Real Estate Investing Secrets: CPA Insights for Business Growth

John Harcar (00:01.134)
Okay guys, welcome back to our show. I’m your host, John Harcar, and I’m here today with Chris Whalen, CPA. And what we’re going to talk about besides, you know, his journey in business and in real estate, we’re going to talk about how it’s really imperative to find the right CPA for your real estate business. Remember guys, at Investor Fuel, we help real estate investors, service providers, I mean really all real estate entrepreneurs, 2 to 5X their business. We provide the tools and resources to grow.

the business they want to grow, which helps them live the lives that they wanted to live. So Chris, man, welcome to our show.

Chris Whalen, CPA (00:34.583)
Thanks for having me today.

John Harcar (00:36.482)
Cool. Yeah, I’m excited to have you on here. Looking forward to talking about really finding the right CPA. I know this might be something that a lot of people struggle with to find the right person. But before we talk about all that, why don’t you tell our audience a little bit about your background, how you got into real estate, to being a CPA, and what brought you to today.

Chris Whalen, CPA (00:57.623)
Big, big thing happened when I was finishing college in the late eighties where my father who worked for a big company, he let me know that a lot of the newer hires were not going to be in the pension plan. They removed a lot of pensions. Even today, it’s hard to find a company with one. So I was an accounting major, of course, at the time. And I realized, so how am I going to replace a pension, which is passive income? And I said, thing I found back then is real estate. So part of what I’ve done since passing the exam and since 1990,

is to try to steer people towards having rental properties along with their normal 401k and other investments for retirement. But I want to use this as a cashflow kind of vehicle. It’s a pension replacement. So if you start with someone young at 30, 35 years old, there’s no reason why we can’t have a couple of thousand dollars net cashflow at 65 to replicate the pension. So I went to college here in New Jersey. I was a double major in computer and accounting. I programmed my way through school.

I had no student loans, which is nice. came out and I went to work for a great firm in Bridgewater, New Jersey. They specialize a lot in two things, forensic accounting, which I love, and real estate related accounting and taxes. So that started off in 1990, about 95 or so was on my own and I’ve been on my own ever since. And I’m specializing in businesses and in investment properties, as we talked about.

and I’m, I’m a sole practitioner here New Jersey. have a great, a tight team, about seven. And we’re, we’re, real estate all the time. So it’s really important for people. I mean, a lot of accounts and CPAs do a lot of different things. It’s very important to find one that has a lot of experience with real estate. Cause a lot of them don’t, a lot of them are just sort of fast food, 10 40 kind of prepares. And that’s, that’s not who you want to go to. and like I said, we’re here in, in, New Jersey and Red Bank.

John Harcar (02:47.427)
Right.

Chris Whalen, CPA (02:56.311)
I’ve been in Jersey my whole life, except at least in business. I have my kids here. I’m a grandpa now, so I love this area and there’s so much work out there. There’s so much misinformation about real estate investing. I get calls every day. The internet is full of misinformation. don’t go to an AI ask about real estate. I’m the AI. I’m the H I the human intelligence. Call me instead of going AI. Trust me.

John Harcar (03:09.55)
Mm.

John Harcar (03:22.698)
Right on. So I like to always go back in the past. Was there any influence in real estate in your life?

Chris Whalen, CPA (03:30.369)
Well, I did a lot of reading since I was 10 years old. had my grandfather on my mom’s side. That’s all he invested in was real estate. I grew up in Queens, New York, and he owned a bunch of properties in and around Queens. And that’s all he invested in. He taught me hard assets should be part of your portfolio. So he taught me all about the rental properties and I helped him do the accounting when I was a young guy. So I got very comfortable with it.

John Harcar (03:30.904)
Growing up.

Chris Whalen, CPA (03:59.863)
I think the big misnomer that he taught me is that if you ask a lot of people, they would tell you that real estate is more, it’s more of a risk than the stock market. And the opposite is true. I do a lot of seminars about this for investor groups, and I try to explain why it’s better. So if anyone out there is listening, being concerned, should I take money out of my portfolio and sell some of those equities and put something into hard assets? You really should be doing something.

John Harcar (04:09.838)
Hmm.

Yeah.

Chris Whalen, CPA (04:29.833)
If you will have all your assets in the market in stocks and bonds, that’s only one little universe. You’re, you’re, you’re, you’re at a lot of risk. So we want to diversify. I’m not saying a hundred percent, but let’s take out something and start to build a nest egg for pension replacement. The good thing about real estate as an investment in the long run in terms of retiring is that if I retired 65 with, with stocks to get money out of them, I have to sell them. Got to pay capital gains tax real estate.

It’s giving me cash every month without having to divest. It’s a very important component. Plus I love that it’s a hard asset. If I owned stocks, I wouldn’t know what to do with it. It’s cool. can’t even hold a certificate anymore. So real estate is a great way to build asset wealth, a good thing to leave to your children, and a good way to get set up for pension for retirement.

John Harcar (05:12.387)
Bye.

John Harcar (05:21.056)
Nice. When did you buy your first property?

Chris Whalen, CPA (05:24.919)
in 1988.

John Harcar (05:27.278)
Do you still have that first investment property? wow. Okay. Okay. Good for you. When you got into buying some of these properties and started investing in real estate, what were some of the struggles or maybe the hurdles to overcome or things that maybe just, you you had to work on?

Chris Whalen, CPA (05:28.991)
I do. I do.

Chris Whalen, CPA (05:44.023)
One of the main hurdles is that at first I was a little bit too enthusiastic thinking that I could do some of the maintenance work or the initial work to get it rentable myself. So finding a good general contractor who you can trust to be timely, that was a hard lesson for me to learn. So the first one I bought, I had to do some work needed to be done to it. And it took me probably an extra couple of months, four and four or five months, which is money down the drain on monthly costs.

Number one, I deal with a lot of couples that watch these shows. You know, in a half an hour you’re buying a property and getting it ready. And so if you’re not a contractor, you don’t have control of one, buy something that’s turnkey, you can rent it within 30 days. So that’s number one. Number two is you got to get used to banks and financing. It’s always a changing world. I have a bunch of hard money lenders I deal with and recommend, but sometimes you need to pay more interest than you think.

depending on how much, how much, what your debt to income ratio is. So, so there are, there are also each township has different codes. So you got to be careful. So you got to be careful who you rent to also. I, a lot of times some good advice is to use a realtor to list your rental, even though you’re going to pay a half or a full month of rent to them, but they’re doing, they’re screening people. A certain level of people come to realtors. So I’ve been over the years, it’s always worth it to go with a.

John Harcar (06:52.899)
Mm-hmm.

Chris Whalen, CPA (07:13.623)
a real estate agent to list it, even though it’s costing me something. The other thing too, I always try to get two-year leases from quality people. It sets me up to not have to worry about 12 months from now, if that makes sense.

John Harcar (07:27.788)
Yeah, that makes 100 % sense. those are some important things to take into consider. Now, what do you see a lot of people or mistakes people are making, whether it be when getting into rentals and or when hiring a CPA? Either one.

Chris Whalen, CPA (07:45.717)
Well, a main thing that happens is people believe they should have all these LLCs. They should have an LLC to own the property and then that’s in a holding company. And it’s really not, you really don’t need to, especially on your first one, you don’t really need to do that. The biggest mistake I see people make is they don’t have the adequate insurance. So everyone thinks they an LLC, they can start running people over. That’s their attitude. But you’re still going to be sued personally. Cause remember you have an LLC, you could be the owner, but you’re the landlord person.

John Harcar (08:04.046)
Mmm.

Chris Whalen, CPA (08:16.289)
So Chris Whalen owns Two Oak Street. If the cement is not fixed, I’m going to get sued anyway. So sometimes people have an LLC and they don’t want to pay too much for insurance and that leaves them in a very bad way. So getting the right insurance is the most important thing. A lot of my properties are not in LLCs at all.

John Harcar (08:30.754)
Hmm.

John Harcar (08:38.382)
How many total do you own?

Chris Whalen, CPA (08:40.151)
15.

John Harcar (08:41.614)
15, right on. What are you seeing as maybe some trends or things going on in either real estate world and the accounting world, et cetera? What are some things that you’re seeing that are becoming more mainline or maybe some things to look out for?

Chris Whalen, CPA (08:58.731)
Well, unfortunately rates are higher, which means that of course rates for investment properties. I’ve noticed that with the rates going up, that the underwriting is, you know, I was getting more stringent underwriters who are the warm fuzzy people. just want to hug them. know, they’re so, they’re so appreciative of your business, but, because the rates have gone up in order to get the same cashflow, people need to put more money down. So be prepared for that. If you’ve been researching properties in an area for two or three years,

and you haven’t really gone in and adjusted it for current rates, you really need to do that right now. And like I said, there’s a lot of properties out there. You need to learn to do an investability analysis. most realtors are selling forever homes, right?

John Harcar (09:44.728)
Mm-hmm.

Chris Whalen, CPA (09:47.031)
Excuse me. So this is the home, Two Oak Street. Over here, this door, it’s a family, forever home. And the realtors are good at that, but the same exact property over here in door number two is for an investor. So that needs to be analyzed for investability. So if you have a realtor right now that you deal with that’s bird dogging some things, you got to make sure they understand how to do investability analysis. The most important component.

is to know the fair market value rent. So a lot of times people are not buying in their immediate area. They’re maybe two hours away. Like a lot of my Jersey clients are buying in Eastern Pennsylvania. And so you got to really get a handle on what’s the fair market value rent. And only a good realtor will know that. having them at the ready is great. But I think it’s the money down. They’re going to want at least 30 % down on a rental, maybe even more now. So.

John Harcar (10:32.585)
Right.

Chris Whalen, CPA (10:43.401)
If you have old analysis you’ve done for an area, you need to pick that up and redo it to make sure that you’re in the right mind and you’re making sense with what you feel is going to be available for you.

John Harcar (10:56.44)
Got it. Okay. Well, let’s kind of touch on our topic a little bit of finding the right CPA. Like, why is that so important?

Chris Whalen, CPA (11:05.152)
Well, the right CPA, of course, is going to do the basic tax work for you for the rentals, but of course, they’re going to really look at your overall financial picture as well as work with your financial advisors. I always say the best financial planning has to start with tax planning. We need to save as much on tax as we can to get that to your financial advisors and roll into new properties. So there’s so much money that’s left in the government’s pocket. If you want someone who’s aggressive, but not stupid, too many CPAs are just taking numbers, putting them down.

And doing the return when that’s only 10 % of the return is getting the numbers. So you got to make sure that they’re very proactive. You want to see what, how many clients they have that have rental properties, that they have properties of their own. Get a, you want, you want to get their clients to call you, have a referral or reference. So whichever CPA you use, get five of them, references of rental, rental property owners that they service. And I can give you 300 or more, you know, easy.

John Harcar (11:56.43)
Five references.

Chris Whalen, CPA (12:04.513)
So then that’s something that people, so interesting with lawyers and accounts, almost it’s like this professional barrier. Listen, I’m just a trades guy. I’m doing tax work. Find out what my clients are saying about me. So ask them for five other clients that they’re doing high-end real estate for. And if they can’t give you that, well, nothing against them, but they might not be the guy for you. That’s all. It’s like, I always ask everyone I go to to professional.

or auto mechanic can have a couple of references. People don’t do it anymore. They used to a lot back in the 70s, but that’ll show you if they have any or not and you have to make a decision. they’re not really, nothing wrong with them, but they don’t have a lot of experience with it. Do I want to put my taxes in their hands? Because they’re going to be, at my expense, they’re going to try to learn all about it at one time.

John Harcar (12:57.326)
Right, right. What other things or questions should people ask a CPA or information they should try to find out before they make a choice?

Chris Whalen, CPA (13:09.267)
Are they going to be personally available to you? So like all my real estate clients, I have a team of seven here, but I do all the face to face. It’s got to be very certain, say, I’m not going to deal with Chris or a junior person. And my junior people might talk to somebody or my managers, but I’m always the one in the loop doing the work, reviewing the work too. So that’s the most important question. Are you going to be the point man that I can talk to at any time of the year?

then you’re going to be able to pull up my account in a moment’s notice and understand what’s happening. Because a lot of people that run CPA firms, they have no idea what’s happening with their clients. They’re just taking in the money and they’ll give you to someone else. But we have a great hive mind here. So I’m doing the work, so we’re reviewing it. At least a couple of CPAs have seen everything we do, at least two or three. So if you want to pin them down and say, are you my point of … When I call, I don’t want to get someone else. I want to get you at first, at least.

I might give them to someone else to talk about something or gather information, but they get to seeing your partner every time they call me.

John Harcar (14:13.592)
Very awesome, very awesome. What areas do you service? Do you do stuff nationwide? mean, where’s your customer base come from?

Chris Whalen, CPA (14:23.863)
And we definitely service all over the country and around the world. We have a lot of expats that live overseas who have properties here. have lot of foreigners that buy properties here. So we do a lot of foreign work in both directions. And I’d say I wouldn’t, I would take a client from anywhere if it’s US tax. So we do a lot of that work. You’ll be surprised how many people retire out of the country, but keep their rental properties here. Also,

1031, something we should talk about a little bit, 1031 exchanges if we have a second. So a 1031 exchange is simple. It allows you to take the gain of a property you have, you’re selling now, and you’re not paying the tax now, you’re deferring that because you’re rolling that gain into a new property. So the first question is, if you’re selling a rental property, first before you sell it, you need to talk to us because if you take money at a closing, we can’t do a 1031 anymore.

John Harcar (14:57.656)
Yeah, go ahead.

Chris Whalen, CPA (15:21.079)
It has to go to an exchange agent, usually an attorney. All right, so if you’re going to be selling a property and you don’t need the proceeds from the sale, that’s the key. Then consider, please, doing a 1031 because people do move. I have a client that moved to Florida, sold a large commercial property, and we bought another one in Florida. He wants to be close. We saved about $2 million in gain just doing a 1031. So before you take a dollar

If you’re thinking of an exchange, you want to learn about it, call me directly and I’ll go through all the facts to do what we can and can’t do. But the moment you take a dollar for the sale of an investment property, you can’t do a 1031 anymore. I get calls all the time. I sold it yesterday, what do I do? And I’m trapped. I can’t do anything.

John Harcar (16:06.594)
Right, got it. Well, very cool. If there’s folks that are listening to this that wanna talk more with you about hiring a new CPA or maybe just have questions that you might be able to answer, what’s the best way for them to get ahold of you?

Chris Whalen, CPA (16:21.299)
They can call me directly on 732-673-0510. My website is chrisweilancpa.com, just like my name with .com at the end. You can, there’s a contact form there and I take meetings, zoom meetings every day around the world. So I’m especially free people. I appreciate you having me on. So I definitely give a free phone call. Anyone that’s coming from, from you, I would love to help out and get to know them. So.

John Harcar (16:46.467)
Awesome.

Chris Whalen, CPA (16:48.681)
I’m always adding, just keep my information because you might have a question next week. Shoot me an email, say you saw me on the podcast, and I’ll get right back to you all the time.

John Harcar (16:57.844)
Awesome. Guys, take notes. We’ll put all his contact information down in the show notes so you guys can reach out anytime. Chris, I mean, I appreciate you coming on here. I appreciate you sharing all this information. It’s definitely some good stuff. You know, folks at home, I hope you guys enjoyed this episode. And we will see you on the next one. Cheers.

Chris Whalen, CPA (17:17.217)
Thank you everybody.