If you are entering the world of real estate investing, then you need to begin your business with a good organization system to keep everything easy to access when you need it. In addition, many of the document that you have will need to be kept secure as they represent your financial future and could include personal information for your tenants and yourself. There are several documents that you will find are critical to your business. These include:
• Agent agreements are the basis for your working relationship with buyers and sellers. In addition, they define the commissions that you have agreed to pay and what you expect in return for the money that you are paying.
• Purchase agreements are the document that outlines the entire structure of a transaction. They include the price that you agreed on, the condition of the property, the timeline for the completion of the transaction and any other conditions that were specified by either party.
• Amendments, addenda, and riders are critical additions to the main paperwork of any deal. These can easily be lost as they transfer back and forth between all of the parties in a transaction and should immediately be added to the original docs.
• Seller disclosures should always be added to a purchase agreement to define any details from the seller.
• Home Inspection documents give you a detailed list of the issues with a property. These are often used when determining the upgrades to a property or in the event that an issue is discovered after the purchase. In some cases, you have the ability to refer back to the home inspection to hold someone accountable for the error.
• Title insurance policy documents are created to protect both the buyers and lenders from title issues after the sale is completed and ownership of the property has been transferred. These are an important reference item if a title issue ever arises.
• Lease agreements outline not only your responsibilities to your tenants but also your expectations for the tenants. If you ever have a dispute with your tenants or they voice a concern to you, then the lease agreement should be able to settle most issues.
Knowing that you will have more than half a dozen really important documents for each property that you purchase, it is easy to see how this glut of paperwork can become difficult to keep organized. But there are a few tips that can get your real estate investment business launched in an organized fashion that will help you to avoid any panics when you need to locate a specific document.
Some people are totally against hard copies of anything today, but it never hurts to have both a hard copy and a digital or soft copy when possible. You might never refer to the hard copy unless there is a very serious matter, but it is good to have them tucked in a safe place. And the ease of searching soft copies anywhere that you take your laptop is certainly a plus. So make life easy, efficient but also ultra-safe and keep both a hard and a soft copy whenever possible.
For all of your soft documents that are stored in a multiple user setting, it is important to manage who has access to the documents. This will help you to be more efficient as well as more secure with your documents. In some cases, you will want to grant read-only access to those people who only need to refer to info in items such as a lease agreement.
Regardless of the type of file system that you choose, it is imperative to have backups. If you are using soft copies only, be sure to have backups created regularly and stored remotely. With hard copies, you will want to make an additional set of docs that are stored off-site in a secure facility such as a safety deposit box or storage facility. In the event of a tragedy, this extra step can protect your financial future.
Labeling sounds like a fairly simple process but it can be very important to keep organized. And again, time is money, so you want to minimize the amount of time that you spend looking for critical documents. The best system is always the system that works best for you and makes sense to you. Some people are fond of a color-coded system while a color blind person might opt for a numerically based system. It is also important to put some thought into the system before you finalize it. Understand, or hope, that your business is going to grow in the future and your filing and organizational system will need to be able to scale to meet your future needs.