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Record Keeping: How to Manage and Organize Your Real Estate Investment Files

by Arthur Garcia on August 29, 2012 · 55 comments

  
real estate files

It was about two years ago when my wife and I made an appointment to see our tax professional.  In order to better prepare ourselves for the meeting, we decided to organize all the paperwork associated with our rentals the night before. Unfortunately, it wasn’t until about four hours later that we found everything we needed for the next day.

It was then that I realized we didn’t have a good system in place for managing the paperwork for our rental business.  We found paperwork in the most random places – seriously (I found a plumbing invoice inside one of my wife’s yearbooks)!

The good news is that, at the time, we only owned a handful of rental properties, so the damage was minimal.  However, this ordeal taught me a very important lesson in organization – mainly, I needed to come up with a system to keep better records.

In today’s post, I would like to share what I have done to manage my own records.

I share this information in hopes that YOU, the readers, will help ME and other readers improve our systems by sharing what YOU do in your business.  So please be sure to share your organization model below in the comments section.

Now, back to the post . . .

After I did my taxes, I looked over all the forums, invoices, receipts, tax info, etc. that I acquired throughout the year and determined that funneling all the paperwork through three “buckets” would be the most effective way.

Acquisition Folder:

The first bucket I decided to use was what I call an “Acquisition Folder.”

  

Here is a list of what I insert into the folder:

  • Cover: Photo of the subject property
  • Photo Tab: Photos of the inside and outside of the property
  • RE Paperwork Tab: Purchase contract, counter offer, inspection reports
  • Make-Ready Tab: First page(s) contains list of make-ready repairs; each additional page contains contractor/ handyman quotes
  • Purchase Comps Tab: Printouts of any recently sold comparable properties
  • Rental Comps Tab: Printout of any comparable rentals

Tax Folder:

After we obtain ownership of the subject property, we then insert the important documents into another folder specifically for tax time.  (Side Note: three things you should consider purchasing are: a three-hole puncher, scanner and label maker.)

Here are the documents we insert into this folder:

  • Overview Tab: An easy-to-read document which has a simplified profit and loss statement (how much I made and how much I spent)
  • Utilities Tab: Invoices from past utility bills
  • PM Statements Tab: Monthly property management statements, year-end statements and any additional statements from our management company
  • Invoice Tab: Receipts for any work done on the subject property
  • Bank Statements Tab: Monthly mortgage statements, mortgage interest statement and any additional information regarding the mortgage where applicable
  • Tax Tab: Property tax receipt
  • Closing documents: A letter-sized copy of the closing statements

 

File Cabinet:

Lastly, in addition to keeping a tax folder, we also got a file cabinet which has a section tabbed for each rental property we own.  If you are just starting out, I recommend picking up a plastic file storage box.  These are around ten dollars and take up less space than a traditional file cabinet.

These files are not as specific as the tabs on our folders are.  We’ve found that just having all the information in one place is helpful enough to keep track of it.  Also, we file the paperwork lengthwise (legal-size) vs. widthwise (letter-size) to accommodate the legal-size documents that real estate paperwork often comes in.

This file contains the following:

  • Purchase contract
  • Final closing statements
  • Mortgage information – any and all related info goes here
  • Tax information
  • Refinancing documents

 

Keeping everything broken up into these three buckets has helped us keep our sanity throughout the various phases of each transaction.  I still spend quite a bit of time preparing for tax season, and every so often I misplace an invoice, but now I can locate most any document within a matter of minutes – which is way better than spending a solid evening looking through my wife’s old yearbooks to find a plumbing invoice.

Readers, throughout this post, I’ve shared the system that’s helped me, but I am curious to see what YOU do to keep your records organized.  Please take a few seconds to share your input below in the comments section. 

I look forward to hearing your suggestions below.

Best,
Arthur

Photos: Jessica Mullen, Arthur Garcia

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{ 55 comments… read them below or add one }

Kevin August 29, 2012 at 9:54 am

Arthur, right on target. I really like the idea about keeping a file of comps/rentals for each rental property. I’m definitely going to incorporate that into my system. I, too, have a corporate job and I pay my Accountant $100/mo to organize and file all of my statements into Quickbooks. At then end of the year it should be a simple process to file my taxes. Last year was my first and I became so overwhelmed with trying to do my taxes and learn QB and that is my busiest time of year for work, that I found it was worth it to pay him.

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Arthur Garcia August 30, 2012 at 12:24 pm

Hi Kevin,

Thanks for the nice words!

It sounds like you figured out one of the most important aspects of running an investment company – outsourcing time-consuming tasks! $100 a month is a small price to pay to keep your mind focused on what you do best – your day job!

I haven’t spend much time looking at quickbooks or similar programs – this was part of my reason for writing this post, to learn from the community ;)

Having folders for each property really helps keep things clean and neat. Before I started doing this, I was just throwing everything into a master pile. Which is why I had to change things.

Does your accountant also offer tax advice regarding capital improvements, deductions, etc.? Or are they mostly handling the bookkeeping? just curious.

AG

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Greg August 29, 2012 at 10:19 am

Round 1: I bought NeatWorks for Mac and scanned all real estate receipts into that. It’s really awesome and helps preserve receipts printed on that cheap paper, while also adding comments. I will probably scan all the contracts, insurance policies, etc. as well.

After my CPA handles taxes this year, I will make adjustments and call it round 2.

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Bilgefisher August 29, 2012 at 12:28 pm

Greg,

Ive been thinking about trying neatworks. It looks like a great way to get rid off all those little receipts rather than lose them. Plus I just hired a bookkeeper, it will allow me to send her the receipts while still keeping the originals.

Arthur,

Good post, its the little things like this that can really help us stay on top of our businesses. I just hired a bookkeeper at $50/mo. She’s also my tax advisory. I know she will slap me upside the head to keep my paperwork in order.

Jason

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Arthur Garcia August 30, 2012 at 12:33 pm

Bilgefisherman,

That is the second reference to neatworks – I definitely need to look into this program.

I am happy to hear you found a few things from this article that will help your business. $50 a month sounds like a really good deal. Does she also provide tax advice throughout the year or is it mostly bookkeeping?

Cheers!

AG

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Jason August 30, 2012 at 3:02 pm

They rarely charge me for tax advice, just for my tax prep.

Arthur Garcia August 30, 2012 at 12:26 pm

Greg,

I’ve never heard of Neatworks – looks like that is next on my “to do” list. Thanks for the great tip!

How does the program handle legal size documents? Is there a setting or do you just break the scan up into two images?

Thanks again for chiming in!

AG

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Greg August 30, 2012 at 1:47 pm

NeatWorks will let you control your scanner, so if it can be scanned, you can then store the PDF or image file. It also have some OCR to help glean important info, like totals, taxes, dates, and vendors. You can enter it all yourself, but it helps speed up the process. Finally, I also track receipts from my day job to file receipts. For this I opened a separate “cabinet” to manage those apart from my real estate business. For my day job, I have scanned receipts that go back months. I dragged them into NeatWorks, and it started eating them up! I sifted through and cleaned them up, including some cropping. From all the data you can record, along with the image, it’s possible to draft reports for your CPA, or whomever. I’m still new with it, but this is how much I figured out just by driving it, not reading any manuals. For $80, it seemed like a reasonable risk to try it out, and I already feel it has earned its keep.

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Greg August 30, 2012 at 1:49 pm

Did I mention, you can create folders-within-folders, all within multiple cabinets, letting you structure things sort of how you want. You can put documents, contacts, and receipts all in one folder, or split up, or whatever.

Arthur Garcia August 30, 2012 at 2:27 pm

For $80 bucks the program sounds like a no-brainer!

AG

Geoff September 22, 2012 at 1:33 pm

I have been using Neat for a couple of years now, I have both the portable, I can take it with me to homeowners for scanning documents, as well as the desktop, for scanning larger files. It is very helpful for scanning document files that banks, investors, etc need to have the documents in a PDF format. Seemed expensive at the outset, but saved hundred of $$ by going to an office store to scan.

jason August 29, 2012 at 10:52 am

thank you for the practical article!

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Arthur Garcia August 30, 2012 at 12:28 pm

Hey Jason,

I’m glad you found the article helpful. It is interesting that every real estate investment book is quick to talk about riches and buying with no money down, but they rarely talk about the practical aspects of the business. Based on the feedback I have received from this article, it sounds like theme I should continue writing about.

Take care!

AG

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Ray Smiley August 29, 2012 at 11:40 am

Great post. I always try to stay organized and especially when it comes to emails I use a fair bit of gmail plugins to stay on top of it.

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Arthur Garcia August 30, 2012 at 12:31 pm

Ray,

Thanks for the nice comment!

I wrote this post for two reason, one to help folks who are just getting started, but also to learn new ways to maximize my organization and productivity. this may sound dumb, but I’m not that familiar with the plugins you are referring to. Do you mind share a few of the plugins that you use and how they help you?

I’m sure everyone reading this thread would benefit from what you do.

thanks!

AG

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Terri August 29, 2012 at 12:30 pm

Excellent information. I keep a very similar system, except mine is almost totally electronic. I only keep hard copies of closing documents and contracts that have original signatures. Even those are also filed electronically.

I’m married to a bean counter, so letting my CPA organize my receipts each month would not fly. I’ve got to be able to produce all sorts of accounting reports at the drop of a hat. Also I don’t know how I could balance accounts if I didn’t log receipts daily. So every day I log all financial transactions, no matter how small, into Quicken. Every penny is accounted for my accounts are always tidy and balanced. At the end of each year I give my CPA a tidy report and he simply plugs those numbers into his system to prep our taxes. He loves me. Instead of a shoeboxes full of receipts, I give him a binder with our yearly accounting report, HUD reports and all other info for acquisitions or sales, copies of all tax receipts, etc.

My life has been made so much easier since I went electronic with my files. I can lay my hands on any document in a matter of seconds. Either way, paper or electronic, you’ve got to be organized.

Thanks for the article.

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Arthur Garcia August 30, 2012 at 12:38 pm

Hello Terri,

Thank you for taking the time to comment.

WOW – your system sounds very modern. I’ve thought about using Quicken. Do you use the version specifically for RE Investments? Or do you just use the regular small-business package?

Do you use a specific type of scanner or a standard model. A few folks have mentioned Networks, do you use that program?

Thanks for sharing, I need you to talk to my wife – I would love her to organize everything like you – lol!!!

CHeers!

AG

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Luci Rizzo August 29, 2012 at 1:54 pm

thanks for the great advice. in my experience as an investor i found that organization was absolutely the key to keeping up to date and current with all of the information. it took the first year for me to be disciplined in doing my taxes and from there i was able to determine as you did which bills, files, captial expenses and even projecting a budget for spending based on the expenses from the previous year. to those of you with a road plan life is easier dont do what i did in the first year and wait till tax time to sit down pull out my hair and say i will never do this again. I have invested in many properties, and being organized well thats the KEY!

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Jennifer August 29, 2012 at 3:34 pm

Great article! You mentioned that you handle rentals. How do you handle the property management side of the paperwork (applications, leases, rent rolls, maintenance requests, etc). Thanks again!

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Arthur Garcia August 30, 2012 at 12:42 pm

Luci,

You are right on the money – organization is essential for success in this business. One pattern I have noticed I most struggling businesses is organization. I was at a fast food spot this morning. I happened to see the office where the store manager worked and it was a nightmare. It wouldn’t surprise me if he had no idea how much money was coming in or out each day, week or month. Likewise in the rental business, if someone is not watching all the hidden costs, it is easy to think you are making money when you might be spending all your profit on repairs.

Thanks again for taking the time to share your experience.

best,

AG

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Kyle Hipp August 29, 2012 at 3:41 pm

I have a large filing cabinet that I use. When I went from 2 to 5 properties as a buy and holder I had to update my system. I have a drawer for yearly tax returns as well as closing documents for owned properties because of their size. I then have 1 drawer with file folders for all the income properties. Each property has its own folder for basic property info like property tax statements and any city updates or info. I also file each utility separately to make it easy to track. I also have a separate folder for each unit for lease documents and any ammendments or notices, I also have any repair info and planned projects in there as well. I have a folder for hard copies of lease documents such as applications and inspection forms and other disclosure docs.

On top of this I have a zip drive that has everything digitally backed up. I also recently started to layout my properties on a blueprint type program that also has a 3D image format as well. I decided to do this so as I grow, can easily get a text of an issue and then pull up the print to get a better idea of what I might need to do and if it leads to any other options as well.

Right now my file cabinet is located in a tight corner in the basement but as well look to move to a larger residence in the next year or so I would love to have an office with another large filing cabinet. At that point I would further break down and refine my filing system to make things easier to find. One thing I would separate first would be the insividual unit folder and have one for lease and tenant documents and one for planned projects and costs. I love the fine details because it easily allows me to bring together the large picture. I feel that a well developed system allows me to not have to worry about small things as I know where they are. This allows me to maximize the value of any improvement or idea that I put time into. As I work on transitioning to having more money than time this is a very important step to get properly set up now. Great post reminding everyone of this vital step of investing.

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Brandon August 29, 2012 at 7:14 pm

Your organization is making me feel a bit embarrassed over my lack! Tax time usually ends up being a hectic month long adventure with lots of stress and procrastination. The secret, as you pointed out, is having a system. Every year it gets better for me, so I guess we’ll see how this spring turns out… after I implement your system. :)

Thanks for the epic article!

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Arthur Garcia August 30, 2012 at 12:52 pm

Brandon,

Nice photo – I could trust a guy who looks like that ;)

I wish I could tell you I was super disciplined and followed my model as neatly I as made it sound, but that’s still not that case. What I can say, is that I am getting better on each transaction.

As far as the article being “epic” well…you’ve been spending too much time on Think Traffic – lol!! j/k. I’ll still take the compliment!

Thanks again!

AG

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Mike August 29, 2012 at 9:31 pm

For those of you track everything digitally, what are you using? I see Neatworks mentioned above. What else should I be looking at?

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Arthur Garcia August 30, 2012 at 12:53 pm

Mike,

Please share any responses you get via PM as well. I think we could all benefit from this info.

Best,

AG

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Clay August 30, 2012 at 9:20 am

I am 95% paperless in my office/record keeping.

I use SugarSync to keep all my “papers” digital. It’s also nice because I can access my files from any computer no matter where I am.

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Arthur Garcia August 30, 2012 at 1:06 pm

Clay,

You are da man!!

How does SugarSync handle legal size documents? Also, what do you use to track all of your info – quicken, quickbooks, etc?

Thanks for sharing!

AG

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Terri August 30, 2012 at 9:38 am

I simply have an all-in-one printer/scanner/fax (HP Officejet 6500 wireless). I simply scan the document to a PDF file and file it in the appropriate folder on my PC. I invested in an upgraded version of Adobe so that I could append pages to existing PDFs and so that I could convert other file formats to PDF. For example, all of my 2012 electric bills for a given property are in one PDF file. As a new month’s bill comes in and is paid and logged into my accounting system, I scan it, appending it to the existing file. At the end of each year, all of my digital files are automatically ‘archived’ because they’re in folders labeled by year.

I have back-up redundancies. First, I have an external harddrive that backs up daily. I also pay for the Carbonite system which backs up files the moment they are created or changed in any way.

I’ve been meaning to check out sugarsync. I tried Neatworks and found that it is very, very basic and limiting for my needs. It made sense to me to buy a printer that could scan, since I already needed a new printer, and these all-in-ones these days are very affordable. I think I paid $130 for mine a year ago. One feature I’m glad I invested in is the ability to scan both on the flatbed and in a sheet-feeder, so I can load a big document and feed it through automatically. Having the upgraded version of Adobe PDF lets me scan multiple pages at once, but it creates individual documents of each page–that’s handy more often than you would think.

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Arthur Garcia August 30, 2012 at 1:09 pm

Terri,

Sounds like you crack the code for digital storage. It sounds like you definitely found a way to minimize physical paperwork. I think I need to change up my strategy a bit and incorporate a few of your ideas.

Thanks for taking the time to share so much detail!!

Arthur

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Terri August 30, 2012 at 5:47 pm

I tried Neatworks myself last year, before buying my all-in-one HP. It is a very good product. My big issue was that it is verrrrrrrrryyyyyyyyyyyy slooooooooowwwwwwww to scan. I’m way to impatient for that. With my HP, I can control the quality of the scan (low quality for unimportant stuff, higher for important things, etc.), which also determines how quickly it scans. When you’re doing a big scan project–like all the closing docs in an acquisition–Neatworks can take too long for my taste. But it is a very cool product, which will work for most. IMHO.

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Melisa September 2, 2012 at 3:43 pm

Arthur another great post I make sure I file everything so it doesn’t get crazy. My 3 ringer binders and my Avery 10 tabs are my bestfriend when it come to organizing my RE Investments. Let me know how Neatworks work.

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Tracey September 2, 2012 at 4:59 pm

Arthur,
Thanks for sharing you filing system. My system is similar to yours except that I added another section for the tenants lease & section documents for those on section 8.

Tracey.

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Ed O September 2, 2012 at 6:55 pm

Arthur, thanks for the post.

I’m in the slow evolution to digital.

Presently:
All docs from closing, including title insurance policies, etc, go into a file cabinet that is legal sized. I also try to keep permits and capital improvement information, things that stay with the property permanently here as well. They are sorted by properties, which are numbered and in order of purchase.
I also keep a file on each property in a separate cabinet that includes all leases, inspection reports, city complaints, etc.
I used to use binders and folders but it felt like they kept getting in the way and were seldom looked at. To me, it makes sense to put it out of sight for reference as needed.
For receipts, I use quicken rental property manager 2.0. It’s simple and easy to use and newer versions of it are junk. Receipts go into envelopes for each month and the property the items were used in get noted at the top of the receipt. I then also note it with a simple mark so I know the data has been recorded into quickbooks.
That being said, I expect to transition fully into an online version of quickbooks, where I’ll download transaction data from the bank and then sort the charges out myself. This, to me is the best way to do it.

As if this wasn’t enough:
I generate my own reports for Maintenance, A/Ps & A/Rs, Rent rolls, Property summaries and city/section 8 issues. By keeping the info summarized in one place, its easier to stay on top of things. This has been the most significant improvement I have made in a long time, It keeps me current and makes it impossible to forget something.

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Terri September 3, 2012 at 6:24 am

Great System Ed! I use the quicken rental property manager too–very good tool.

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Thos September 2, 2012 at 7:53 pm

I have about 60 tenants, and have some seller-financed buyers that also pay me, and have been using Quicken Rental Property Manager 2004 for years. I pay an intern to do data entry and other less pressing tasks so I can try to focus on finding more deals (Maybe I should have him digitize all my files using Sugarsync or Neatworks). I have a PhD. in Economics, but even after taking special classes and trying pretty hard, I could not get Quickbooks, it’s just too damn complicated, too much peripheral stuff–distractions–going on. QRPM 04 (doubt you could even find that version any more) is not perfect, but it was simple to boot up, and simple to use. NOTE: I’ve looked at newer versions of QRPM and bought the 2011 version recently, but they suffer from at least two problems (for me, anyway) 1. Newer versions seem to be web- or cloud-based, and is much more difficult to figure out, and 2. Data from older QRPM versions apparently can NOT be transferred to the newer versions, meaning if you change versions, you lose your data and have to re-enter all your properties all over again. Don’t know about Neatbooks I still keep annual boxes of receipts in folders organized by property. And I though it may be redundant, I have a simple Excel spread sheet to keep track of renter and payees, so I know who’s paid and who hasn’t. After about ten properties, I couldn’t remember any more.

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Terri September 3, 2012 at 6:29 am

Thos, I would recommend you do upgrade to some newer version of quicken as soon as you can. If you ever need help with data corruption or anything like that, you won’t find any support for an old version.

I had a very very very old version too, and wanted to get QRPM but found that I could not upgrade directly from my current version to the new one without having to start over. This was because I had such an old version. The folks at quicken sent me one “in-between” version to serve as a bridge, and I bought the newer QRPM too. So I upgraded first to the bridge version, and then one more time the same day to QRPM. I lost absolutely nothing. And, although it took awhile to get used to the new version (because we all get comfy with the status quo), now I love the new version.

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Quentin September 2, 2012 at 9:42 pm

We use a folder system for each property. Each property is contained in an accordion file folder. Then all folder types are the same colour – red =tenant information, yellow = mortgage etc. So at a glance you basically pick out the folder once you pickup the accordion file.

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Dan September 3, 2012 at 7:00 am

I have property managers for each property (10% of collected rents). They send monthly statements to my bookkeeper ($125/mo) who puts the numbers onto “Excell” spreadsheets and files the paperwork. Each month I get the updated spreadsheets Emailed to me. There is one tab for each property. The first page totals all profits and losses. The columns show all expensis (mortgage, taxes, repairs, profit or loss, etc).
I keep soft copies of rental agreements, insurance polices, photos etc on a portable hard drive that I carry in my ruck sack.
After years end, I take vacation in USA and my book keeper hands over all the years hard copies in an accordian file that includes my tax mans questioner filled out for Tax time.
I simply bring in the spread sheets and tax booklet to my tax man. This system is not cheap but works good for me since I work overseas and dont have to handle: paper, tenants, or mail. Just manage managers. ;)

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John H September 3, 2012 at 1:00 pm

Excellent post,

I get great ideas to be more organized, thanks to all and to AG who start the topic.

John

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Lisa September 3, 2012 at 1:06 pm

We pulled out our hair for the same reason our first year – one thing I learned the hard way is to ALWAYS keep some invoices receipts handy and do not file them away with your tax info – improvements such as A/C, plumbing, roof electrical you always need handy for insurance quotes. I also keep a seperate notebook tabbed by property for most recent hud, warranty deed, and survey – if you even need to refinance or are preparing to sell then you need all of these. I also try and keep as much as possible paperless but i’ve found that sometimes you really need paper.

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Diana September 3, 2012 at 2:37 pm

Also check out the Nolo Press book on Schedule E deductions. I just went through a tax audit on my rental properties. After I read the book and did what it said on record keeping per IRS requirements, my EA and I were ready for anything that flew in. The book was invaluable.

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Don Arfsten September 4, 2012 at 5:28 am

I use the Neat system (scanner and software) to keep track of paperwork. The idea is to scan every item in as soon as possible, then file the items under the headings appropriate for the type of property you have. Once in the computer I then keep all of the paperwork related to a single property in an expanding folio until after tax time when it gets heaved. Make sure that everything is backed up often. I use a separate portable hard drive and a cloud based service.
This way I can organize it all as I go and don’t have to worry about losing receipts.

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Ken September 5, 2012 at 1:02 am

We use Evernote and a fuji Snapscan to digitize. Evernote is amazing. Everything can be organized into notebooks and sub notebooks in the cloud. All accessible from all your devices- smart phone, pad, computer, etc.

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Greg September 5, 2012 at 7:40 am

You know, in my software developer circles, I have heard high praises on EverNote, and it’s ability to let you collect thoughts and ideas, and organize that knowledge. Haven’t used it myself yet.

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edita September 5, 2012 at 2:40 pm

Arthur,
great post! After reading this post I re-organiazed my filing system. One thing I did not change is keeping monthly PM statements and bank mortgage statements. We have only 5 properties, and it’s a pain to file away all the PM statements every beginning of the month times five!!! what’s going to happen when we have 12 properties?… Especially if PM company has all that info! I really want to hear your comment why to keep PM statements and bank statements. Maybe I am not understanding something… (I am new to RE)
Thank you and looking forward to hearing an answer! :)))
Edita

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McKellar Newsom September 12, 2012 at 3:54 pm

Hi Arthur,

Great post! I like to systemize too. I like binders for everything. I have the following binders: Level 1: “looks good on paper,” “inspected but watch”, “not inspected but watch,
Level 2: good deals “bids”

I also have a “no” binder alphabetized because I don’t want to show up at the same property twice (I’ve done it!).

Once I get a contract, I put all the details into a manila folder. After it closes, I have a binder per property. I use the following dividers: Description (incl pix, financials, mls listing sheet), HUD docs, Title Insur, Taxes, Insurance, Rehab (divided by different colored paper if needed). loan docs & misc.

mck

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Arthur Garcia September 13, 2012 at 3:18 pm

Hi McKellar!

Thanks for the comment. It sounds like we have similar systems. I would love to get away from all the physical paper one day. I’m starting to have a lot of files and binders.

Maybe I just need a bigger office ;)

Best,

Arthur

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Lynn Andris September 16, 2012 at 1:22 pm

If you are just getting started a simple excel spread sheet with a page for each property works well too. Make the appropriate entry, scan the document and save in a folder labeled with the address you can have sub-folders for different items.

Keep important documents in a file. I use one file box for each property so they are easy to grab and go when I need them. this gives you some redundancy too. House burns down…access your electronic files (I use carbonite and I have used dropbox too) . Computer crash pull the hard compy until you have access to the net again…

If you want to combine PDF files into one file use http://www.pdfcombine.com

Also keep a “to go” box with all the paperwork, clip boards, pens etc…necessary for renting the property, or establish a simple website where applicants can go to print all the required paperwork and bring with them when they come to see the house.

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Kevin October 14, 2012 at 6:29 pm

I’ve been investing in buy & hold for just over a year with two properties. My current system includes an accordion folder for each property, with a file folder setup by expense category based on IRS schedule E. I also use excel with the same columns and enter income/expenses right away (usually). I find this helped me at tax time last year. I was able to give my accountant a spreadsheet for each property that had details and total for each category on schedule E, making it easy to complete. Each accordion also has a folder for leases, insurance policy, etc. I have all paperwork as a PDF on my home computer and thumb drives as backup. I’m looking to add to iCloud to access from anywhere. As I add properties I’m thinking of buying quick books.

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Honolulu Aunty February 27, 2013 at 4:20 pm

Aloha Arthur,

Getting numbers together for our annual tax filing to our accountant was always the most stressful event of the year. My files were a piled up mess of everything under the sun and I would have to search and re-search for simple documents and statements.

Our latest (and best) CPA forced (yup, forced) me to get Quickbooks for Macs and I spent hours learning and inputting our numbers into it. Being a rather anal type of person, I actually liked it and when all the numbers were finally inputted, it was reason to truly celebrate.

With a few clicks of the mouse, I can now generate specific reports for specific properties (Quickbooks has a “class” category that can be used to separate expenses for specific properties), with no stress! My credit card charges, checks, receipts are each input to the proper account/class as well as income and other expenses. Having multiple LLCs is now manageable and trackable!

Because the system naturally organizes itself, I love inputting as soon as bank statements, credit card statements, etc. come in. When and if I tire of this rather mundane task, my CPA’s office can do those chores, for a (rather hefty) fee.

I keep all papers for each property in a file cabinet like yours – and filing is easy. At the end of each calendar year, I scan (I have a little scanner) the documents into their own folders (i.e. bank statements, utilities, HOA statements, property management statements, etc.) and have each year in a separate folder for each property on my desktop. After that is done, I can either destroy or tie up the past year’s papers and put them out of sight, out of mind.

Now, even though my house is a mess, my accounting is beautiful. It is one of the best forced lessons that I have ever had.

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Rob Fegan October 16, 2013 at 7:48 am

Arthur, Thanks for the great post. Just came across it today and this is an area I have struggled with is good record keeping. You have lots of great ideas and tips (that are much better than the shoe box of receipts and giant inbox of documents!

Thanks for sharing (even if I’m getting to it a year later still totally relevant)!!!!!
Cheers,
Rob

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Bryan November 20, 2013 at 8:08 pm

Great topic and article, thanks!

My system includes paper filing, scanning, cloud storage, and quickbooks.

The paper, original docs for a property, is stored in a classification folder with at least three pages in it. It has binders at the top of each tab requiring a two hole punch to punch the top of pages. I have tabs for current lease docs, insurance, loan docs, legal docs (deeds), maintenance docs (appliances, paint chips, etc.), and a spare set of keys. I file this by the first letter of the street name. I only a have a few units so it’s not too hard find the one I need but it is very easy to pull a property and have everything at hand. I really like these folders, they store well in my file cabinet and are easy to pull. I just fold the bottoms of legal paperwork.

I scan all receipts, bank statements, etc. into .pdf as I enter them into quickbooks. I use dropbox, which is comparable to sugarsynch, to store my digits. What’s great about these cloud services is that a local copy of the folder is stored on your computer. You can sync dropbox across multiple computers so not only is it on my laptop, but my desktop, and my wife’s laptop. And of course it is in the cloud. Dropbox also stores multiple revisions of files you update.

For security, I use truecrypt safes to encrypt and store sensitive docs. When you mount a safe it shows up as drive on your computer, just like a thumb drive. The safe contains various .pdfs. When you dismount the safe everything is encrypted into a single file. The safe is what actually gets uploaded to dropbox so there’s two levels of security. I use a safe for properties and one for each tax year, I like to keep the safes small.

Within a tax year safe, I have a .pdf file for each expense account in my quickbook chart of accounts. Receipts added to the .pdf are naturally added in chronological order. You can now scan receipts into quickbooks but I’m not comfortable with it yet. At the end of the year I put my QB file on a CD and hand it over to my CPA. He double checks my work as part of my taxes. When he finishes my taxes I save my financial statements to .pdf and store in the tax year. I stick all of the paper copies of receipts in a single folder labeled by tax year. This is the backup to the backup.

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Arthur Garcia August 30, 2012 at 2:26 pm

Greg,

You officially sold me on the product!! This program sounds amazing! I’m buying it today and I will be sure to also read the manuals ;)

Thank you again for sharing so much helpful information!

best,

AG

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Jack November 5, 2013 at 3:49 pm

Hey Greg.
How did neatworks end up working out for you? did you like it and would you recommend it? I’m considering the purchase.
Cheers!
Jack

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Greg November 5, 2013 at 8:59 pm

Hey!

I would recommend neatworks. But I’ll be honest, I don’t need it on a day to day basis. My property manager sends me electronic invoices, leases and other stuff. My daytime job change expense reporting systems such that I can file an expense report by simply taking a picture of the receipts on my iPhone.

But it will be another big pay off at tax preparation time when I scan all my tax docs and then email to my CPA.

If you need to scan leases and other paperwork, it’s a great way to manage an electronic backup while keeping the originals on file.

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