3 questions you need to ask yourself before going it alone
Many property investors forget something important: as a property investor you are a business owner.
That means you need to file a tax return with the IRD, and you need to do it properly.
So, ask yourself these 3 questions before heading out on your own:
#1 – Do I know how to be my own accountant?
Even if you do your own accounting … you still need to do it properly, and it often takes time to learn.
If it’s your first time, expect to spend 3–4 weekends learning how to do it properly.
You’ll need to:
- Learn the IRD’s website and system
- Figure out which forms to fill in
- Download your bank CSVs and categorise your rental income
- Understand the difference between principal repayments and interest payments (one is a tax dedication, the other isn’t)
- Get your head around depreciation (especially on chattels)
- Learn Excel functions like CUMPRINC to calculate the right deductions.
To be fair, the IRD does have a guide: IR 264: “Rental Income” that you can read.
It’s 66 pages and packed with jargon, so if you want to be your own property accountant you need to read and understand it.
It’ll take a bit of time, so ask yourself: Are you willing to spend your weekends buried in tax guides and spreadsheets?
Some people will say ‘yes’. Other people will say, ‘No way in hell am I doing that. I’ll just hire a property accountant and get the job done for me.’
#2 – How much tax can I save myself?
An accountant shouldn’t just be seen as a cost. They should help minimise your tax so you’re not overpaying.
And there are many tax rules accountants know that you might not.
For example, most property accountants will ask you to get a chattel depreciation schedule. This is something most DIYers either don’t do right (or don’t do at all).
That alone could save you $16,500 in tax over the long term.
If your accountant can help you save more tax than you would on your own … then they’re an asset not just an expense.
#3 – What is peace of mind worth to me?
The biggest thing you pay an accountant for isn’t the paperwork; it’s the confidence that your taxes are done right.
If the IRD launches an audit, your accountant deals with it (if you have one).
If you don’t have an accountant, you will be dealing with it.
If a tax law changes your accountant handles it (if you have one). If not, you’re dealing with that too.
