CPA that specializes in income and rentals as soon as you can. Consider them not just a vendor but an advisor. They'll give you tips and suggestions on how best to keep your data. They'll help with your management and acquisition strategy from a tax perspective. Their input is really invaluable and can save you thousands in the long run.
I would also agree with what others have said and look into software to help you manage the books. Rental management software can automate all the income for you and make the expenses easier. Quickbooks is also a solid tool for accounting but you will need to enter the data yourself. And of course you can rely on Excel, but you must be diligent with it.
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Ahad AliPro Member
CPA/Investor · Bronx, NY · Member since 2018 · 236 posts · 45 votes
5y
I would highly suggest speaking with a CPA first before progressing too deep into this venture. They can not only assist you with tax planning to mitigate taxes due but also can help with advise on other aspects of real estate like bookkeeping, management, etc. Especially try to speak with a CPA who has experience with and/or specializes in real estate. They will surely help you greatly to get you on the track.
Personally I use a QuickBooks software to manage bookkeeping as it really simplifies the process greatly. An excel spreadsheet is also a great and free route to go, just a bit more time consuming and need to be very meticulous with the detail and organization. As you are just starting out it can be fine but if you expect to grow then I would highly suggest looking at a software to do your bookkeeping or find a bookkeeper to do it for you.
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Basit SiddiqiBusiness Member
Accountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes
5y
@Jesus Sosa

I think the issues arise if you don't connect with a competent professional in the start is that you may do something incorrectly or create an entity that is not really required or the incorrect entity was set up.

Tracking your expenses in excel sheet is a good start.
I would also save your receipts in some sort of data storage(google drive, dropbox, etc)

Good luck with connecting with a CPA
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Jesus Sosa
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Rental Property Investor · Anderson, SC · Member since 2020 · 38 posts · 12 votes
5y
Thank you all for your inputs. I was able to reach out to a CPA in the local area who does specialize in Real Estate. He was able to assist me gave me the exact advice as you all did. I will continue to track my expenses, copy my receipt, and store them in my data cloud. I am very small at this moment, but will later grow an empire and begin implementing paid bookkeeping to reduce my involvement.
Happy New Year to all.
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