The Importance of Keeping Detailed Records for Your Rental Property

Proper record keeping for your rental property is not just good practice, but essential. It helps you stay organized and protects you from potential disputes simultaneously. Below outlines the importance of rental property record keeping, along with methods to do it as accurately as possible.

Why is Record Keeping Important?

Preparation for Tax Season

Rental property owners should keep accurate records of income and expenses to support their tax filings and potential audits. Essential records include payroll tax records, withholding records, and tax returns. Practice record retention for at least four years up to seven years, as they can be used to resolve issues with the IRS.

Income and Expenses

Tracking income and rental expense records allows you to assess the profitability of your property. Financial records can even be used as proof of income to secure financing or refinance loans when you intend to expand your rental property portfolio.

Legal Protection

Property owners can protect themselves by maintaining accurate rental records, including lease agreements, tenant applications, and notices. They can serve as evidence should disputes or legal issues arise with tenants.

Lease Management

Keeping records of rental agreements helps you manage rent payments, security deposits, and other fees when needed. Your tenancy timelines will be organized, and you can adjust the deal during lease renewals.

Maintenance Tracking

It's challenging to keep up with all the maintenance duties you have, let alone what you've already accomplished. Detailed rental records of completed maintenance can demonstrate how well you have taken care of your residential rental property, as well as which tasks still need to be done.

Good Record Keeping Tips

Go Digital: Electronic record-keeping is gaining popularity due to its convenience and security. You can use property management software to do so, or scan paper receipts when you have physical documents for financial transactions.
Automate Records: Some tools come with automation features that allow for immediate rental record-keeping for every transaction.
Keep Paper Records: Although digital records are efficient, they are not always reliable. Keeping physical records means you will have a backup when your files are corrupted or deleted.
Preparation: Gather the necessary documents in advance. If you're fulfilling tax obligations, for instance, set aside records of rental income, deductible expenses (ordinary and necessary expenses), and other relevant transactions.
Retain Records: With all the transactions that occur in your rental business, rental paperwork and records can accumulate. However, you may need those records for at least four years as supporting documents to back up your tax return if the IRS audits you.
Use Separate Bank Accounts: Numbers can all blur together if you keep them in the same bank account. For effective record-keeping of bank statements, use separate accounts for expense management. For instance, your rental income should not be stored in the same place as tenant security deposits.

Hiring a Property Manager Covers It All

Real estate investors sometimes opt for professional property management so they don't have to worry about keeping rental documents, worrying about property taxes, or overall rental property management.

Green River Property Management can maintain your records and provide access to digital record monitoring through our tenant portal.

We can generate reports, file taxes, and handle other management duties like marketing your rental real estate, tenant screening for prospective tenants, and maintenance of rental units.

Leave your worries to us, and we will ensure that we maximize the value of your investment property. Contact us and let's talk about how we can help.