An important part of real estate investing is keeping all of your ducks in a row. When you start to own rental property, you will be sent all manner of documents that you will have to organize and keep at-the-ready. Examples include:
- Closing documents
- Financing documents
- Insurance documents
- Rental agreements with property managers
- Leases with tenants
- Tax bills from the city
- Assessments, violations, notices, etc. from the city
- Bills from contractors
- Contracts with contractors
- Receipts for purchases and investments in the property
This isn't 1985 so you're not necessarily keeping these documents in a hard copy in a drawer or filing cabinet. Most of them will exist online and you have to know how to get to them because you never know when an insurance provider wants a current copy of the lease or when a financing agent wants a copy of the insurance binder or you have to dispute a price with a contractor. Or worse! The IRS disputes a tax deduction and you have to prove that you did in fact buy that property an oven at Home Depot and not a jacuzzi for your personal residence!
The point is to keep everything organized from the word go! Here is how I do it.
I do keep hard copies when they are sent to me and I keep them in a file folder labeled with the property address and the year. So for example: 123 Main Street, 2016. This is NOT the folder where I keep the ownership and closing documents. Those are kept in a separate folder called 123 Main Street Ownership Documents. Use whatever naming convention you want but the point is to have a quick place to access these documents and keep your yearly records separate from your ownership papers.
I also keep digital records of all of these documents. If I get a hard copy in the mail, I make a digital copy using Scannable by Evernote. Best app ever! Then I file it in the EXACT same way that I file the hard copies. In an online folder called 123 Main Street, 2016. Separate from this file but in the same host folder is 123 Main Street Ownership Documents.
Do I keep these on my computer hard drive? Hell to the no! I use the cloud of course! I actually like to triple up because I'm an organization junkie. I keep the same documents in Dropbox, Google Drive, and our home shared Drobo using the same filing convention. This is WAY overkill so don't do what I do. Choose one and stick with it. None of them have ever failed me, ever! (Knocking on wood!!!)
Since we have a variety in our investment portfolio, I keep our information separated by the type of investment. So the main folder is Real Estate Investments. The sub folder is Cash Flowing Properties. The sub, sub folder is 123 Main Street. The sub, sub, sub folder is 123 Main Street 2015, 123 Main Street 2016, etc. and 123 Main Street Ownership Documents.
Now repeat for any notes you may have out to other investors, investments inside of IRAs or other investment funds, etc.
These systems take mere minutes to set up and keep up but they are oh so important. You don't want to be searching your email inbox for this type of information. That is a waste of time and energy.
And can you have a bookkeeper do this for you? Some of it. The receipt part definitely. But the ownership part and the contract part, well, unless you have a large real estate investment company with several employees, these are things you should be able to get to yourself. Maybe some day you'll hand it all off to your assistant's assistant's assistant bookkeeper. But if you're a home business like we are, you've got to develop good habits from the start. And anyway, it's back to school time so who wouldn't want this excuse to shop for office supplies!?