Should your co-buy group use an accountant?
You can probably count how many people you know who enjoy accounting, on one hand. Now try to imagine how many of those people would enjoy accounting for a group of co-owners. No one buys a new property with dreams of handling all of its accounting needs - odds are, they buy a property to enjoy it. So if you are co-buying as part of a group, is it worth hiring an accountant? Let’s take a look.
Without an accountant
It’s by no means impossible to manage a co-ownership without an accountant. If you prefer to do without hiring one, then here are a few tips you might find helpful.
Keep track of EVERYTHING. The “everything” in that statement covers a lot of bases, like receipts, expenses, and bills - these include things such as mortgage payments, monthly taxes, utilities, landscaping, insurance, cleaning, maintenance, and any pest control services you may require. If it applies, then keeping track of all rental income is a definite must, as well as any rainy day funds.
Consolidate responsibilities - assign all the accounting tasks to one co-owner. This will help avoid disarray and confusion, because the last thing you want is to have separate co-owners rummaging through emails and papers, trying to find and send important documents to each other at the last minute.
Create an account specifically for your property. The last thing you want to do is have to go through and pick out your personal expenses from your property expenses. The easiest thing to do is create an account just for managing the property.
With an accountant
If you’re struggling with the intricacies of accounting, hire and an accountant. It’s as simple as that. Deciding between cash and accrual accounting or making other important financial accounting decisions are much easier with the expert guidance of an accountant. By delegating the day-to-day financial management tasks to your accountant, you’ll be freeing up the time and resources for you to be able to make important, informed decisions regarding your investment.
An account will also help you file property taxes, which should ease your nerves if merely hearing the word “taxes” gives you instant anxiety. Also, having an accountant doesn’t mean allocating a bunch of time towards meeting with them. All you really need to plan for is working together to set up your finances with them, and then annual year-end meetings.
What we recommend
When in doubt, hire an accountant or at least make use of one of the many accounting softwares available. Of course, there’s no software available that can offer the same services as a good accountant. Yes, it might cost you a bit extra, but the time, effort, and, yes, probably money you’ll save in the long run will be worth it.
That said, if you’re dead set on not hiring an accountant, then we recommend simply trying one for a year. Give it a shot and see how you like it, if you’re still confident in your ability to do without one, then by all means do without. But you just might end up appreciating how a good accountant will make your that much easier.
Attorney Sam Alcabes
Nestment, Inc. does not guarantee and is in no way responsible for the accuracy of information provided in this blog post. All information is provided “AS IS” and with all faults. Data presented here may not reflect all real estate activity in the market. While the information on this site is about legal and tax issues, it is not intended as legal or tax advice or as a substitute for the particularized advice of your own attorney and tax professional.