Perhaps you didn’t get into real estate investing with the goal of becoming an expert at recordkeeping and filing.
It’s an important requirement when you’re renting out properties, however, and sometimes new landlords and investors can get sidetracked with what needs to be done to effectively document every procedure, every tenant, and every dollar that’s earned and spent.
We’re here to help. Here are 5 recordkeeping tips that will keep you organized and compliant with all the laws and requirements that govern rental properties.
Invest in Property Management Technology
You need a system for storing all of the information you collect on your properties, your tenants, and the maintenance and accounting that’s associated with your investment. A good software system will help you stay organized and keep the data you need at your fingertips.
Most property managers invest in some sort of online system that provides portals to tenants and owners. When you’re managing on your own, options may be limited. However, there are still plenty of systems out there that can help you with recordkeeping even if you only have one or two properties you’re keeping track of.
Maintain Digital and Paper Files
Keeping everything in the cloud is now the most secure way to collect and organize information. When you have digital files, you’ll be able to access that information from anywhere, whether you’re at home, at the office, or at one of your rental properties. It’s always available.
This doesn’t mean there isn’t also a place for paper files, even now when everything is automated. Keep both paper and digital files because you never know what’s going to happen or how you’ll need to provide an important document or piece of information.
Track Your Income and Expenses
Rental property accounting at the simplest possible level means accurately tracking your income and expenses.
At tax time, you’ll be required to demonstrate how much you earned on your rental property and how much you spent maintaining it. This has to be clear, accurate, and transparent. Even if you work with an accountant or a CPA, you’re likely the one who will be collecting the checks and paying for repairs. Make sure you can clearly see what you’re earning and what you’re spending on a monthly, quarterly, and annual basis.
Protect Yourself Against Potential Disputes
Good recordkeeping will protect you against potential disputes and conflicts. A great example is your security deposit. If there’s going to be a disruption in your relationship with a tenant, it will likely occur when they don’t get their full security deposit back. If you’ve documented the condition of the property before and after the tenancy, you’ll have the evidence you need to support a security deposit deduction. If you need to evict a tenant, you’ll have to provide proof that payment has not been made. Keeping good records and supporting documentation will reduce your legal risk.
Consider Professional Property Management
It may seem like too much – to set up systems and stay organized. That’s an excellent reason to hire a professional management company. We already have these processes in place. We’ll document every part of the rental process for you, and there’s nothing extra you need to do. This provides both protection and peace of mind.
If you’d like to discuss how we can help, please contact us at Action Properties.
