My CPA billed $1,400 for cleanup and I still can't say what I made

My CPA billed $1,400 in February for what she called cleanup and I want to understand what I'm actually paying for before it happens again.

The setup. Three single family rentals, gross rents $5,850 a month combined. One manager handles all three at 8 percent plus a leasing fee of half a month when a unit turns. Two houses are in my personal name, one is in an LLC I set up before I understood why.

The manager sends a PDF owner statement each month and deposits net. So in a month where they collected $5,850, took their $468, and paid a $720 plumbing bill, my bank shows one deposit of $4,662. That single number is the only thing hitting my records. My spreadsheet has been recording $4,662 as income, which means my expenses are invisible and my income is understated by the same amount, and I assume that's most of what my CPA was fixing.

What I'm deciding between. A bookkeeper quoted $250 a month, which is $3,000 a year against roughly $70,000 of gross rent. Or one of the landlord software tools at $15 to $30 a month where I key the statements in myself. Or I ask the manager for a CSV export of the owner ledger and keep the spreadsheet, which costs nothing except the hour a month I already spend being confused.

I got into rentals so I wouldn't have a second job. Three thousand dollars a year to avoid an hour a month is a bad trade on its face. The $1,400 cleanup bill suggests the hour a month isn't actually working.

Where's the real break point here?

5 replies

1chriswalton8CC1CPRO8

Different angle. Nothing in your post mentions capital improvements or basis. Over a hold of any length, the number that decides what you keep at sale is your adjusted basis, and that gets built from the closing statement plus every improvement you capitalize along the way. A $720 plumbing bill is probably an expense. A $9,000 HVAC replacement is probably not, and if it disappears into a netted owner statement nobody ever records it as an asset.

That's the part a $15 a month tool won't do for you unless you make it. It's also the part that's very expensive to reconstruct eight years later.

1paulgrant17PassivePRO5

Where do the tenant security deposits live, and do they show up anywhere in your records at all? If the manager holds them, they're still money owed back to tenants, and I'd want that balance on my own books rather than only on theirs.

1laurenkim53Passive

$250 a month is 4.3 percent of your gross rent. You're already paying 8 percent for management. Together that's over 12 percent of the top line going to people who handle paper, on three houses.

I run six doors in a low price market and I key the owner statements into a spreadsheet on the first Sunday of the month. It takes forty minutes because I built the template once. The trick is that the template has the same rows as the manager's statement, in the same order, so it's transcription and not thinking.

Ask for the CSV first. If the manager's software can export an owner ledger, and most can, half your problem is done for free. If they can't or won't, that tells you something about the manager.

2raj_mehta14CapitalPRO6

bramble, I want to be sure I understand. If the manager reports the gross to the owner and to the tax authorities, and marlow only ever recorded the net, then he looks like he received $70k and declared $56k, and the missing $14k is actually his deductions that he never claimed. So he overpaid rather than underpaid?

I find the gap between cash arriving in an account and income being earned genuinely hard to hold in my head. Marlow's example is the clearest version of it I've read.

My CPA billed $1,400 for cleanup and I still can't say what I made

5 replies