All Forum Posts by: David Kuhlke

How are you providing your records to the CPA?  If you're well organized, have summarized results, and are ready to go, it's a cheap date. Deliver a box full of receipts and that CPA is simply going to price you out.  Saves the time of telling you no and why.

You might look into securing some investment tax software and doing it yourself; there are several programs that are very good.  And/or get referrals and shop for the right expert who will charge you a fee that best represents the work in compiling your return.

Walk from this guy...

I use QuickBooks for my LLC. So I just send my guy the export. He does my LLC and my personal taxes for 1,500. A little higher than other quotes I've gotten but he answers an other questions i have during the year. And a big plus is he is the CPA for a lot of investors so he knows the ins and outs. Most CPAs charge by the hour so if you send him all of your docs in a need and orderly fashion it should cost less. As @Seidy Lasker said get the rates for doing your returns upfront when you go to the new CPA. When you interview CPAs ask a few other questions as well.  Who is actually doing the taxes, the CPA or an assistant?  What experience does the CPA have with other investors?  Will the CPA answer basic questions throughout the year for free or will you get billed by the hour for that as well.

You file seperately or jointly? If seperately, thats 4 tax returns.

In your situation Id expect to pay in the $1500 range for someone who knows what their doing. $400-$600....I can almost guarantee those returns are a mess.

@David Kuhlke

Most CPA's use three different pricing models when charging their clients

1) Fixed Cost based on complexity and your tax profile - This cost should come up to no surprise to you as the CPA would have told you the charge before starting.
2) Hourly - This is a little bit more complex as he will tell you his hourly rate. It is his goal for him to tell you how long it would approximately take based on information that you provided to him before starting.
3) Monthly subscription model - a monthly fee that is charged to you to help file your return and answer questions.

Firms with high prestige and many employees will normally have a higher charge to file returns.
Think of firms like the big 4
Smaller shops will likely charge a lower cost

Overall, I think your charge is high but it depends...do you have any entities holding the properties?(this would require additional entity returns) are your rentals scattered in different states?(This would require many state return filing obligations)

You may want to shop around for another CPA next year.
best of luck

It depends on the level of tax & retirement planning. Have you asked your friend what he is getting for the $400 to $600? Why aren't you using their CPA?

@David Kuhlke

Before talking cap rate, you need to clean up your underwriting.

-You can get the exact tax number by going on the auditors site and calculating the assessed value. If you are in a state where the property is reassessed at sale then plug the tax rate in based on your purchase price.

-insurance looks high at 1,000/unit/yr. I’ve seen this around 175-275/unit/yr in the Midwest - granted for larger deal sizes.

-capex - you should itemize your capex budget based on the condition of the apartments. If they need a lot of repairs best to get them knocked out early and with financing so it doesn’t burn a hole in your CF.

-Repairs and Maintenance is high but it looks like you could be including other stuff in here.

Overall, a 4.2 cap is very aggressive especially using proforma numbers. You would want to see how the property has been operating for the past year and get an idea what the trailing cap is. If there is opportunity to push rents or if the property is not being managed well, you may be able to see that with a good operation you can improve the revenue decrease expenses which will bring your cap rate up. If there is upside then that justifies the compressed cap rate.

What is your business plan with the property? Perhaps the 4% cap rate may be higher in the future. 

@David Kuhlke

I usually don't do my business thinking about the cap rate as much as I think on coc, I like at least 12-15% coc. Now I do business in the Midwest and where I invest I wouldn't consider paying over 50k per door, again I Brrrr this properties so they have to be bellow market value. Is this 11 door mfh turnkey? Also, if you make sure the property is all updated I'd reduce that maintenance expense. Good luck!