Proper document maintenance is a must in real estate, especially if you want to protect yourself and your property management company. Accurate and comprehensive documentation enables property managers to access vital information at a glance, avoid errors and even spot potential opportunities. However, they may not be sure which paperwork is most beneficial or necessary for their business.
Below, 14 members of Pyjama People Real Estate Council discuss key operational real estate management documents. If you manage one or more properties, keep copies and backups of these important lists, records, and agreements on hand at all times.
1. Due Diligence
As more assets are acquired, owners must learn from their past mistakes or oversights. Apply these lessons to a comprehensive and evolving due diligence document that ensures the same mistakes aren’t made twice. -BJ Turner, Dunleer
When it comes to retail properties, if landlords have given exclusive properties to tenants, it’s important to have one document describing all of the exclusive language in one place. We even had a landlord put the document on display in the lease, so there was complete transparency about what is and isn’t allowed. – Carrie Bobb, Carrie Bobb & Co
3. Lease Attachments
Real estate leasing and addendum maintenance are critical to success. Specifically, specifying expectations for payment options ensures on-time rental delivery on a monthly basis. This section of the lease, or special addendum, should include details of potential savings with various payment options, as well as penalties for non-compliance. Clear communication in advance is essential. – Ellen Calmas, Neighborhood Payment Services / NPS Rent Assurance
4. Note and Mortgage
We raise a lot of money from private investors to carry out our renovation projects, so having a note and mortgage document saved me a lot of money on paperwork. In addition, it has enabled me to act quickly and put my investors’ money to work. My attorney drafted these for me a few years ago and I’ve used them hundreds of times now! – Bill Allen, 7 figure flipping
Too many property managers will find a lease online, assume it’s fine to use for their tenants, and quit. I cannot discourage this strongly enough. Your rental agreement is not a formality; it is an essential security. Hire an attorney who knows the relevant laws in your city and state to draft your lease. It may be more expensive at first, but it can avoid many problems down the road. – Ken McElroy, MC Companies
6. Business Administration Data
There may not be one “main” document. Loan documents, tenant leases, insurance policies, contracts with major suppliers, service agreements, financial and tax records are all vital to asset ownership and operation. Business administration data is also important. – Anne Keshen, RMT Capital Management
7. List of Property Improvements
A detailed list of real estate improvements with dates, supplier names and costs is essential for any real estate investor. This is useful for planning future improvements and justifying real estate valuations when it’s time to sell. Don’t use paper either! Provide a cloud solution, such as Google Docs or similar, that you can access and modify anywhere, always be backed up and cannot be lost. – Megan Micco, Compass
8. Occupant Issues Logs
We keep copies of all residents’ issues, including the resolution of the dispute. This ensures that we have a well-documented record for future reference. -Mark Tiefel, Capital Equity Group, Inc.
9. Profit and Loss
The P&L, short for profit and loss, is the most important document. The income statement is a measure of the health of the property. It tells you what expenses have been incurred and how much revenue has been collected in a given time frame. This document serves as a vital check of the property so that you can resolve issues in a timely manner. – Pam Scamardo, TPK Properties LLC
10. LLC Incorporation
As a real estate investor, it is essential to limit your exposure to potential liability. Owning a title in an LLC can help owners provide an extra level of asset protection and protect their personal assets. Ask your broker for a CPA or attorney recommendation to help you navigate these waters. – Tara Hotchkis, Compass
11. Maintenance Calls and Work Orders
Keep track of exactly when a maintenance request was requested, what the request was and the timing it took to respond, then prove it was completed and documented. The full timeline must be documented, including photos and all communications with the tenant, which can help illustrate why the timeline to completion was reasonable. – Ari Rastegar, Rastegar Property Company
12. List of Trusted Suppliers
A list of trusted suppliers and backups is essential: phone numbers, addresses, correspondence, contracts, and previous documents related to the property’s supplier history. Why is this so important? You don’t want to hassle and call unsolicited phone numbers if a water pipe breaks, the roof leaks after a storm or a rodent moves into a tenant’s space. – Charles Argianas, Argianas & Associates, Inc.
13. Commercial Building System Records
Keeping good records on HVAC and other commercial building systems is critical. Many equipment manufacturers’ warranties are based on accurate data and regular detailed maintenance reports. In addition, many commercial leases shift responsibility from tenant to landlord regarding building systems if the equipment is not properly maintained, along with proper documentation to prove it. – Jonathan Keyser, Keyser
14. Business Continuity Plans
Covid taught us the value of business continuity plans (BCPs) and the need to keep them up to date. These operational contingency plans prevent future problems and lawsuits while preserving physical and financial stability in uncertain times. The BCP must go further than just accidents and unforeseen situations. A good BCP for an asset should include strategy during downtrend economic cycles. – Jacob Bates, CommonGrounds Workplace