March 9, 2020

By Thomas O'Shaughnessy 

A lot of people think being a landlord is easy; you just buy a place, and start collecting rent checks. That’s true, to a degree. But there’s also a lot of peripheral work that goes into the job. Even if you hire a property manager to handle the 4 AM calls about clogged toilets, there are reams of paperwork and recordkeeping that need to be done--especially come tax season.

So what documents, exactly, do you need to keep on hand? Let’s go over some of the most important ones, and touch on why you should carefully file them away. 

A Note on Storage

But first, let’s quickly discuss methods of storage. You should keep hard copies, and, if possible, digital copies of all your documents. That way, if you need quick access to a certain document, you can use programs like Dropbox or Google Drive to pull them up, instead of going to your office and digging through files.

But you’ll still want to maintain well-organized hard copy files. If you have the bad luck of being audited by the IRS, they’ll want to see extensive documentation. If you can’t produce it, you could be in for some financial pain.

Where do you keep all this documentation? Consider investing in a secure, fireproof file cabinet for your peace of mind. And remember that the IRS can audit you for up to six years, so you’ll want to keep records going back at least that far.

Move-in and Move-out Checklists

When a tenant moves into one of your properties, you’ll want to carefully inspect the unit beforehand, and note the condition on a move-in checklist. This can help you avoid problems later if you and the tenant have a dispute over damages.

The move-out checklist, when paired with the move-in checklist, essentially paints a “before and after” picture of the unit. This can come in especially handy if you end up withholding part of the security deposit for damage, and the tenant protests.

Rental Application

This is the heart of your tenant file. This document contains all your tenant’s relevant personal information and allows you to run a credit and background check. Careful vetting of tenants upfront can prevent a lot of legal and financial troubles down the line.

Signed Leases

A lease spells out, in detail, the terms of the rental agreement. It covers everything from the amount of rent, to when it’s due, and any fees that are due. It also specifies how many occupants are allowed, whether pets are allowed, and when you can access the unit for maintenance or showings, if you decide to sell. Make sure it’s signed by all tenants, so those terms are fully enforceable.

Records of Improvements

Carefully document any repairs or improvements you have done on your rental property. These records can be useful in many ways; if there are problems down the line with the repairs, you’re protected. These records are also crucial at tax time if you’re deducted those expenses. And finally, when it comes time to have the property reappraised, these records can help you figure out if you’ve received a fair assessment.

Utility Records

Whether you’re paying the utilities for a property or your tenant is, you’ll want to keep a detailed list of utilities for each unit, including account numbers and contact information for the utility companies.

Lease Renewal Letter

If you decide to retain a tenant, you’ll want to let them know a few months before their lease ends. A lease renewal letter is a formal invitation to stay in the unit, and it lays out any changes or additions you want to make to your rental agreement, including rent increases.

Mortgage Records

Your mortgage papers tell you how much you owe, how much equity you have, and how much the property is worth in real, liquid terms. And if you’re planning on deducting mortgage interest on your taxes, these are some of the most important documents you can have when April 15th gets close.

Emergency Contacts

If something unfortunate befalls your tenant, you need to know who to contact. On the other hand, if they disappear without paying the rent, their contact list can give you some leads on tracking them down.

Tax and Financial Records

Taxes are one of the biggest concerns of any landlord – not only paying them on your yearly income but minimizing your taxes as much as possible when you sell your investment property.

If you haven’t incorporated, and don’t have any employees, you’ll likely report your rental income on the 1040 Schedule E form. You’ll have to attach detailed records documenting all your income and expenses from the previous twelve months, so keep that in mind throughout the tax year. Keep meticulous records of expenses like advertising/marketing, office expenses, legal fees, mortgage interest, and travel. A little time spent on organization can save you a ton of stress and frustration at tax time.

If you have multiple rental properties, you’ll have to fill out a 1040 Schedule E for each property. And as mentioned above, the IRS can audit you up to six years later, so don’t get rid of those documents after you file your taxes.