There are so many factors that contribute to the success of every rental property business and career. Factors such as the type of properties, the quality of its features, finding the right tenants, and managing the rental income well are the obvious ones.

However, there are things that are not as obvious as those mentioned above but are crucial to any player in the rental housing industry. That is why sometimes they are taken for granted. One example of this valuable element is documentation. 

The Purpose of Documentation

There are many benefits a landlord, rental agent, or property manager can enjoy when there is proper documentation of everything that goes on in the business. Such as:

• Mitigate legal issues.

Every business has a certain level of exposure legal issues and lawsuits. The rental housing business is no exemption. In the unfortunate event that you do encounter a lawsuit, having a thoroughly documented paper trail can save you.

For example, a tenant sues you for illegal eviction. If you have kept proof (e.g., signed documents, receipts, footage, etc.) of all the tenant’s violation that led to his eviction, it would be easier to justify your decisions in court. On the other hand, the lack of documentation would decrease your chance of winning the case because it would be your word against theirs.

• Tax planning

Keeping receipts of all your expenses can prevent you from paying taxes amounting to more than what you owe. If you keep those papers securely, tax planning will be simpler, and you would be prepared to prove your calculations to an auditor.

• Determining profitability

Income documentations like receipts of rental payments made by your tenants are helpful in profitability analysis. You want to ensure that you have accurate figures when calculating the return on your investment.

Not having a profitability analysis based on accurate figures might lead to mismanagement of funds, low income, bad business, or bankruptcy. Knowing the financial performance of your rental properties can help you determine which ones to sell, which ones to improve, the best area to invest, and other things you can do to help your business and your income multiply.

• Peace of mind

Knowing that you have protection against legal issues and that your business finances are in order is enough to give you peace of mind. The price of putting extra effort in documenting everything is worth it. 

What to Document

Documentation is not easy. You have to do it constantly throughout the operation of your business. But regardless of the effort it requires, it is important that you keep record of the following:

• Rental applications
• Disclosures
• Lease Agreements
• Rent payments
• Mortage and property tax expenses
• Maintenance and repair expenses
• Other expenses (e.g., gas to travel from one property to another, insurance, etc.)
• Communication with your tenants (emails, text messages, voice mail, etc.)
• Official notices (e.g., Notice of Eviction)

Safekeeping documents

There are many ways you can safekeep documents and ensure they will be helpful when you need them.

• Produce hardcopies and softcopies of documents.
• Make sure that documents are signed and dated as much as possible.
• Make backups. Save copies of your files in various locations like office drawers and cloud storage.
• Organize. You would gather tons of documents along the way. Arrange them in a way that you can quickly access them. You may sort them according to date, location, or whatever is easiest for you.

Online listings are also important to record. It is easier when you use listing-publication websites like Padleads. You keep track of them even when you syndicate them to other real estate websites. If you decide to delete them in the future, make sure you print a copy and take screenshots first. Better safe than sorry.