Along with a strong work ethic and a lot of patience, the most important trait for a landlord is organization. You have a tremendous amount of detail to keep track of and you never know when youll need any particular piece of paper or record. You need an organizational system that you can update quickly, get information from easily, and keep all your records secure.
Heres a cautionary tale that will make my point clear. I knew a landlord who needed to evict a tenant. The only trouble was, he couldnt find his copy of the tenants lease! He didnt remember exactly what the lease terms were and certainly didnt have the tenants signature on a document that spelled out the house rules. With no other options left, this landlord did something dangerous, unethical and even illegal he entered the tenants apartment, poked around until he found the tenants copy of the lease, ran out, made a copy for himself, and snuck the tenants copy back in.
Its easy to imagine what this landlord risked. If the tenant found out, he could have had the landlord arrested. Even if the tenant didnt press criminal charges, a housing court judge would certainly have dismissed any eviction complaint. By using, and sticking with, a system of organizing his records, the landlord could have avoided all this.
I recommend using property management software to keep all of your records organized. At the same time, you should have a paper filing system so that original documents are available when you need them.
The most important part of my system is the landlord software. It keeps all of your documents organized automatically by tenant, building and owner; this means that you can find everything related to one tenant, for example, by simply searching on that tenant. When you go to a tenant record, you can click on tabs to see the tenants rent status, incidents, maintenance issues, lease document and so on.
Of course, you have to enter this information into the rental property program, which does take a little time. However, thats nothing compared to the amount of time you would lose if you couldnt find a lease, or something else important. Also, landlord software is getting better all the time. You can now import some information from other sources, like Microsoft Outlook email, to reduce my overall workload.
The other part of my organization is the paper filing system, which should be designed to match the computer system as closely as possible. It would be great if we never had to deal with paper documents. Unfortunately, legal authorities just wont take our word for it that a lease document on our computers is exactly what the tenant signed. If we ever get audited, the IRS will want to see our actual bills, not what we recorded on the computer.
Because my computer organization is excellent, I almost never need to get anything from my paper filing system. The only way I would ever need anything from there would be if some third party, like my lawyer, needed an original copy of a document. Its much more likely that I will just need some fact how much was that utility bill? that doesnt require an original.
My system starts with the premise that I will save every document I get or send out regarding my landlord business. I may not have time to file documents whenever I get them, so I have a holding cell where I put documents before I file them. My holding cell is a cubby on my desk. I put my receipts, bills and what have you in there as soon as I get them; this is usually at least once per day. I never put anything not related to landlording in there. I never put anything related to landlording anywhere else, and whenever I take anything out of there, I immediately record it in the property management software, then put it in the proper place in my paper filing system.
At least once per week, I go through the holding cell and file each document. The system is a series of folders inside larger dividers. For example, I have one divider for each tenant. Within the divider are folders for photos, the rental application, the lease, any correspondence, and written summaries of any incidents that took place at the tenants apartment. Those tenant dividers go inside a larger section for each property, which also has dividers for (for example) bills by different categories.
This system requires a lot of file folders and dividers, as well as a fairly large file cabinet. Its not really portable and thats on purpose. I feel like every time I take a document out of my office, I might lose it. On the very rare occasions when I take something out, I would prefer to photocopy it, give the copy to whoever needs it, and stick the original right back in the files, where it belongs.
On the other hand, my property management software is portable. It runs on the Internet and I can access it from my laptop, or any other web-connected computer. That means I can get to my important records from almost anywhere. And, if I need an original paper document, I can get it in a day or two without much searching or aggravation.
For example, I can pull up a bill from my electrician and confirm that payment was issued, all within my software.
The convenience of my property management software lets me spend time on more important and fun jobs; making my properties more profitable, and finding new and promising deals.
The last step, of course, would be a backup schedule for my data. With my online rental property software, thats not necessary; because its hosted on a web server with constant backups. I know that whenever I need some crucial fact, I can open up my laptop, and itll be right there in front of me.