How much is a real estate investor tax client worth?

There are many things to love about dedicating your tax practice to serving a specific, narrow target audience.

When you niche, you get:

  • economies of scale
  • greater operational efficiency
  • reduced marketing costs
  • simplification of lead generation efforts
  • higher fees from specialized services

This is why I always encourage tax pros to niche, niche, niche. It’s simply the smart thing to do, and it’s what the large public accounting and law firms do. In fact, it’s usually how they get big.

On Monday, I extolled some of the virtues of real estate investors as a niche. Today, let’s look at the Lifetime Client Value (LCV) of a real estate investor client. This is a good exercise to go through with any niche you’re considering focusing on, by the way.

There are many different types of real estate investors. Residential, commercial, big, small. This exercise could be done differently for each of them.

But for illustration purposes, I’m going to step through this using a mom ‘n’ pop, buy ‘n’ hold rental property investor that buys one property per year. This happens to fit the profile for most residential real estate investors out there, and resembles what I do myself. The exact rental property acquisition strategy that I use is explained here if you’re interested.

I’m going to assume an hourly rate of $250 per hour for this exercise. Some readers charge less than this, some charge more. But this is a rough industry average.

Let’s begin with the 1040. I’ll use Dan Henn’s base fee of $600, and I’ll tack on an extra $250 for each property. If our new client has 1 property, that’s an $850 tax return. I’m betting that this is already more than the average tax return that many readers prepare.

This new client uses a property manager that uses the AppFolio software, as most do. This produces really nice bookkeeping reports. With that, we don’t have an ongoing monthly bookkeeping fee for this client. Sadness ensues. However…. There’s some annual work to reconcile those AppFolio reports, plus add in the receipts and whatnot that the client brings us personally. Let’s say that’s 2 hours of work a year, at tax time. So call it $500 for bookkeeping.

So now we’re at $1,350. Maybe nothing to get too excited about yet.

Let’s say that our client purchases 1 rental property per year. Just one. They’re not a math person, so they’re going to turn to your expertise in this niche to help them do deal analysis. Let’s say they have you do 5 of these before pulling the trigger and buying a house. Each one took about 20 minutes, so you bill at the half hour. That’s another $625 for deal analysis.

What about tax planning and personal finance coaching? At the most basic level, I would argue that even the simplest of real estate investor scenarios requires a few sit-downs with you per year to go over their budget, long-term goals, and basic tax planning moves. Even if you just do these hourly (which isn’t usually recommended), figure at least 3 meetings a year at an hour each. That’s $750 minimum for planning.

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Right there, we’re at $2,725 per year.

And quite frankly, if you saw what some of your peers charge for these services, you’d realize this is quite conservative. In fact, I already know in advance that I’m going to get emails from some readers saying my estimates are way too low, and just as many emails saying my estimate is absurdly high. All I can say about that is to do your own research and set your fees where you will.

If you also happen to have the appropriate licenses and are either set up with a broker-dealer or your own RIA, think about the financial advising fees you can add on top of this, too. Think about it — this real estate investor is also much more likely to have a securities portfolio than your average tax return client, right? Even fee-only financial planning can generate about $2500-$4000 in planning fees for the initial plan, plus an ongoing fee ranging from $0 to some percentage of assets under ye olde AUM model.

If you go down the RIA route, there are even financial planners that include the value of real estate in determining AUM fees. Yes, that does exist.

But even without the financial planning piece, this is a great tax client for a small practice. Am I wrong?

$2725 the first year. Then, because there are more properties in future years, the prep fee grows. $2975 next year. $3225 the third year.

This doesn’t even include normal price increases due to inflation. It also doesn’t include advanced tax planning, advisement on 1031 exchanges or other moves they might make, etc.

Over a period of 10 years, this client could easily bring in $35,000 in new revenue to your tax practice. And that’s the low end of things.

See why this is a great niche?

If you’re interested in pivoting your tax practice towards these lucrative niche clients, I’d like to offer you a brand new marketing toolkit that will help you attract these clients.

To forewarn you, this marketing toolkit is built entirely around public speaking. If you’re scared to death of public speaking or flat-out refuse to do such a thing, then this marketing toolkit will be of no interest to you.

But if you’re open to speaking in front of investor groups, then you’ll find that doing so can be one of the most successful ways to generate new clients.

Here’s what you’re going to receive with this brand new marketing toolkit:

  • PowerPoint presentation for doing a 30-40 minute presentation.
  • Four blog posts to help you advertise your presentation, either on your own website or as guest posts on other sites.
  • Two video scripts for creating YouTube videos, LinkedIn videos, or even Facebook Lives to promote your presentation.
  • Ten different email templates to use as follow up emails at various points in this marketing funnel.
  • Seven example social media posts to drip out to advertise your appearance.
  • A 17-page Quick Start Guide showing you how to use the various content marketing assets.

Notice how it all forms a marketing funnel? Yep, that’s the idea. 🙂

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It’s taken about two months to assemble this marketing toolkit, and I haven’t done so alone. Working with me on this project is a copywriter and digital marketing expert that has collaborated extensively with businesses like Digital Marketer and Infusionsoft, and worked with folks like Michael Gerber and Sharon Lechter. His name is Chris Groote, and you’re going to be hearing much more about him from me in the coming months.

As a special bonus, I’m including a copy of my 2-hour public speaking training course, titled Public Speaking for Pain & Profit. In that training, I share many insights into how to position yourself and actually get clients from your public speaking endeavors.

You can get this marketing toolkit, and the bonus training, for only $997.

Ready to increase the profitability of your tax firm? Get your copy of my new book, Profit Optimizers: 12 Big Ideas for a More Profitable Tax Firm