Some people are naturally detail-oriented; others gravitate to an organized chaos approach. In daily life, this doesn’t really matter, but when it comes to keeping proper records, detail and organization are key. One characteristic of a driven real estate investor is being organized, especially when it comes to property records.
A box of receipts in your office isn’t sufficient in normal life and it definitely doesn’t work once you’re a real estate investor.
Here are some of the records owners of rental properties should keep…
Getting rent payments each month is exciting as a real estate investor. Someone is essentially paying your monthly expenses for your property. However, each month, you should take another quick step to keep proper records.
Make and file a receipt each month when you’ve received payment from your tenants. You can make or find a receipt template online, fill in the basic information needed, and file the receipt. If your tenant pays by cheque, include a photocopy of the cheque. If they pay by e-transfer, download or take a screenshot of the transfer record so you have a digital copy you can print for your records.
Keeping proper records allows you to provide a history of rent paid or missed should it ever come into question by the tenant, or by you, the landlord.
All landlords should keep records of all rent receipts, but this is especially important for any rent to own properties. That’s because rent paid on time is a typical requirement for receiving a monthly credit which will be used towards the future purchase of the home by the tenant. You can learn more about rent to own investments here.
There are several documents you’ll want to hold on to around the time your tenant moves into your property.
You’ll want to keep a move-in checklist and property condition report that both the landlord and the tenant sign. Having this, included with pictures, that all parties sign is an important move-in record to have and hold onto should property damage occur. This is also a chance to make note of any repairs that need to be made at that time.
This walkthrough is like when you pick-up a rental car and they walk you around the car looking for scratches before you leave. That way you can’t be blamed for previous damage when you go to return the car. A walkthrough in the house makes it clear what the condition of the house is in before move-in and what condition the house should be in when the tenants move out.
The signed lease agreement is another important document you can file in this section.
Most people are good at keeping records of the income and expenses for a property handy for taxes each year, and that’s great! Did you know that it’s also important to keep records of basically everything that goes on with your rental property? Things like maintenance requests, when they were reported, when they were dealt with, and when they were completed.
Keep records of when you schedule your visits to the property, change the furnace filters and smoke/CO alarm batteries. This way no one can say you were a non-existent landlord, or for liability purposes, especially as more cities are taking a hard line with landlords and fire protection.
When working to keep proper, organized records for your investment property you should keep a physical hard copy of all records, but you’ll also benefit from keeping a digital copy too.
This means printing digital records and scanning physical records and saving them as a digital copy.
You may think this is overkill but maintaining a paper and digital copy of all of your records is a smart idea.
The digital file is handy if you ever need to send something to an accountant, or tenant, or whoever else may require a copy of a record.
Paper copies are important for having a physical copy if you’re audited or you need to go to court for whatever reason (i.e. tenant eviction, property damage claims, etc.). Organization is key.
Setting up an easy to follow system from day one makes future filing simple. You only have to set up the system once. If you’ve compiled a stack of paper and receipts, it can become daunting to sort and go through. However, if you have a filing system, each time you have a new receipt or document that you need to hold onto, you can easily put it in the right place in seconds.
Here’s an easy way to keep organized:
-Get a binder and insert dividers with labels (i.e. Lease Agreement, Move-in Checklist, Rent Receipts, Maintenance Records, Miscellaneous).
-You can either hole-punch and add the documents into the appropriately labelled section of the binder, or purchase 3-hole sheet protectors (or binder envelopes) that you can slide your documents into and then add them to your binder.
This way everything for the property is in one place and sorted by relevant topic, making it easy to find exactly what you’re looking for. Sorting receipts and records chronologically, and each year separate is also an easy step you can take to stay organized.
Digital copies are a little easier to maintain.
-Create a digital folder for each property. In the property folder, create additional folders for each of the sections you have in your physical binder (i.e. Lease Agreement, Move-in Checklist, Rent Receipts, Maintenance Records, Miscellaneous). In folders like “receipts” you can break it down by year, type of receipt, or another method that works for you that keeps things organized and easy to locate.
Pro Tip: Make sure every file is named. Try to stick to a naming convention i.e. Property Address-Rent Cheque-Date.
At the end of the day, find a way to organize and maintain proper records of your investment properties that works for you. It will make your life easier and have you investing like a pro.
This post is expanding on one of our 10 Crucial Real Estate Investing Tips for Driven Investors. If you have not had a chance to check that, please do so today.