Gordon's Duplex Experience

Basic record keeping for landlords

Once you buy a duplex you you need to keep accurate financial records. You need to track expenses so you can file accurate tax returns. You need to record your tenant's rent payments and security deposits. There are three types of information you need to record: Basic property information, Tenant information, and Unit specific income and expenses.

Basic property information.
This is information that relates to the property as a whole such as mortgage and insurance data. You need to have a file folder or big envelope for each property you own. In the folder you need to keep a copy of any documents relating to that property. This should include:

• The closing papers
• Insurance documents.
• Original copies of leases.
• Instruction manuals for appliances.
• Mortgage papers.
• Maintenance and repair receipts.
• Anything else that you think is significant.
• A sheet with the name, address and phone numbers of your mortgage company and your insurance agent.

Tenant information
This is information that relates to your tenants such as names and contact info. For each of your units you need some basic information.

• The names of everyone living in the unit.
• Their phone numbers (work, home, cell, etc)
• Any other contact information (IE: e-mail)
• The name and phone number of an alternate contact person. If your tenant disappears you want to be able to find out what happened to them. Did they skip out on you? Are they in the hospital?
• The dates the tenants moved in and the renewal date of their lease.
• The amount of rent you are charging them.

Unit specific expenses
This is information that relates to the income and expenses of a particular unit. You need to keep a separate record for each unit of a property. If you own a duplex you will need two records. For each unit you will need to record rent income and any maintenance expenses. You will need to know this for tax purposes. You will also have to keep track of the security deposits made by your tenants.

A work sheet
To keep things simple, I created a work sheet. Find it by clicking on "Property Account Sheet" under "Tools" in the side bar. You may copy this sheet and use it for your own records. You will need to make a separate sheet for each dwelling unit in your properties (IE: if you own a duplex make two copies, one for each side) Each year you should close and file the current sheets and start new sheets. If a unit changes tenants during the year you should also close out the sheet for that unit and start a new sheet for the new tenant.

The sheet has six sections.
The first section is to record the basic property and tenant information. Since the property address is most important it goes first. Be sure to record the unit number or letter in the address. Next, record the tenant information as outlined above. Be sure to note the lease renewal date. This will act as a reminder when it is time to send out renewal notices.

The rest of the sheet is divided into two columns. On the left side are tables to record income and payments received. On the right is where you record expenses.

Security deposits
The first section on the left is to record the tenants security deposit and any dockages for damage, etc. Ten rows may seem like a lot of space to keep track of a simple security deposit. But, this way you have plenty of space to break out a pet deposit (for instance) or to allow the tenant to make the deposit in installments. Remember, deposits are refundable. Don't record any non-refundable payments here, like cleaning fees or application fees.

Rent payment
The second section tracks rent payment history. There is a row for each calender month. Be sure that you record the exact date that you receive the rent and the amount. If a late fee was assessed, record that too. Do not record a partial rent payment in this section. A lawyer or judge may consider that to be a fully satisfied payment. Instead record partial payments in the next section.

Other Payments
The last section is for you to record any other payments you may receive, including partial payment of a months rent, charges for repairs, etc. Partial payment of a month's rent should be recorded here. Keep a running balance in the 4th column. When enough of a balance has been accumulated, subtract out one month's rent and note it as a rent credit. Then note the full rent payment in section 2.

Expenses
The first section on the right is to record any expenses you incur such as repairs, advertising, maintenance, etc. Be sure to file all receipts for all expenses, the IRS may want to see them. Make a note on the receipt about the expense if it is not obvious what it is for. If you incur an expense that applies to the entire property, not just a single unit, (new roof, exterior painting) then split the expense equally among the units. Be sure to note that this is a partial expense. Or you can put the whole expense on the primary unit's sheet. Be sure to note that this is an expense that applies to the whole property.

Depreciation
Some items are not expenses. New appliances, roofs, A/C or heating gear, water heaters, etc. are depreciable items. That means that you can't deduct the full cost of replacement in one year. You must spread out the cost of these items over several years. Refer to section 10 of IRS publication 17 for the rules and procedures for depreciation. Since these expenses need to be treated differently there is a separate section to record depreciable expenses.

This work sheet will help you to keep track of most normal tenant information and month-to-month expenses. If something unusual comes up... Well the sheet has a nice wide right margin for jotting notes and other info. You will find this sheet makes it easier to track the finances of your property. When April 15th comes around you will find that the sheet has all the information to prepare your taxes. In the unlikely event of a rent dispute, having these accurate records will support your position.

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