Despite the hardships of 2020, the real estate market is booming. Globally, there is an expected annual compound annual growth rate (CAGR) of 3.2% that will amount to a valuation of $2774.45 billion this 2021. Largely driven by record low mortgages and a surge in millennial and Gen-X buyers, real estate agents can expect more business than ever.
With this influx in complex financial and legal requirements, real estate agents are turning to accountants for their expertise. Whether it’s crunching taxes or imparting advice for your business plan, there are many reasons why any serious broker or agent should have an accountant in their barracks.
What Can Your Accountant Do for You?
The most obvious advantage of having an accountant is sorting out taxes. An accountant can help you distinguish tax liabilities and deductibles that keep your funds circulating well. As economic experts, an accountant can also be your money manager, in that they ensure strategic cash flow for every client transaction. This is especially important in luxury real estate, where money can amount to millions. This assures you, your client, and your business partners that every penny is accounted for.
In the future, this is also integral in avoiding tax fraud and misfiling. A simple mistake can cost you your entire business in the eyes of the IRS. For budding real estate agents, an accountant can even help sort out commission rates that will ultimately dictate whether your business will be profitable or not.
What Kind of Accountant Do You Need?
The next thing you should consider is what kind of accountant you need. There are many specializations that accountants can focus on like government, public, corporate, and forensic. While all accountants are extremely well-versed in all things to do with licensing, filing, taxes, and computations, a real estate specialized accountant understands the subtleties of the industry. For instance, a real estate accountant can help minimize your business debt while maximizing your revenue. This can look like finding a different cleaning service contract for your open houses or calculating a more realistic (and profitable!) number of house flips.
In terms of training, there are many legitimate avenues that a person can take to become an accountant. Aside from the more traditional in-person accounting classes, online accounting degrees are just as valuable and respected as they also prepare students for their certified public accountant exam. So don’t discount accountants with an online education. Financial service professionals with a remote education even get business courses woven into their curriculum, and develop in-demand digital skills that can play well into their professional practice. And because of the increased demand for accountants in sectors like real estate, trading, and ecommerce, the US Bureau of Labor Statistics expects a 4% job outlook growth and a median annual wage of $73,560. Online degrees have become a respectable way for accountants to acquire their skills and experience, not to mention how it’s helping fill that talent gap.
Things to Ask Your Accountant
Are They CPA-trained?
Remember, all certified public accountants (CPAs) are accountants, but not all accountants are CPAs. If you can, opt to hire the former as they are licensed members of the American Institute of Public Accountants. Being a CPA is like a seal of credibility that is recognized in all states. That being said, accountants who aren’t CPA trained are still highly skilled and may offer their services for less—which may be more practical for smaller real estate companies or newbie agents.
Are They Comfortable Working with Lawyers?
Many times, accountants and lawyers are the two pillars any successful real estate agent needs to maneuver in the industry. As a team, they can advise you on whether you are considered a 1099 contractor, an LLC, or a legal corporation. Following this, an experienced real estate accountant can aid real estate agents in becoming creative financiers. This means that you will be knowledgeable on variables in crafting a successful offer, how mortgages can work for your client, how tax regulations play out in your state per property, and more.
Regardless, if you’re an industry greenhorn or a veteran, having a real estate accountant is an investment that will see you, your properties, and your clients protected for years to come. As the market continues to grow, arming yourself with an accountant now will keep your business thriving for years to come.
Article was specially written for joycerey.com by Alison Carter