Being a landlord requires you to do some paperwork. Make it easier on yourself by keeping the right documents on file for quick access.
If you believe wealth building should include passive income—generating a monthly income while doing little or no work—it can be hard to be a landlord. You might not feel the money your properties generate is truly passive. After all, you’re working hard. But there are ways to be more efficient and organized, especially when it comes to documentation.
Best Practices for Storing Documents
You can make your job easier by keeping certain documents handy. You should have instant and secure access to them, so consider storing electronic versions in a Google Drive or Dropbox account. Then you can access them via your mobile device or laptop computer.
If you’re only storing paper versions of these documents, then you’re leaving yourself open to damages caused by house fires, burglaries, or anyone who might want to sift through your papers.
Here’s our list of the documents you should keep on file (preferably electronically) for each property you manage.
1. Move-in Checklist
Having a move-in checklist documents the condition of the property before a tenant moves in. Barring normal wear and tear, your property needs to be in the same condition when the tenant moves out as when they moved in. If not, you can deduct the cost to repair any damages from the security deposit.
Without a move-in checklist, it could come down to your word against theirs. The move-in checklist helps both of you. If there’s preexisting damage to the unit, you can note it in the move-in checklist. This gives tenants peace of mind that you won’t charge them for damages they didn’t create.
Fill in the move-in checklist in the presence of the tenant. Then you should both sign the document. (Note: it’s also useful to take pictures or video of the unit during this time.)
Everyone who will live in your unit should fill out a rental application. If there will be a co-signer, or someone else responsible for the rent (parents, for example), they should also fill out an application. You will want to run a credit and background check on all parties who will be living and/or paying rent for your property.
By requiring everyone to fill out an application and by screening all applicants, you lower your risk of winding up with a tenant who doesn’t pay rent.
3. Emergency Contact
It’s a good idea to have your tenant provide you with a list of three emergency contacts. You can have this as a separate form, or you can add space for this information in your lease.
There are two main reasons you want emergency contacts. If something bad happened to your tenant, such as an illness or injury, you need to know who to call. Also, if the tenant moves out without you knowing about it, and they still owe you rent, you’d have a better chance of finding them.
No matter how relaxed and easy-going you think you are, you should always have a lease.
The lease will list all the tenants, and every one of them should all sign the lease. That way, you can collect the full rent from any one of the tenants, or you can break the lease if only one of the tenants violates the lease agreement. Keep a signed copy handy.
Your lease will state the rent amount, when it’s due, the ways you accept payment, and whether you charge a late fee. It will also include the lease term, such as whether it’s month-to-month or for a set period such as a year. The amount of the security deposit should also be stated in the lease.
Rules governing when you are allowed to enter the unit should be on your lease. You might wish to have an annual or quarterly inspection, for example. You will also want access for showings when it’s time to re-rent or if you decide to sell, and how that will be handled should be covered in the lease. You’ll also spell out when you can come in for repairs and maintenance and during emergency situations.
Define anything else that’s relevant to you in the lease. You might want to limit the occupancy, for example. This prevents the tenant from moving someone in after the fact. You should decide whether you allow pets, and include a clause about how many and what kinds if you do.
If you forget to include something in your lease, or if there is a special circumstance with your tenant, you can add an addendum to the lease. Just write up the changes, date the document, then all parties should sign it. Keep the lease addendum with the lease.
6. Mortgage and Improvements
Keep records of all mortgage information for all your properties. This includes refinance information as well. Along with that, you’ll want to keep a record of any improvements you’ve made, such as remodeling or additions.
Whether you or your tenant will pay the utilities, you should keep a list of utilities for each property. If you’re paying utilities, keep the name and phone number, or contact information of each utility, in your files. If your tenant will pay utilities, keep a list of the utilities for that property, and give it to your tenant before they move in. This will help your tenant have a smooth move-in.
8. Lease Renewal Letter
About two months before the lease period ends, you should send your tenant a lease renewal letter, if you want them to renew. The purpose of this letter is to determine whether your tenant intends to renew the lease or move out. Note: if you let the tenant stay in the unit after the lease period, but without signing a new lease, your tenant will become a month-to-month renter.
You should let the tenant know if there will be a rent increase in the lease renewal letter.
Keep a sample letter in your files, and fill in the specific information each time you send one out.
9. Move-out Letter
The move-out letter contains instructions for your tenants on what to do when they move out. Send this to your tenant a couple of weeks before they’re scheduled to move out. Let them know the date and time that they, and their possessions, need to be out of your unit.
Let them know that if they abandon trash or junk, you may charge them for the cost of removal. Explain that you would like the unit left clean and undamaged, and list your specific expectations. For example, you might want the fridge, stove, and oven cleaned.
Explain that they should lock up and tell them where to leave the keys. Also, ask for a forwarding address where you can send the security deposit (or an explanation of the reason you’ll be keeping all or part of it).
10. Move-out Checklist
The move-out checklist is same as the move-in checklist. You can go over this with your tenant prior to move-out to give them a chance to repair anything. Or you can perform a walk-through after they’ve moved out. Just make sure you document everything, especially if you intend to withhold any portion of the security deposit for damages beyond normal wear and tear.
Do you keep any additional documents for your rental properties? Let us know in the comments!