Finding a qualified tax professional takes time and work. It is all worth it in the end. The best tax professionals are selective in who they take on as clients so you will be vetted at the same time you are vetting. This is a good thing as you want a good fit for all parties involved because it is your investment and money is on the line.
It’s official. I’m back in the real estate business!
Before you get too excited, let me explain. Waaaay back in the day I was a third owner of a real estate partnership with my dad and brother. We bought investment properties of all kinds. We specialized in single-family homes, but owned plenty of multi-unit buildings, storage and rooming houses.
My partners were more along the lines of the silent kind. I, of course, could bounce ideas off them, but the workload fell on me. I hired maintenance staff and crews and was always interviewing potential property managers. Before we closed shop we had taken an interest in 179 buildings (not all at once). At the peak we had somewhere north of 80 units scattered all over NE Wisconsin.
We sold properties frequently once our inventory grew. We held some properties longer — our first property was one of the last to be sold.
The biggest risk most people have when it come to building wealth is putting all their eggs in one basket. Having one full-time job supplying you with 100% of your income means you are either doing well or in a crisis.
Wealthy people and large corporations have multiple streams of income and continually work to develop more. Sometime the failures are huge. New Coke might be an example. In my practice I’ve had ideas cost serious money go down the toilet. I’ve also had spectacular successes.
Multiple streams of income are the only way to protect your wealth creation program. The same applies when you reach financial independence and decide to retire. All your eggs in one basket is a bad idea. Imagine busting your tail for a decade and having all your money in Enron.
A few weeks ago I wrote about the massive tax benefits to investment property owners and business owners who also own commercial real estate using a cost segregation study. Some of you took me up on the offer and now are up for a significant tax reduction. Then the problems started. I didn’t anticipate the large number of tax professionals who didn’t know how to handle cost segregation studies on a tax return.
Before you call your tax preparer bad names, know most tax professionals rarely, if ever, see a cost segregation study in their office. When the rules changed a few years back I doubt 1 in 100 accountants handled their client tax returns correctly as it pertained to the repair regs and tangible property rules. The good news is the changes only required certain actions in the first year of accounting method changes. The bad news is that most tax professionals don’t know how to handle a cost segregation study on the actual tax return when a client comes in with one. Not to worry. Your favorite accountant will spill the beans on how to get it done right. No picking on your accountant either. This is advanced tax planning and tax law can be miles from tax application at times.
In the past I shared ideas that saved you $10,000 or more per year. I also shared numerous other ways to reduce your tax burden by smaller amounts. And, of course, retirement accounts and the Health Savings Account provide plenty of tax reducing power, too.
That is all small change compared to what I share today. Today the gloves come off. Today you will learn how to peal massive amounts off your tax bill. I am talking about taking six figures and more from the IRS and putting it into your pocket legally.
This program applies to investment properties and businesses with a building. All others can safely skip today’s post. Or you can read it and share it with someone who owns rental properties or a commercial building. You will make a lifelong friend if you do.
The most dreaded words a salesperson can here are, “I need to talk it over with my accountant.”
Accountants have a reputation for breaking deals. Behind the scenes we are actually called ‘Deal Breakers’ as a derogatory term. But the name isn’t fair. What we really are doing is protecting our clients.
The investor or business owner already thought of all the things that can go right. Accountants throw cold water on the deal by examining the numbers. They don’t always stand up to the hype.
During the 1980s and 90s I owned a lot of real estate. It started slow and exploded into a 176 building pain in the ass. To be fair, most of the investment properties we owned were either single family homes or duplexes. A few multi-family buildings, a boarding house and a storage facility rounded out the mix.
With so many properties running through my personal accounts and a partnership with dad and brother, I learned a few things along the way. One hundred seventy six buildings is a lot of buildings. Good thing I didn’t own all of them at the same time. Mistakes were sure to happen.
By the early 2000s the real estate empire was gone. I was burnt out and sick of working with tenants. Countless property managers helped us over the years, but it was not enough. Managing over a hundred units much of the time over a footprint covering most of NE Wisconsin took its toll. To complicate matters, I also ran my accounting practice with double the employees I have today (during tax season).
Starting slow was my greatest idea. It felt good to see the passive income filling the checkbook. Our teams of contractors allowed us to buy fixer-uppers and increase the property values significantly. Our best deal was the purchase of an upper-lower duplex in my hometown for $8,000. Hard not to make a profit on those.
Over the years I have used attorneys for a variety of needs. When I started a hedge fund the initial deposit was $25,000 and I was happy to pay it. We laugh at lawyer jokes and sometimes lawyers deserve the bad rap they get, but most of the time attorneys are a powerful part of your team preventing expensive problems before they happen. There is a reason why they are called counselors.
I encourage landlords and business owners to keep a relationship with an attorney. Buying and selling a property requires an attorney in my opinion and landlord/tenant issues can be reduced when a lawyer is consulted before actions are taken. There are also the surprise attorney needs. Who do you call when arrested for a DUI? (The first person who says Ghostbusters will be escorted out the door.) You don’t plan on certain events in life; they just land in your lap. Business owners and landlords have greater legal needs, but the average guy on the street finds himself in need of professional help a time or two in life as well (wills, probate, trusts, sale of property, et cetera).