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Why you should keep records of your financial documents if you rent property

November 19, 2019

Why you should keep records of your financial documents if you rent property

Investing in real estate can make you money, but becoming a landlord who owns multiple property can make you a lot money. As a landlord, you are also a business owner whether you own a few property or multiple property worth millions. One of the great benefits of being a landlord is the tax deduction you can take advantage of. To take advantage of these tax deduction, you have to keep accurate records of important documents relating to expenses and income throughout the year.

Top two reasons to keep income and expense records

  1. In case you are audited by the IRS, you will have all financial records to dispute any discrepancy. If you don’t keep your business’s financial records, you can find yourself in difficult situation. Your business could be fine and have to pay additional taxes.
  2. Having everything recorded, filing your taxes reduce frustration and can save your business money. Time is money when you are a landlord.

What type of records should you keep?

If you are wondering what records should you keep, the short answer is everything. When it comes to operating a business, good record keeping is very important. The IRS is known to audit and scrutinize small business who claim losses in consecutive years. The types of documents you should keep are permanent records and short-term documents.

Some example of permanent records you should keep are:

  1. All tenant lease contracts.
  2. All legal documents i.e. (fines, inspection reports, court documents).
  3. All construction permits you may have taken out on the property.
  4. Business and incorporated legal documents i.e. ( Joint venture, limited partnership, Limited liability company, C Corporation).
  5. Property title and deed.
  6. All insurance policies you may have taken out on your business.

Examples of short-term records you should keep are:

  1. Office expenses you paid to contractors, accountant, and lawyers.
  2. Wages paid to employees.
  3. Utilities expenses.
  4. Rent payment.

How should you keep track of these type of documents?

In today’s digital world, all records can be easily archived and tracked. Physical paper documents can be scan and digitized. Expenses can be entered into spreadsheets to track. To make your job more streamlined, you could purchase software to help with record keeping. You should always back up your business data in a safe and secure location. You don’t want to do all that hard work and lose the data because of faulty computer hardware.

However, you should always keep hard copies of your most important financial records in a safe place that can be easily access if you need to access them. If you have lost or did not receive copies of legal paperwork, financial records, real estate contracts, or tax records, our certified field agents can assist you in recovering these important documents. Call our professional certified field agent at 714-632-3480 to discuss how we can help your business.