CPA or financial advisor for tax advise and which house to pay off sooner

[Davin Pauline]

Hello!! We are looking for financial advice to look into our stuff and help us better decide which mortgages to pay off or how maximize the returns on our funds and give us sound financial advice. We have a tax preparer, but we feel like she doesn't have much experience in real estate to give us sound advice as to what to do in the future. I tried looking into it from the forums, but the financial advisors I found start off at 10K-- we are not earning that much that it be better if we use the 10K to pay some of the principal of our mortgage. We have 5 SFH rentals. Both me and my husband are currently working, so the excess, if we do have it, sometimes goes to one of our rental houses. Rentals have different interest rates ranging from 2.85% to 5.125%.

Where do I start looking for financial advisors?

[Randall Tannen]

@Davin Pauline

You can check with your local REIA and speak with other investors there to see if they may have some helpful referrals for you.

[Bill Hampton]

@Davin Pauline

I recommend finding an accountant/financial planner who specializes in real estate taxation, tax planning and financial planning.

You may want to consider working with your accountant remotely to expand your options.

I would also recommend looking for a accountant willing to work with you throughout the year. You want an accountant who can help you strategize and who is responsive when you want to know the consequences of the financial decisions you are making throughout the year.

There are over 20 real estate accountants on this site. Reach out to a few and see who you like.

You can also ask members of your local real estate investors association for real estate accountant recommendations.

Good luck.

[Account Closed]

Quote from @Davin Pauline:

Hello!! We are looking for financial advice to look into our stuff and help us better decide which mortgages to pay off or how maximize the returns on our funds and give us sound financial advice. We have a tax preparer, but we feel like she doesn't have much experience in real estate to give us sound advice as to what to do in the future. I tried looking into it from the forums, but the financial advisors I found start off at 10K-- we are not earning that much that it be better if we use the 10K to pay some of the principal of our mortgage. We have 5 SFH rentals. Both me and my husband are currently working, so the excess, if we do have it, sometimes goes to one of our rental houses. Rentals have different interest rates ranging from 2.85% to 5.125%.

Where do I start looking for financial advisors?

 Hello Davin, 

i would not recommend you spend the extra money on a financial advisor at this stage. Working with a proactive accountant who knows real estate will give you all the advice you need and more at this stage. No sense in paying off any properties at this stage given those golden interest rates you just mentioned. 

[Davin Pauline]

Quote from @Randall Tannen:

@Davin Pauline

You can check with your local REIA and speak with other investors there to see if they may have some helpful referrals for you.

 Thanks for the response! I will check those out.

[Davin Pauline]

Quote from @Account Closed:

Quote from @Davin Pauline:

Hello!! We are looking for financial advice to look into our stuff and help us better decide which mortgages to pay off or how maximize the returns on our funds and give us sound financial advice. We have a tax preparer, but we feel like she doesn't have much experience in real estate to give us sound advice as to what to do in the future. I tried looking into it from the forums, but the financial advisors I found start off at 10K-- we are not earning that much that it be better if we use the 10K to pay some of the principal of our mortgage. We have 5 SFH rentals. Both me and my husband are currently working, so the excess, if we do have it, sometimes goes to one of our rental houses. Rentals have different interest rates ranging from 2.85% to 5.125%.

Where do I start looking for financial advisors?

 Hello Davin, 

i would not recommend you spend the extra money on a financial advisor at this stage. Working with a proactive accountant who knows real estate will give you all the advice you need and more at this stage. No sense in paying off any properties at this stage given those golden interest rates you just mentioned. 

Thanks for the response. Are those interest rates good? We are looking to get more cashflow in because if we have more kids, we might only rely on one W2 income (and more on the income from the rental houses). We are not looking to expand since we also have our primary residence and paying PMI right now. Just lots of debt that I'm not too comfortable having. But yes, I feel like we don't need a finance advisor just yet, but more of just sensible tax/financial advice for some decisions to be made in the near future.

I feel like it's more advantageous to pay off one house to save on interest, HOI, and have some cushion for repairs for the rental houses. Other than losing out on the tax advantages, what other consequences are there for paying off a house? 

[Davin Pauline]

Quote from @Bill Hampton:

@Davin Pauline

I recommend finding an accountant/financial planner who specializes in real estate taxation, tax planning and financial planning.

You may want to consider working with your accountant remotely to expand your options.

I would also recommend looking for a accountant willing to work with you throughout the year. You want an accountant who can help you strategize and who is responsive when you want to know the consequences of the financial decisions you are making throughout the year.

There are over 20 real estate accountants on this site. Reach out to a few and see who you like.

You can also ask members of your local real estate investors association for real estate accountant recommendations.

Good luck.

 Thanks for the response. I will definitely look into it.  Appreciate it.

[Henry Clark]

I am not a financial advisor and not giving financial advice.

Reading through your post, your concern is risk management versus paying down debt, which might be a solution.

1.  From a straight interest rate standpoint and return it is better to not pay off your loans.   
2. Or pay down to get off PMI.

3.  Look at your personal resident and the rentals separately.

4.  Are your properties primarily cash flow or appreciation type investments?

5.  Lay out your cashflow by property.

6. Lay out your future Capex by property.

7.  Do any of the properties not fit your Buy box today?  Should you prune.

8.  How secure are your two jobs?  Does one make more than the other?  If you had more kids who would stay home?

9.  Do a cash flow with the one less W2 and an extra child or two, or with extra daycare costs.

10.  Can you offset lost income with doing more maintenance?

11.  Risk management. If things got tight, in order, which units would you sale?  What would be the cash impact to your situation and does it change anything as far as your risk?

12.   Do a sensitivity analysis.  What if?  One tenant doesn’t pay for 4 months?  One leaves and it’s $10,000 to clean up?  Etc.  

13.   What is your potential appreciation gains and how far out?  Do they beat inflation?

Key is to lay it out on paper.  Otherwise you will dream up the worst scenarios.  Basically look at potential failures and determine their impact.

Use the lookup function on my name and What happens if you die?  Go thru those items to help manage your risk.  

[Fulton Sanchez]

Davin, hi. You've come to the perfect place. We are over 20 experienced CPAs active in these forums, many of whom specialize in assisting real estate investors like yourself. We offer comprehensive tax planning and strategies, providing valuable insights that go beyond mere tax preparation. It is important to reach out to one with real estate experience as location is not an issue these days.

[Account Closed]

Quote from @Davin Pauline:

Quote from @Account Closed:

Quote from @Davin Pauline:

Hello!! We are looking for financial advice to look into our stuff and help us better decide which mortgages to pay off or how maximize the returns on our funds and give us sound financial advice. We have a tax preparer, but we feel like she doesn't have much experience in real estate to give us sound advice as to what to do in the future. I tried looking into it from the forums, but the financial advisors I found start off at 10K-- we are not earning that much that it be better if we use the 10K to pay some of the principal of our mortgage. We have 5 SFH rentals. Both me and my husband are currently working, so the excess, if we do have it, sometimes goes to one of our rental houses. Rentals have different interest rates ranging from 2.85% to 5.125%.

Where do I start looking for financial advisors?

 Hello Davin, 

i would not recommend you spend the extra money on a financial advisor at this stage. Working with a proactive accountant who knows real estate will give you all the advice you need and more at this stage. No sense in paying off any properties at this stage given those golden interest rates you just mentioned. 

Thanks for the response. Are those interest rates good? We are looking to get more cashflow in because if we have more kids, we might only rely on one W2 income (and more on the income from the rental houses). We are not looking to expand since we also have our primary residence and paying PMI right now. Just lots of debt that I'm not too comfortable having. But yes, I feel like we don't need a finance advisor just yet, but more of just sensible tax/financial advice for some decisions to be made in the near future.

I feel like it's more advantageous to pay off one house to save on interest, HOI, and have some cushion for repairs for the rental houses. Other than losing out on the tax advantages, what other consequences are there for paying off a house? 

 So it may make more sense for you to refi your mortgage as rates come down here and pull out some equity. That should give you and your family a significant cash cushion to relief any lost sleep around debt payments. I wouldn't pay off the house entirely, as you can deploy that cash into more real estate or stocks. I would suggest you build up a bit more liquid assets just to diversify and also have assets you can quickly access if needed. Not saying we would sell, but just the fact you can often relieve a lot of pressure 

[Steve Vaughan]

With savings rates so high I'd save in a money market mutual fund until I had enough to get rid of PMI on my primary.

In the past I paid off several 6%+ mortgages when savings rates were .4%     The mortgages were 12x higher than I could earn risk-free.  Now you earn more than the mortgage is costing.   

It makes no mathematical sense to pay down anything except to get rid of PMI. To feel more secure if that's the primary goal, I'd just save it in a money market account.

[Basit Siddiqi]

You will have two general thoughts on this topic.

First, payoff the mortgage with the highest rate. This will result in paying the least amount of interest over time.

Alternatively, people will suggest to pay off the mortgage with the lowest balance. The logic behind this is once you pay off the mortgage, you will obtain a level of satisfaction that will make you want to pay off the next balance faster.

Best of luck on whatever you decide to do.

[Arthur Flores]

I would recommend a fee-only financial planner to help you run a financial and investment plan.