One thing that continuously surprises new landlords is the sheer amount of paperwork required to manage a rental property. If you are thinking about investing in a rental property and managing it yourself, you should definitely own a file cabinet; If you are more technically savvy, then you need to have a printer and scanner for your computer. Paperwork is a must when managing a rental property, because it will protect you and your tenants if any issues arise.
One question that I get asked a lot is, “What paperwork should be saved, and what can be thrown out?” My answer to that is save everything! There is no way to know what might become relevant later, so the easiest way to keep track is to keep everything in one place. Since we are in the technological age, this has become much less of a burden, but it does take some time to set up properly. However, this article is not about setting up your office, so I'll get back to the topic at hand.
All your communication with your tenants should be documented in writing, and this includes random, spur of the moment conversations in passing. Now I'm not saying you need to go out and buy a tape recorder and carry it with you everywhere you go, but a notepad is definitely a must. Make a note of all conversations, the time, date, and a brief description of what was discussed. This is good for many reasons, as it can act as a cheat sheet for getting to know your tenants. It can also be used to verify your records for tax purposes, but that is another article as well.
Any complaints, violations, notices, work orders, receipts, etc. should all be kept in the tenant file, with copies provided to the tenants. This file is your insurance policy in case of any disputes, and nothing bolsters an argument better than written, documented proof of what occurred, especially in eviction cases or other legal disputes. This is another reason to document all your encounters with your tenants; a record of all contacts could very quickly end any “he said, she said” type of arguments when it comes to legal matters. If you keep meticulous records, your odds of winning a tenant dispute improve dramatically.
Tenant files should begin with a renter's application, and include a copy of the driver's license or government issued id, credit reports, and any other information that you used when doing a background check of your tenant. From there the file should be expanded to include the move in inspection inventory list, and then any confidential paperwork generated during the course of the tenants' residence. As I said before, meticulous records are a landlords' best friend.
Once a tenant has moved on, I would not recommend immediately using that file as kindling. I have found that it is a good idea to hold on to that file for at least a year, as you may be contacted as reference for a departed tenant, and keeping those files are a good way to provide accurate information to the inquiring party. Nowadays, that is not very difficult to do, because most of your records should be digital; This will allow to keep a record exclusively, without having to invest in another file cabinet or building up massive amounts of clutter.
If you are going to invest in a rental property, I suggest you get comfortable with paperwork, and discipline yourself to document everything … it is vital to the success of your venture!