If you don’t want to have a heart attack in 10 years, or maybe even sooner, I highly recommend hiring a CPA and bookkeeper.
First and foremost, when searching for a CPA, make sure they already work with clients who are doing what you are doing. The first question you should ask in an introductory email or phone call is, “Do you currently work with other apartment syndicators?"
If the CPA doesn’t know what apartment syndication is, then that’s obviously an indicator that they don’t work with syndicators. If they know what apartment syndication is but don’t work with any syndicators, that’s not necessarily a deal breaker — however, I would recommend finding someone else. You don’t want them learning the ins and outs of apartment syndication on your dime. You want a CPA who already knows the types of tax deductions you can take and understands the apartment syndication business model.
If the CPA knows what apartment syndication is AND they currently represent syndicators, you can move forward with an interview to understand their tactics. Ask the following nine questions:
- How are your fees structured? Get an understanding of exactly how you will be charged. Will there be fees for each time you call in? Can you give them a quick call every now and then and not be charged? Do their fees include the tax return at the end of the year, or is that separate? Do they charge a monthly retainer for conversations? How do they structure bookkeeping fees?
- Who will be your point person? When you sign up for their services, who will you be engaging with? Will it be someone right out of college, a partner, or a mid-level real estate CPA?
- How conservative or aggressive are you with the tax positions you take? Additionally, does the conservative/aggressive nature of the CPA align with your desires? If taking aggressive stances, how will that be communicated to you for you to understand and accept? You may rely on the investment CPA to prepare your tax returns but, ultimately, when you sign your tax return, you are taking responsibility for it.
- Does the CPA offer a secure portal to transfer sensitive files back and forth? Tax documents contain a lot of personally identifiable information (social security numbers, adjusted gross income, etc.) that shouldn't be sent via regular email. Stolen identities can wreak havoc on your personal and professional lives for years.
- How proactive are you with tax planning and how do your tax planning services work?
- Are you able to file tax returns for all state and local governments in the country?
- If you previously had a failed relationship with another real estate CPA, be upfront with your new prospective CPA about why it failed.
- What is expected of me as a client? Expectations should be set early and communicated clearly.
- May I have some references? No matter how great the interview goes, always ask for references in order to make sure they are legitimate.
After interviewing a handful of investment CPAs, analyze their responses, determine which one aligns with your interests and goals the most, and move forward with using their services.
One final note about CPAs/bookkeepers: As your business grows, your needs evolve. Moreover, a real estate CPA who you selected as a beginner apartment syndicator may not be the best CPA after your syndication business has grown dramatically, or if your business model has expanded to include other niches. So, as these changes occur, it may make sense to conduct additional interviews — even if only to confirm that your current CPA is still the proper choice — and make any personnel changes if necessary.
About the Author:
Joe Fairless is the co-founder of Ashcroft Capital, a fully integrated multifamily investment firm with more than $2.7 billion in assets under management, and the founder of Best Ever CRE. His podcast, the Best Real Estate Investing Advice Ever Show, is the world's longest-running daily real estate podcast with more than 500,000 monthly downloads.
