Developing Your Recordkeeping System
You may think you got away from recordkeeping by becoming a landlord. Nothing is further from the truth. You need good office skills — organizing, filing, using a computer or typewriter, and bookkeeping — to run your business. Think of it this way: You have to satisfy the bank, the city, the state, the courts, several federal agencies, and the IRS. You also want to know at a glance if your business is in the black or red.
The easiest way to keep things straight and understand exactly how you're doing is to keep good books. You'll have to find the system that works best for your tenant records, property management records, financial records, and maintenance and repair records.
Find a Corner for Your Office
Set up a home office with a filing cabinet, some shelves, a desk, a computer, and a printer. Figure out how you want to keep your books, and get organized right from the start while you're getting the apartment ready for your first tenant. If you delay organizing, you'll soon be buried under a mound of receipts that you need for income tax purposes. The rental applications, credit reports, and other tenant records also will pile up. All of these are essential business documents. If they're stuffed in shoeboxes or crates, whenever you need something you'll waste time hunting for it.
If you have to purchase a new printer, get one that is a combination printer, fax, and copier. That way you won't have to run out to a print shop or other store every time you have to copy a form.
Develop a Filing System
Some landlords throw unpaid, incoming bills into a folder. They have other folders for bank loan information, insurance records, paid invoices and receipts, tenant records, and all their accumulated rental applications. That may work for some, and it's a good start to getting organized, but it still means sorting papers and wasting time whenever you need to find something specific.
A folder stuffed with paper doesn't help you analyze and assess your business. In addition to keeping all those records, you need to transfer the information onto a balance sheet or another form to know at a glance how you are doing and whether you have a positive or negative cash flow.
Some landlords like to keep records in a three-ring binder with dividers. Others prefer filing cabinets. When you start out and have only one rental unit, a three-ring binder may be sufficient. If that sounds good to you, buy prepunched paper or a three-pronged paper punch, and some large envelopes or plastic sheet protectors for storing receipts and invoices.
A traditional filing system might give you more flexibility to make changes and additions to the records you keep. If you purchase file folders in five different colors, you can color-code categories. One color should be devoted to rejected rental applications. Use another color for tenant records, another for financial records, another for property management records, and the last color for maintenance and repair records. Then it will be easy to find the records you need every time you open the drawer. Remember to have your schedules or balance sheets at the front of each folder to save time when you look things up.
Use Your State's Landlord-Tenant Forms
You can find generic copies of certain forms, notices, and landlord-tenant letters in Appendix B. These forms will help you get an idea of what such forms will look like, and the type of information you need to get. But instead of using generic forms, once you know you are serious about landlording, get copies of the forms you need from a rental property owners organization in your state or from one of the websites that have specifically tailored documents for each state (see Appendix A). That way you'll be assured that your lease and everything else you use comply with state law. Use these official samples as master copies and duplicate them whenever your supply is low.
