Whether you’re looking at getting into real estate investing, or you already own rental properties, you may be asking yourself if an accountant is right for you. Maybe you’re wary of handling the accounting on your own or perhaps you want to free up some of your time. Whatever the reason, an accountant can provide many benefits for you and your real estate investments.
Hiring an accountant can be an excellent choice for your rental properties. An accountant will help track your income and expenses, navigate a complex tax code and prepare your taxes, and save you time and potentially money. A certified accountant will also give you peace of mind that you comply with tax regulations.
While deciding whether to hire an accountant is dependent on your situation, there are many factors in making this decision. We’ll walk you through what accountants do and the many benefits they provide.
What Is An Accountant And What Do They Do?
In any business, accountants are keepers of financial information. They perform myriad duties related to the financial operation of your business. And they ensure you comply with tax laws and regulations. Here’s a list of just a few of the responsibilities of an accountant. If you’re interested in learning more, Ramsey Solutions has a good article detailing the roles and benefits of accountants.
- Prepare financial reports like income statements and balance sheets.
- Record financial transactions
- Audit your books
- Prepare and file tax returns
- Manage payroll
But the most beneficial thing accountants do is save you time. You can spend numerous hours every month just keeping up the books.
Difference Between Accountants And Bookkeepers
You have probably heard bookkeeping and accounting used synonymously, but they’re not the same thing. There is, however, some overlap in the tasks that accountants and bookkeepers perform. And for most people with one or just a few rental properties, an accountant is the right choice.
So what is the difference between accountants and bookkeepers? Bookkeepers can perform tasks like entering financial information in your accounting books, making payments, and handling payroll. Bookkeepers don’t have to have any certifications.
On the other hand, accountants are certified by the state and have to pass both certification and ethical exams. This holds them to a higher standard than bookkeepers. The biggest difference between accountants and bookkeepers is accountants can prepare your taxes.
Because of the overlap, and because you likely only require the service of a single individual, an accountant makes the most sense unless you have an extensive portfolio of real estate investments. If your portfolio is large, you should consider hiring both an accountant and one (or more) bookkeeper. This solution optimizes your costs because bookkeepers are less expensive than accountants.
Benefits Of Hiring An Accountant For Rental Properties
Accountants provide many benefits to you and your business. A good accountant will provide benefits beyond simply handling your accounting and tax preparation needs.
When you hire an accountant, you should discuss the role they will play within your business. Do you simply want them to prepare and file your taxes, or do you want them to play a more integral part in your business growth? Depending on how you use your accountant, you can enjoy the following benefits.
- Save time
- Find opportunities for reducing expenses
- Ensure compliance with tax regulations
- Prepare, review, and audit financial statments
- Provide insight into optimizing your business model
- Help plan for future growth and expenses
How Much Does An Accountant Cost?
While the cost of accountants does vary, on average they charge around $50 per hour. A more skilled accountant or a more complex set of needs will be more expensive. However, for a typical real estate investor with one or a few properties, the accountant’s job is pretty straightforward.
You can expect to either be charged per hour or per service by an accountant. Monthly services like balancing books or handling payroll will cost $200-300. The cost of tax preparation is in the same range. Thumbtack has a good resource breaking down the costs of accountants depending on their services.
How much should you expect to pay per year for an accountant? If your accountant manages your books, creates monthly financial statements, and prepares your taxes, you can expect to spend between $1000 and $2000 per year in accounting fees. The more properties you own, the higher this fee will be.
Can I Handle Rental Property Accounting Without An Accountant?
While we recommend hiring an accountant for your real estate investments, it is certainly possible to manage your books and file your taxes without an accountant. If you have a strong background in accounting and the tax code, you may be able to handle your accounting.
However, doing your accounting work does cost you valuable time and the decision to hire an accountant should consider this.
A better compromise might be to handle your bookkeeping while having an accountant generate and audit reports and file your taxes. Using a tool like Intuit’s Quickbooks can help you keep your books organized and make your accountant’s job easier (and less expensive).
Summary
An accountant can be very beneficial for most real estate investors. From ensuring proper bookkeeping to preparing and filing taxes, an accountant is sure to save you time and ensure you comply with ever-changing tax laws.
Deciding whether to hire an accountant depends on your circumstances and skills. If you’re unsure about general accounting practices or the tax code, you should highly consider spending the marginal fees to get help from a professional accountant.
Do you use an accountant for your real estate investments? If so, let us know what they help you with and how much they charge for their services.