1.7 New Strategies in Leveraging Your Money in today’s Market.
Buying properties already up and profiting on DAY 1! (And use the banks 4.5% money for your 1st mortgage)
Get your down payment from a 401K (borrow form yourself not others)
Get your down payment from a whole life insurance policy (Put its cash value to use instead of earning an embarrassingly low rate of return)
Get your down payment from a commercial line of credit against your other rentals (yes, banks want to lend money now!)
Use cash for a down payment (Did I say cash? Yes, I said cash. When coming out of a recession and prices will go up and rents will go up and interest rates will go up, use cash. Trust me, you will get the best deal using cash
1.8 AVOID INEPT CPA’S: Fire-Up, or Fire Your Tax Advisor.
One of the biggest reasons why real estate investors (and others) pay too many taxes is bad advice from inept or overly conservative tax advisors. An article in Money Magazine revealed that 50 different tax preparers were given the same family’s financial records.
The Result: 50 different answers as to what the family’s taxes should be. And we are talking about significant differences as high as 54%, plus the amount of taxes due varied by thousands of dollars.
Most erred in favor of the IRS! Money Magazine also did an article titled, “Whose Side Is Your Tax Preparer On?” In many cases, it’s not your side! Unlike doctors, accountants are not formally categorized into various specialties, such as a “Tax Specialist” or a “Real Estate Tax Specialist.”
Here are some suggested questions of a prospective tax advisor:
How much is 2 + 2? If they say “4”, don’t hire them. However, if they say, “What would you like it to be!”…Then this may be the one to hire. That is, you do not want someone who is overly conservative. A conservative tax advisor is like a slow race horse — worthless! On the other hand, you do not want the tax advisor to be reckless, blundering, and imprudent. Remember the overall objective is to both maximize tax savings and minimize IRS problems.
Could you tell me about a recent tax change about real estate that may interest me? This will tell you how sharp and updated the person is about taxes affecting real estate.
Will you help me plan my taxes to ensure the best possible outcome under different scenarios? You do not just want a “bean counter” or “glorified bookkeeper” to simply put numbers on a form. You want someone not only to prepare your return but also to plan it. Expect to pay more for this. However, the additional investment could save you significantly.
What steps do you take to reduce the chances of my return being audited? This is an excellent test of their knowledge and willingness to be diligent and concerned about your tax situation.
Can you provide references from real estate investor clients as to your quality of service? When you are checking with the reference ask specifically, why they like the tax advisor. For example, did they come up with tax-saving ideas that others did not think of? Were they very thorough by explaining your tax situation?
Did they call you during the year to make tax-reduction suggestions?” Would you recommend them to your mother?” If the reason why they like them is too general or more personal than business, this may not be a good referral source.
You want a tax advisor who can: (1) Assist you in rethinking your tax situation under current laws, especially those affecting real estate, (2) Apprise you of tax-reduction opportunities (old & new), (3) Alert you to IRS “tax traps”, (4) Give you prompt, courteous service and (5) Be ethical. If you believe that your tax advisor basically has what it takes, have a candid discussion with them and see if you can help provide any missing links. If after your discussion, the tax advisor is not open to new ideas, then stop the bleeding and immediately get rid of them!
One thing is for sure, like a bad tenant… having NO tax advisor is a heavenly dream next to having a bad one.
Also, do not limit yourself to just someone “local”. With today’s technology, we are closer to each other than ever before, despite being many miles away. Don’t let physical distance get in the way of money-saving advice.
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