Organizational Hacks for Landlords

In order for a rental property to be a lucrative investment, landlords must be able to manage their space effectively. This means keeping paperwork organized for tenants, the property, and most of all, for tax purposes.

From rental applications and invoices, to leases and inspection checklists, real estate investors tend to have a fair amount of paperwork to keep together for even a single property. With multiple rentals, it becomes a matter of survival to implement an organizational system for your business.

Here are some organizational hacks to help prepare your rental property for tax season, and stay sane throughout the year between tenants, repairs, and more.

Document Everything

Like any other business agreement, renting to a tenant is a transaction that requires documentation. Collecting everything, including all communication (email, text, and paper) with your tenant, can prevent any misunderstandings later if you have proof of all interactions and agreements.

Prior to Renting

During your screening process with a potential tenant, give them a rental application to fill out. Also, provide them with your contact information so they can reach you if they have any questions.

Move-in

After finding a suitable tenant, you will need to prepare yourself for their tenancy.

To stay on top of your duties, create a checklist of all the things you need to prepare for move-in day. This will include everything from signing the lease, to handing over the keys to your new tenant.

At this point, you should provide your tenant with a “move-in” package, consisting of:

• A copy of the signed lease agreement
• A copy of the inspection report
• Invoices for first month’s rent and an invoice for security deposit, if applicable
• Your contact information or the contact information for the property manager

You may also wish to offer them a list of nearby amenities if they are new to the neighborhood.

Most importantly, go through the lease with them, and clarify any rules that apply to their tenancy.

Filing System

Everyone has different systems for organizing their paperwork, but here are three typical ways to file information for your property.

Per month, per property (for taxes)

Creating a filing system will keep you organized throughout the year. Many landlords opt to organize their rental properties by using one folder or envelope, per month/per property. That way, come April, you have records of each month for each property. A traditional three ring binder also serves the same purpose.

Label each folder with the month, tenant, and property. Inside, store the following, by date:

• Leases, rental applications, walk-through inspection reports, tenant information, and a copy of tenant insurance, if applicable
• Dated copy of rent invoice for that month, statement when they paid, and a photocopy of the check
• Invoices for any repairs made, including equipment, materials, and supplies. Also, any service agreements or quotes given by repairmen.
• Receipts from advertising costs
• Notices (rent increases, repairs, termination notices, etc.)
• Records of tune-ups or improvements to property (e.g. last time the furnace filter or smoke detector was changed/tested)
• Photos/video footage of the suite pre-move-in
• Reimbursements to your tenant (e.g. if they had to purchase something for the suite)
• Copies of utility bills (water, heat, and electricity) if you receive these yourself

Filing your property using this type of system makes it easy to refer to at tax time because you have already organized all your documents in one place, and can easily pass them off to an accountant or be one step ahead when doing them yourself. Color coding these folders using tabs, such as “red” for receipts, “green” for repairs, or “blue” for tenant information, can further keep your records straight and tidy.

By tenant

In addition to filing papers according to month and property, you may wish to keep a file for each tenant, with records of their info and all other documentation (rental application, lease agreement, notices, inspection report, photo id, credit check, payment history, references, employment history, tenant requests/complaints, vehicle information, etc.) to keep track of their information, including the duration of their stay (move-in/move-out dates).

By property

Furthermore, having separate files for each property is extremely valuable and this information should be stored somewhere secure, such as a safe. This includes the property deed, insurance policies (premium/policy type/contact information), maintenance checklists/logbook, tax information, fire and electrical safety inspections, mortgage agreement, and loan/bank information.

Digital Files and Paper Documents

Try to keep both a digital and a printed copy of all your documents. That way you have a backup in case you lose one.

You may create folders on your computer the same way you create traditional ones, or host your rental property information on a separate flash drive for easy transport.

Finances

In preparation for tax season, keep an online expense spreadsheet (or an old fashioned ledger), and every time you incur a new expense for the property, record the date, amount, form of payment, type of expense, where it was purchased, etc. before you file the receipt manually in your folder or make an electronic copy. That way, you can have a running tally of all your costs throughout the year, and you will know exactly how much you have made (income record), the amount you spent (expenses), and a breakdown of the two to determine your cash flow analysis (also known as the income your property is bringing in).

Some of your expenses may be considered deductible items, which means they can be written off of your total income.

If you don’t have the time or patience to create your own spreadsheet, there are numerous property management software systems available online.

Some landlords opt to open a separate bank account for their rental property and conduct all transactions through this account. This depends on your personal preference or if you manage several rental properties. Whichever financial path you take, it’s important to keep your personal income and rental income separate.

Best Practices and Other Organizational Tips for Landlords

• If you are going to be traveling, or out of touch, let your tenants know in advance, and provide them with an alternate form of communication if possible.
• If you make any verbal agreements with tenants, make sure to follow these up in written form to protect both yourself and the tenant. For instance, if you agree that the tenant will maintain the property, and they will use your lawn mower and garden tools, ensure you have a signed statement added to the lease, or another agreement drawn up just in case.
• Alphabetize records by name and date.
• Color code your files.
• Store files in a secure place, such as a safe, due to the confidential information included on leases, credit reports, and the like.
• Set passwords to protect digital information.
• Cross reference repairs you made in the rental, and forecast/budget future repairs you will need to make in the coming years.
• Use a Smart Phone Scanner App to quickly turn paper files into electric ones.
• Backup all digital information onto an external disk/flash drive.
• Make use of agendas, calendars, or online time management software to keep track of appointments or rent due dates.
• Hold onto contact information from previous contractors, plumbers, and electricians, etc. to refer to when you need additional repairs.

The Importance of Organization

Developing a strong method of organization can help you manage your business more efficiently. A filing system, especially, can be your saving grace come tax time when you have to calculate your income, and determine your profits and losses from the past year.

Paying taxes is a necessary part of owning a rental property. If you keep your files organized, honest, and thorough, you will not only benefit from coordinated filing system, but also a profitable business.

Additionally, if you are not confident with numbers, you can always hire an accountant to see to your income tax returns. They are credible professionals who are up-to-date on tax laws, and who will help you determine if you missed a deduction, or if you’ve made a mistake in your expense report—all of which can help you avoid an audit.

How do you stay organized? Share you tips with us in the comments!