Landlords and property management companies have a heavy load of paperwork.
From tenant screening documents like applications, mortgage records, property insurance documents, and management fee receipts to property expense statements and tax records, it's a document-intensive business—and you can't afford to go wrong on documentation. Moreover, each property and each dwelling (if the property houses several tenants) must have these tenant files recorded and stored separately.
With so many papers to keep track of, it's hardly surprising that landlords and property management companies often are confused about what types of records to store, how long to store them and how to comply with document retention policies for taxation and audit requirements.
But apart from complying with regulations, you also want meticulous expense and income records for all the properties you own to be able to track your business's revenue, profits and growth and get insights into where you can save costs, build efficiencies or improve your profit margins.
Perfect record keeping for property managers: The ultimate document list
The primary documents that all landlords or property managers must keep include:
- Rental income records for each property, including lease agreements, tenant applications, and tenant income details.
- Expenses incurred for each rental property, including mortgage payments, insurance premiums, and repair and renovation costs.
- If your property management company has employees, you must retain payroll, employee tax, and insurance records.
- Document proofs for the above income and expenses, including repair work payment receipts, payment stubs, bank statements, and more.
A lot of the information in these documents is sensitive PII and financial records, which have stringent data privacy and data storage compliance norms.
Retention periods that property managers must adhere to for compliant record keeping
Generally, property documents for landlords must be retained for a period of 6 to 7 years. The IRS recommends that you keep tax-related documentation for at least three years after filing the applicable taxes as tax inspection paperwork.
Property deals and agreements can run into litigation for any disputes or disagreements between the tenant and the landlord. So, most rental property owners will keep records for a minimum of seven years so that they have documentary proof to fall back on in case needed. Additionally, if any discrepancies are found in a financial audit, for example, if an attempt is made to write off debt incorrectly, authorities can ask for documents that go back as far as seven years (depending on the statute of limitations applicable for that state.)
For your own organizational needs, you may want to keep certain income and property papers even beyond 7 years.
Costs of maintaining paper records
The main question about record keeping for property managers is how to store and manage document archives securely and affordably. The cost of maintaining paper records for rental properties is very high. You must account for the cost of paper, printing ink, binders, filing cabinets, and the cost of real estate for storage. Then there are human resource costs for managing documents—it may be a percentage of time spent by employees or a dedicated recourse to manage documentation. Each year of operation and every additional property you deal with will only increase the administrative burden of paperwork on your company. Moreover, your risk of loss of documentation due to natural calamities, theft or data leaks keeps growing as your archive increases in size.
Is digital record keeping the ideal solution for property managers?
Scanning business documents is the first step in going digital. It allows you to store years of records without the cost of additional storage space.
DRS Imaging specializes in secure scanning for document-intensive industries. We have state-of-the-art SOC-certified facilities located throughout the US. We manage your document digitization project to completion—from safe pick-up and transport of your documents to our facility to routing digitized documents into a content management system and secure shredding of the paper originals as per your document retention policies.
Document digitization is more affordable than storing paper.
Cloud storage solutions are safe and allow you to take frequent data backups, making it easier to protect critical business data over long periods. DRS Imaging offers scalable cloud storage solutions to store high volumes of data at the highest levels of security, including personally identifiable information (PII) or data that has to be kept in compliance-ready storage.
Once digitized, a cloud-based robust document management system also helps you manage documents conveniently and share them easily. Easy audit trails and greater transparency make audits a breeze and mitigate the risk of penalties due to human error in record keeping.
Mercury, our enterprise content management system, helps you eliminate paper and manual processes and reduces costs as well as compliance risks. Mercury also automatically manages document retention periods.
Whether you choose to store your documents in paper form or digitally, make sure you put in policies and procedures to segregate the type of information that must be held in original paper formats and digital files and their retention periods. For example, retain the most important property documents in original paper form indefinitely. Save originals for tax and audits for up to 4 years and in digital formats for at least 7 years. Maintain certain records for business growth tracking for more extended periods of time.
Create a plan to regularly audit the stored files for expiration and put in processes for secure shredding of originals after they expire.
DRS Imaging: The ideal digitization & record keeping partner for property managers
DRS Imaging offers tailored digitization and automation solutions to meet the information management challenges that landowners and property managers face.
DRS can convert any of your property or tax document into digital formats, including fragile legacy documents,large-format drawings, photographs, or odd-sized documents like receipts. We have successfully completed thousands of scanning projects resulting in billions of images and data files.
Connect with us to get more information about how you can leverage our secure onsite or offsite scanning services to digitize your real estate and rental property records. Mercury, our industry-leading document management system, dramatically improves productivity, manages and secures all your business records, and helps you achieve compliance, putting you firmly on the path toward digital transformation.
Connect with an expert at DRS to digitize paper documents and find the ideal record-keeping solutions for property managers.