All Forum Posts by: Aaron Zimmerman

Thanks for the informative post. Audits will be on the rise (albeit from low levels). The best audit protection are great records and documentation. For real estate professionals, that would be a time log (which ideally has the hours that count (i.e. not education hours). 

I am a CPA. Unless you're a real estate professional or doing the STR loophole, you can not use those losses against active income.

I would strongly encourage you to buy properties that cash flow or break even. This is a classic case of trying to let the taxes dictate the investment decision. There is plenty of tax planning opportunity with a property type of that size. 

You often get what you pay for. Cheap is expensive!

There are 7 tests to materially participate. The other two that are commonly used is (1) 100 hours and more than anyone's time in the activity or (2) substantially all the time in the activity. 

What are you using the materially participation test to qualify for?

Does the CPA have to be in Arizona? There are plenty of qualified CPAs on here that file returns in Arizona. I would recommend expanding your search to remote CPAs to get the best quality.

@Jonathan Small - it  seems like you have a great situation with your current set up. Are any of the accountants you have looking proactively for tax planning opportunities as well?

I usually spend about 10-12 hours on my taxes, if I had to take a guess. This is for 3 properties I use spreadsheets, that I also provide to my clients if they don’t have a good accounting system. 
it can be a lot of work with making sure you have all the receipts, issuing 1099s, ensuring you have deductions, etc. as such, I recommend doing bookkeeping monthly. 

what’s funny is that as a tax preparer and advisor, the majority of the time isn’t spent entering numbers on a return. It’s typically all of the work to get numbers to enter on the return!

Nicholas - I’d recommend reaching out to a few real estate CPAs in the forums, interview a couple, and see who you connect with.

Flipping has large tax implications, so you’ll want to make sure you get the right one. You will want to ask how you can qualify for real estate professional status as well. 

There a lot of great real estate CPAs on the forums. I’d recommend searching here as a starting point. You can also use the find a tax professional finder on BiggerPockets. Lastly, you could post in Facebook groups to see if there’s further recommendations.

I would say you need to play to your strengths, whatever those might be. Building a real estate portfolio might be attractive, but if you're crunched for time, perhaps you could do private lending in a SDIRA or get into syndications. You might achieve the same result you're wanting with less time expended. 

I think BRRRR would be quite challenging as a first deal in an out of state market, but that is just my opinion. You would really want to do your own due diligence and probably fly to the market(s) you'd like to invest in.