Keeping accurate records for a rental property is essential for any landlord. You’ll need to refer back to this information for tax purposes. In addition, you’ll want to keep accurate records to avoid any discrimination claims, prevent misunderstandings about the property’s condition, and for various other purposes that may arise.
Income tax and tax-deduction record keeping. Keep a log of all payments you receive from each of your tenants. Consider providing either a payment book or physical copy of a rental bill for each tenant, to make record keeping easier.
You’ll also want to save receipts and documentation for any expenses you incur for your rental property. This can include maintenance work, equipment, or furniture purchased for the property, such as new fixtures, plus all repair and cleaning costs. If you hire a property management company, keep records of your payments.
Individual tenant record keeping. For each of your tenants, keep a separate file that contains a copy of their signed lease agreement, an initialed copy of the walkthrough checklist, and a record of rental payments.
You can also use this file to record and track any problems or claims from your tenants. Any warnings or notices that you have given a tenant should also be noted in this file. In the event you ever have to evict a tenant, this file should include all the documentation needed when serving the eviction notice. Maintain all these files for at least five years after the tenants in question have moved out.
Additionally, you should keep current business, cell, and home telephone numbers for each tenant in this file, in the event that there’s an emergency or a problem with the property. This is especially important for absentee landlords.
You should also keep a copy of their written rental application and current reference list in this file. If a tenant leaves without paying his or her rent, this information may help you track them down.
If you accept security deposits for your tenants, include the information for any trust account established and any interest paid. If you have a large number of tenants, accurate record keeping will help you stay organized and be able to locate information on a specific tenant as needed.
Damage logs. Always take photographs of your empty rental units before your next tenant moves in, and make notes of any damage you discover over the course of a tenancy. Dated photographs or videotapes and damage logs can be invaluable if you ever need to prove that a tenant has damaged your property.
Property-specific information. You’ll need to keep a file that contains the deed for your property, mortgage information (if applicable), and copies of your insurance policies. Consider keeping this file locked in a fireproof file cabinet or in a safe for protection.
Computerized solutions. The use of computers has revolutionized the way landlords keep records. Instead of laborious handwritten notes, you can completely automate your record-keeping system, and reduce the amount of time and effort you spend updating rental records. However, you’ll need to make sure that all information is completely backed up, and that you have printed copies of these records as an extra safety measure.
There are specific software programs designed to assist landlords in managing their rental properties. Some programs will handle everything from checking references to monthly rental record keeping. If you do not currently use a software program or computer to keep records for your property, you may want to consider giving it a try. You may also be able to deduct the cost of such software as a business expense.