Computers, Accounting, and Records



On the way home from the closing, the new owner of an apartment property would be well advised to make one more purchase that day—a personal computer. The job of administering the paperwork and accounting tasks of a large apartment building is formidable, and a computer can greatly simplify these tasks. Now, with the computer as a mainstay of most management operations, those who continue to resist this technology find themselves on the outside looking in.

What makes the computer so important is its ability to handle repetitive tasks using only a fraction of the time the same job would take manually. As one might gather through reading this guide, there is a lot to the apartment management business, and most managers need more time on the property to see that everything is being done correctly. That’s difficult when you are saddled with paperwork, schedules, lists, letters, and basic record keeping.


Every day, the technology and variety of computers and printers advances to yet another level. The day you purchase a computer, the product is usually on its way to becoming obsolete—the manufacturer has already directed its staff to find ways to improve or replace the machine you just purchased. Nevertheless, don’t fall into the trap of waiting for the “next generation” of technology. The longer you wait, the more difficult it will be to catch up with everyone else in the property management business.

The computer equipment used to handle the chores of the property management business should have considerable speed and substantial memory capacity. A good part of the work you will want the computer to perform will involve a data base system of one design or another to maintain resident and accounting records. This processing can be slow with the old-style microchips, and property management files can use up a great deal of memory in a very short time. You surely want to maximize productivity during the time you utilize the computer; you are best advised to purchase equipment at the leading edge of technology in terms of speed and memory capacity.

The manufacturer of the equipment is not quite as important as the operating system that is employed by that firm’s machines. Stay in the mainstream. Talk with a number of your associates in the property management business before making a decision. Find out what kind of equipment they use and ask the names of compatible software. There is a great deal of sharing of customized spreadsheets, privately written programs, and advice among professionals in the property management business; but if you are to participate in that sharing, you will need compatible computer operating systems and equipment. (Note: Do be mindful of the way copyright laws govern the exchange of programs.) If your equipment is made by a major manufacturer, it will probably be easier to obtain advice on how to install and operate it. You do not want to be the proud owner of equipment that worked fine during the “canned” showroom presentation but won’t print your rent roll when you’re back at the office.

Your hardware requirements will include a printer. This equipment is clearly moving toward continued advancement of laser technology. The printing process is quick and quiet, and the printed page appears as if it has been typeset. Because so much of a management firm’s work ends up in printed form, it would be foolish to damage your image with the output of a bottom-of-the-line printer. Compatibility is less of a problem with printers because most software developers have made the effort to ensure that their product will work with the widest assortment of printers and configurations.


One of the most difficult aspects of converting accounting chores to a computer is selecting software. With the dozens and dozens of programs on the market, you shouldn’t choose to develop your own custom pro gram. I know of firms that have been “developing” a workable accounting program for years. Meanwhile, they must struggle along with a manual or quasi-automatic system while they are waiting. There are many programs available today that will handle all but the most specialized tasks, and you can be “up and running” in several weeks. The wheel has been invented; save yourself the time and trouble of reinvention.

Choosing the right software for your operation remains a very difficult task, however. Suppliers carefully package software to show off t strong and unique attributes of their products; the limitations are not publicized. These limitations are for you to discover when you get the new program hack to the office. This is why it is so important to speak with fellow property managers. If they have had a system for some time, they will quickly recite its deficiencies and at the same time explain what it really can do. You should also ask the software dealer for a complete collection of print Outs that can be generated by their program. Study and compare a number of these to determine if they will deliver what you need or expect. Your study will also prompt a number of questions that you should be asking dealers. It is the salesperson’s job to sell; it is your job to sift through the many different functions of these programs to be sure they will perform the work the way you want it done. Choosing the wrong software program can have serious consequences—if you find another program next year that suits you better, it is very complicated to switch. Take a little more time with your initial decision.

Spreadsheet. In addition to your accounting software, you will need what is referred to as an electronic spreadsheet. Basically, the electronic spreadsheet is set up along the lines of a columnar pad with rows and columns. This is the program that you will spend most of your time using. Monday morning reports, budgets, listings of availabilities, time records, analyses, evaluations, financial reports, and presentations are just a few examples of the daily tasks that can be accomplished very quickly using spreadsheets. Many managers have gone a step further and have automated data entry or calculations by writing program macros, a set of commands making up a kind of mini-program to instruct the computer to perform a series of tasks. The commands might be in the form of user prompts requesting the input of different information. After all of the information has been gathered, the computer usually follows additional instructions to sort the data, perform the calculations, and print a schedule of processed information. These programs can be written in a few hours and customized to perform some very specialized and time-consuming tasks. Personnel with very little computer training can quickly learn to handle the input. Property managers develop many of these specialized programs over the course of a year or two and they commonly trade these privately written and macro-driven programs with other managers. This is another reason why it is so important to select initial equipment and basic software that is compatible with the mainstays of the real estate industry.

Ideally, you will want an accounting package that is compatible with your electronic spreadsheet program. You should insist upon the capability of importing and exporting data to and from your spreadsheets. For example, you may develop a customized budget that lists all of your bud get categories and has room for insertions in separate monthly columns plus the yearly totals. After filling in the spreadsheet, you may want to ex port these numbers to the accounting program. Without the ability to ex port this information directly to the accounting program, you must re enter all of your data—and avoiding this was one of your reasons for choosing automation. The same thing is true in reverse. Computer ac counting systems contain a host of data, including all of your information regarding residents, collections, expenses, etc. You may need a listing that specifies where each resident works, or an itemization of expenses on a per-square-foot, room, or plumbing-fixture basis. Your program should be capable of extracting data from the records that exist in the accounting program in a manner that can be used by the spreadsheet program.

There is a major risk inherent in spreadsheets: Their looks can be deceiving. Spreadsheets often present columns of figures that line up nicely, but may not be correct. Because they look good and are the product of a computer calculation, people tend to accept figures displayed on a spread sheet without checking them. Unfortunately, the formula in the cell calling for the total of a column may not extend to all of the rows of figures—or the formula may be wrong. Another difficulty exists with macros that are prepared to handle a specific job, perhaps in connection with a particular property. You might decide that with a few changes you can use such a macro for other jobs or properties. If this is not done carefully, a variable associated with the original may be forgotten—making the modifications incorrect. Computers are wonderful tools, but they can’t protect you against yourself.

Word Processing. Next on the list of required software is a program that will perform your word processing. Like other types of software, there is a constant procession of new programs and new generations of old programs. Every person who has taken the time to become proficient with a particular program believes it to be the best. It will take some investigation to determine what is best for you. The standard advice applies here as well: Stick with the programs that have proven themselves. There are web sites, books, newsletters, software programs and user groups to help you with the best-known programs—so why waste your time being a pioneer?

There are programs that will do just about anything you want to accomplish with words or numbers. You can write single letters, form letters, or newsletters. You can produce labels, invoices, forms, or even letter heads. Some will allow you to print not only the standard input concerning the parties to the agreement and the terms of the lease, but also the entire lease form in a single printing. So much of our work is repetitive; the word processor can handle most writing tasks with just a few commands. You will be able to personalize letters that were once handled as general form letters. You can ask the machine to insert custom salutations and to use the resident’s or client’s name in the body of the letter and the letter’s spacing will adjust automatically. Management offices now collect certain letters dealing with common situations and catalog them for future use.

Most management offices keep their records in unit number order because the unit is permanent and the resident isn’t. That’s fine when the resident is standing in front of you or he or she is on the telephone and you can request the unit number, but what about inquiries from a parcel delivery service driver? Word processing programs can usually produce an alphabetized listing of your residents or your vendors in a matter of minutes. Such programs will also help you with your spelling, word selection, and even grammar. Word processors have become so popular in property management offices that often the biggest problem is producing a single, typed envelope.

Graphics. Property managers spend a considerable part of the work week preparing presentations to explain or promote ideas, plans, and results. Boring rows and columns of numbers can come alive with the use of computer graphics. Beautiful color visuals can be customized and produced in minutes using basic hardware, a plotter or a color printer, and one of the many graphics programs available. Signs, charts, title pages, and even floor plans are easily generated. In fact, some managers have their floor plans on file in the computer so that they can work with prospective renters and plan positioning of the prospects’ furniture in various unit layouts. This same capability is often used to redesign troublesome units.

Computer Skills Tell a Story

A property manager with little or no computer skill has severely impaired his or her career potential. There is no doubt that the computer will play an increasingly important role in property management. Those waiting for their employer to provide the equipment and training could be left far behind. When interviewing for new staff members, progressive executive managers will surely inquire about computer familiarity. A lack of meaningful computer skills will hurt your chances in the selection process.

On the other hand, we have all seen the manager who goes overboard learning about the machine and all of its intricacies. Hiding behind a computer while producing reams of reports cannot replace on-the-job common sense. After all, apartment management is a business of people con tact. Property managers should use computers to provide more time to spend with customers, not machines.


Personal computers make your work easier, but they can’t think for you. To begin to put your machine(s) to work, you must consider all the aspects of accounting for the income and expenses of your property.

Types of Income

In the process of managing rental apartments, you will collect and spend a great deal of other people’s money. The collections fall into two basic categories: scheduled income (the rent roll) and unscheduled income (any income received other than rent). The design of any accounting system should be based on tracking the fixed factor (which is, in this case, the apartment units), and not the variable factor (in this case, the residents). If there are 120 units, we must account for 120 unit months (43,800 days) of potential income. It is to be hoped that most units will be occupied by rent-paying residents, but all units—vacant, office, model, unrentable, storage, etc—must be accounted for each month. A system that does not maintain a running financial history of each and every rental unit can be easily compromised.

The second form of income, unscheduled receipts, presents more problems and accounting risks. More money is misappropriated, “lost,” or stolen from this area than any other.

Unscheduled revenues come from several sources: resident payments to cover damages, fees from concessionaires, charges for use of a hospitality or recreation room, lease settlements or cancellation fees, back-rent payments on accounts that have been written off, and income from building-owned laundry equipment, among others. Much of this money comes in the form of cash. It can amount to many thousands of dollars over a one- year period. Because of this and the fact that collection cannot always be anticipated, the opportunity for loss through theft or misuse is great. Be aware that the situation exists and that the risk is also there. No system is foolproof, but you should take the time to develop a system that will at least minimize the risk.

Handling Security Deposit Funds

Security deposit funds are a daily part of a manager’s work. The manager starts by issuing a receipt for this money to the individual resident. The money is then typically deposited into the property’s operating account or, in some jurisdictions, it must be maintained in a separate escrow ac count. Some laws now require that the entity collecting the security de posit (e.g., the management firm) remain responsible for the reimbursement at the time of move-out. Such laws are a response to complaints by renters who have lost their security deposit money because the property was sold or the owner became insolvent. Traditionally, new security de posit funds were deposited to the operating account as income, and re fund checks were cut from the operating revenues of the move-out month. If all went well, a new resident was in position to move in, and effectively that person’s security deposit money was used to repay the vacating resident. During periods of rising vacancies, however, the collection of new security deposit funds does not equal the money being refunded. That means operating expense money must be diverted at a time when it is most needed. When refunds are not made promptly, word spreads quickly and this affects both new rentals and renewals. It has been common practice for legislatures to enact stricter regulations governing the return of security deposits. Many of these involve rather severe penalties if prompt refunds are not made.

Virtually all real estate accounting systems prepare a monthly schedule itemizing each resident’s security deposit account and listing a total of the security deposit liability. This money belongs to others, so a fiduciary responsibility is involved. As manager, you may be held responsible if this money is not available at the time the resident completes his or her occupancy requirement.

More and more communities have passed laws requiring the owner to pay interest on security deposit funds. Usually, this means actually preparing a check each year, not just crediting the security deposit account with the earned interest. Either way, if the interest exceeds $10, the owner—or more commonly the agent—must promptly issue a Form 1099 signaling to the Internal Revenue Service that interest has been paid.

Owner’s Custodial Account

All monies collected on behalf of the owner should be placed in a custodial or trust account separate from the funds of the managing agent. There should be no commingling of the owner’s and management company’s funds. Separate custodial accounts for a property owner’s funds are required by most state laws and ethics codes and by the United States Department of Housing and Urban Development for all federally insured or assisted apartment properties.

It’s not necessary for every building to have its own bank account, al though this is sometimes done and may be required in some areas or by some management agreements. It is more desirable to deposit all funds from properties under your management in a single bank account. This practice greatly simplifies check-writing and record-keeping procedures. Each owner then receives a statement showing his or her cash position. The single bank account for all owners’ funds is a matter of convenience for the managing agent.

One word of caution: With several different owners’ funds in a single custodial account, it is possible to inadvertently overdraw one owner’s funds using the surplus funds of another. Unless you have approval for this, you are making an unauthorized loan of an owner’s money. As an alternative, some management firms have invested in equipment that is capable of imprinting the magnetic bank account code number on blank, continuous form checks. This provides the convenience of writing checks on individual bank accounts for each property without the problem of constantly loading the printer with different checks.

Accrual versus Cash Accounting

For the most part, accrual accounting has replaced cash-basis accounting, because the Internal Revenue Service requires it in most cases and it is the preferred general accounting practice. It certainly provides a truer financial picture than cash-basis accounting. Accrual accounting is also essential if the accounting records are to be audited. Many computerized management programs are a mixture of the two forms of accounting. These systems track rents on an accrual basis but account for many expenses on a cash basis or when paid. It is then the job of the owner’s accountant to sort Out the differences at income tax time.

Purchase Orders

In order to provide true accrual accounting, the accounting of expenditures should begin at the time a product or service is ordered or a commitment is made. Without such information, the owner or his or her ac counting consultant does not have a realistic picture of the property’s financial position at any given point in time. Many computer programs re quire that purchases be made with a purchase order system that begins tracking a potential obligation from the time it is issued—not when the invoice is received or the bill is actually paid.

It is important to make all purchases with a written and numbered purchase order. This is essential if you are to keep track of what is ordered, what orders are outstanding, and whether the invoices agree with the quoted price. If you have a file of such orders and a building is sold, you can easily contact vendors whose shipments have not been delivered and cancel the orders. Otherwise, vendors may fill the orders and then bill you or the former owner, a situation that could lead to disputes. The new owner may refuse to pay the bill, claiming not to have authorized the order; the vendor might then put a lien on the building, further complicating matters. This unpleasantness can be avoided if you cancel unfilled orders. Without a purchase order file, you’ll have trouble remembering what orders are open. The remedy is to put everything in writing.

Every purchase order placed by a managing agent should contain a notice to the effect that the management company is acting as an agent, not as the principal, and that it will disclose the identity of the principal requested. This signals to the supplier that your company is an agent and that the principal, not the managing agent, is responsible for payment of the invoice. (Obviously, the notice is not necessary if the manager is a direct employee of the owner.) Without this notice, the supplier can assume that the managing agent is acting on his or her own behalf and will look to the agent for collection if the invoice isn’t paid. It’s very rare that a supplier will ask the identity of the principal but, if you are asked, you should be allowed to disclose this information.

Bill Payments

As managing agent, you need policies and procedures for paying bills. The major points to be considered follow.

• Choose a period to pap bills when money is available and when you have the time to do the paperwork. Do not have suppliers submit bills by the tenth of the month for payment on the first of the following month. While it’s true that bank balances are highest in the be ginning days of the month, this is also the busiest time because the manager is handling move-outs and move-ins, collecting rents, taking complaints, and doing extra paperwork. It would be better to select a time that’s less hectic—perhaps the middle of the month—for bill payments.

In the same regard, it’s unfortunate that most mortgage payments are due on the first of each month. Invariably, there isn’t enough money collected and in the bank to meet the first-of-the-month payment date. At the time the mortgage was originally made, it would have been an easy matter to arrange for payments to be due later in the month. Even if the mortgage is established, it’s worth a try to have the payment date set forward. By setting the date at the fifteenth, there will be more money on hand, and the payment can be handled more comfortably.

Inform all vendors of your bill-paving procedures. This will discourage calls from vendors who want to know when they will be paid.

Be aware of discounts and gross and net billings. The manager should take advantage of these discounts merely as good business. If you can’t take discounts because of a short turnaround period or be cause of a lack of funds, notify owners of this right away. Otherwise, if they find out that you’re not taking advantage of discounts, they may put in a claim for the money because you were negligent. Negotiating discounts and payment terms is frequently part of the property manager’s responsibility.

To take advantage of discounts, you may have to deviate from your established bill-paying schedule. For example, many discounts are only available if payment is made within ten days of the invoice date; if you pay in fifteen days, the discount won’t be granted. Some vendors, however, will honor a discount even if payment is made thirty days later, feeling that money is money. Others will strictly observe the discount period.

Utility companies may bill on a gross and net basis. The lower net amount must be paid by the stated due date; the higher gross amount is due some days later. If your operation is large enough, the utility company may extend the net period.

Another point about utility bills: You may be billed for a vacant apartment even though it is leased to a new resident. The same thing may happen if a resident moves in early. To avoid this, have the resident sign the utility application and turn-on card when the lease is signed, so his or her utility service and charges will begin with the date the lease is in effect or the move-in date, whichever is earlier. It is to your advantage to have utility company forms in your office and mail the signed forms to the utility company yourself. Residents will appreciate the fact that you’ve saved them some time, while you en sure that the chore will be addressed immediately.

Avoid paying bills that are cash on delivery (COD). Some vendors insist on COD payment, especially if they’ve had bad experiences with apartment owners and managers. Once you are in the habit of paying COD, vendors will insist on it because it’s the quickest way to get cash; there’s no incentive for them to change. Paying COD will complicate your record-keeping and bill-paying procedures.

If necessary, change vendors in order to avoid COD billings. With a new vendor, allow time for the vendor to run a credit check and approve the account. This is recommended for purchases of all sup plies, materials, and services. The only exceptions would be payments for one-time items, such as emergency, non-contract snow plowing for which the driver demands cash.

Don’t use petty cash funds to pay vendors. If you do, you will need a large cash fund on hand to pay all the vendors who will soon demand cash. These funds are subject to theft and misuse. It also leads to poor record keeping. Petty cash is for incidental purchases such as postage stamps and postage due, small shipping charges, gas for lawn mowers, and minor office expenses. A revolving fund of $200 should be adequate for most properties.

Have bills approved 1 the site manager who ordered the work be fore they are processed for payment. If checks are prepared centrally, don’t send the checks back to the site manager for review prior to forwarding to the vendor. Some firms do this, claiming that it enables the site manager to know who is being paid and to hold back a check if there is a last-minute question about performance. This should have been determined before the bill was approved for payment.

The danger of letting the site manager approve the check or forward it to the vendor is that it provides the chance to extract a kickback from the vendor, even if it’s nothing more than a free lunch. By simply calling the vendor and saying, “I’ve got your check,” the site manager exerts some pressure on the vendor. This leads to a poor business relationship, which in turn will cost the owner money.

Form 1099

Vendors who are not corporations must be issued a Form 1099, Miscellaneous Income, detailing the amount of money that was paid to them in the year. This form must be in their hands shortly after the end of the calendar year. Many computer programs can prepare these forms to be sent to vendors, the IRS, and state authorities (where applicable). The Internal Revenue Service does exempt minor amounts from this accounting of miscellaneous income; always be aware of the current IRS definition of a “minor amount.” The IRS rigidly enforces its regulations and there are penalties for noncompliance.

Taxes and Reporting Forms

As managing agent, you will most likely prepare payroll checks and this will involve making regular deposits of monies withheld for federal and state income taxes as well as accounting for both employer and employee social security contributions (FICA), employer contributions to Federal Unemployment Insurance Tax (FUTA), and other payroll taxes. Most management firms are also responsible for filing Form 941, Employer’s Quarterly Payroll Tax Return, which reconciles tax liability. Shortly after the end of each calendar year, every employee is entitled to receive a Form W-2, Wage and Tax Statement, detailing gross wages earned as well as the total amount of taxes withheld and contributions made into his or her social security account. In municipalities that have instituted a form of taxation on employers and employees, that money must be accounted for and reported. State and local sales tax on rents has been a subject of much discussion and, if enacted, will involve filing even more reports.

Management Statement

Basically, managing agents produce a statement of receipts and disbursements for the owner; it is not intended to replace all other accounting documents or procedures. The problem is settling upon an accounting format that will provide the necessary information and satisfy most clients. A large percentage of management business is centered around major institutional owners who have hundreds of properties in cities and towns across the country. The asset managers for such owners prefer that you conform to their company’s style and format of accounting so that the preparation of their own consolidated management reports is made easier. They must detail total figures for all the properties in their portfolio. Computerized accounting systems are simply not capable of major modification. Therefore, managers often must deviate from their standard system and manually produce a special report in order to secure institutional management business.

Some systems can extract data and rearrange display output to meet specific requirements. Now, with advancements in technology, some managers are in a race to see how many different reports and report variations can be conceived to dazzle owners. It is not uncommon to find monthly management reports for a 150-unit apartment property that are one-inch thick. Many owners are not impressed; they are overwhelmed.

The management statement is actually a collection of reports, usually starting with a narrative summary to explain the month’s activities to the owner and including separate reports detailing such items as rent roll, disbursements and miscellaneous receipts, reserve account transactions, etc. Management statements are typically prepared and sent to the owner shortly after the end of each monthly reporting period. Many firms end their accounting month before the last calendar day so that the management report can be prepared during the slow business days rather than the busy first few days of the month. Once the pattern is established, how ever, it is critical that it be maintained because owners will become accustomed to that schedule. This monthly package typically includes the original copies of the paid invoices and a check for any payment due to the owner.

The basic components of the monthly management statement (excluding the introductory narrative) are explained below.

• Rent roll. Each apartment and all other rental spaces should be listed in numerical sequence, regardless of whether the unit is leased.

Once this order has been adopted, it should not vary much from month to month. Listed with each apartment or entry should be all other fixed information, such as unit size, floor number, and address.

Following on the same line is the variable information—including the resident’s name, amount of security deposit, term of lease, rent, and rent status. If a particular unit is vacant, this portion would be blank. The more sophisticated programs often detail the amount of rent lost since the unit was last occupied. Possibly, under a single apartment unit, information would be given for more than one resident in the same month (e.g., residents moving during the month, collection from a delinquent previous resident).

The information concerning the resident is a running history. It should show the status listed at the end of the previous month, all transactions during the current month, and the ending status. With out such a detailed description, an owner cannot properly monitor the activities of the property, nor can he or she evaluate the managing agent’s performance.

Some agents do not list the entire rent roll but instead report by exception. This type of report is easier for an agent to prepare and easier for an owner to read, but it lacks the unit-by-unit detail necessary to really explain what is going on.

Disbursements and miscellaneous receipts. This is a chronological listing of all checks written and all monies received from sources other than rental units (e.g., collections from laundry equipment, vending machines, recreation room fees). This list details the name of the vendor, the amount paid, and often the check number. It also specifies the source and amount of each miscellaneous receipt.

This statement will include items other than routine building operating expenses. Common examples are debt-service payments, payments for capital expenditures, and distributions to owners. (Most managing agents establish a chart of accounts to classify items of expense. By so doing, purchases can be categorized for budgetary and accounting purposes by using the assigned account numbers for each category.)

Many disbursement listings are on a cash basis and do not reflect unpaid bills. This omission can give an owner the impression that there are no outstanding debts. One way to avoid this is to include a total of unpaid bills at the end of the statement so the owner be comes aware of them.

Reserve account transactions. Items on this list might include the monthly deposit into the owner’s real estate tax fund, with an indication of the current balance; deposits for future capital expenditures; or a regular monthly accounting of an established reserve-for- replacement account. These items show the owner how much money is being accumulated for major expenditures. Generally, when these major expenditures are made, a portion of the reserve fund is transferred into the operating account where it will be used to pay a particular bill.

Running summary of all financial transactions. This summary usually contains a beginning balance for the month, total of collections, total of disbursements, an update of the escrow or reserve account, remittances to owners, and the ending balance.

In addition to this essential information, many managers add the following extra reports and schedules to provide a more complete picture of the property’s fiscal and market position.

• Complete general ledger

• Security deposit liability report

• Separate delinquency report with monthly aging

• Listing of accounts payable

• Square foot income-expense analysis

• Vacancy analysis

• Comparability analysis

• Prospect traffic and conversion report


As a property manager, you become the “keeper of the records” and there is no shortage of items that need to be maintained, filed, stored, protected, and rotated. When you first become manager, the owner usually entrusts you with many of the records that he or she has accumulated as part of the ownership and operation of the particular property. These files might include leases, contracts, insurance policies, warranties, payment books, real estate tax information, correspondence, etc. As time goes on, many of these files and documents will move to storage boxes after being replaced by more current paperwork. All of these materials must be maintained in a manner that ensures their safekeeping and ease of retrieval. In the following paragraphs, I will discuss the more important records and offer some thoughts about the maintenance of such files.


Documents dealing with the occupancy of the apartments (and perhaps parking or commercial enterprises such as laundry facilities) are important legal papers. Basically, they represent the income potential of the property. As such, they are valuable and should be carefully protected. If the leases were to be lost, stolen, or destroyed, you would have difficulty duplicating these records, and the job of enforcement and tracking would become much more onerous. Many managers maintain the lease files in locked, fire-resistant cabinets. The permanent, active-lease file is usually set up by building, and then by unit number within that building, not by an alphabetized resident list. Files are organized in this fashion to provide a complete and permanent record for each unit. This method often re quires a cross-index to facilitate locating a particular person’s lease. As leases expire and are replaced by new ones, the outdated leases are typically maintained in a less secure fashion in alphabetical order by resident. Inquiries involving expired leases are almost always initiated with the name of the resident rather than the unit identification. The lease documents are the property of the building and they must be turned over to the owner when they are requested. Laws vary regarding the length of time one must hold leases; some people choose to hold them indefinitely (this is the practice I advocate).

Warranties and Owner’s Manuals

Managers who oversee the structures that constitute most investment real estate tend to accumulate a substantial number of warranties and owner’s manuals. These documents may not be needed for many years but they are valuable and must be protected. For example, a new roof may carry a ten or even twenty-year warranty; many air-conditioning compressors or refrigeration units come with a five-year or longer warranty; and sealed window units frequently carry long warranty periods. Virtually every pump, motor, and appliance comes with some sort of factory warranty. Some times, the manufacturer can determine age by the model or serial number, but that doesn’t always work. Frequently, the warranty period is ex tended when delays are incurred in the finishing and occupancy of the building; you will need the paperwork to help enforce a claim.

When you buy a new device, you expect it to work or you will quickly demand repair or replacement. At that point, you know who the product contact is, and this representative arranges to get things going again. A few years later, the arrangements will almost assuredly be more complicated. When a breakdown occurs and you have the owner’s manual flied in a safe place, you will be several steps ahead of the game. Top managers guard these reference materials carefully and make sure that they are transferred with the property if there is a sale or management transition.

Plans or Occupancy Certificates

When a building is under construction, almost everyone seems to have a set of plans and specifications. As the years slip by, the sets of plans become more and more tattered as they are moved to different locations. A complete set of plans is often heavy, certainly bulky, and rarely fits in a standard file cabinet. It is, however, very valuable and it should be protected and not stored behind a door or sent to the maintenance area. The need for plans will become apparent later in the building’s life when renovation, retrofitting, or replacement of some hidden, but major, mechanical item must be undertaken. As the manager, do your part to protect the original drawings.

Occupancy certificates or zoning documents are other examples of papers that have a way of getting lost. Holding these papers can save count less hours in later years; they should be preserved in a permanent file.


Operating an apartment building means removing trash, exterminating bugs, cleaning windows, keeping the grounds, and maintaining complicated machinery. These activities usually involve outside vendors—and that means contracts and letters of agreement. Having access to these documents can avoid misunderstandings; they have legal significance, and they bind the owner of the property. Contracts need to be filed for safe keeping—even after the contract period has passed. They belong to the owner and should be turned over to the owner should there be a transition in the property’s management.

Correspondence and Memos to the File

Property management involves a great deal of letter writing to a wide audience: owners, residents (future, present, and past), neighbors, bankers, insurance carriers, governmental agencies, vendors, etc. Many agents choose to file correspondence by year; others do their filing by property. Either is fine so long as the pattern is consistent and retrieval is fairly easy and gets predictable results.

Memos to the file are an important part of record keeping. Today’s society is becoming increasingly litigious, and our minds are simply not capable of recalling exactly what was said or agreed upon during a discussion. Whenever a situation shows any potential for developing a misunderstanding in the future, write or dictate a memo that records your understanding of the circumstances; then file the memo away for future reference. You will never have a clearer understanding of a conversation or negotiation than you do in the moments immediately following it. Memos to the file require an additional time commitment—a burden considering the number of activities that you must pack into each day—but memos are essential if you are to be in a position to defend yourself if a problem should occur. In fact, many top professionals make a regular habit of recording the highlights of virtually every discussion they have in a chronological diary maintained in a binder or steno pad. These diaries are then labeled with the starting and ending dates and filed for future reference. Without such a record, you may find yourself defenseless in a situation that develops years after the fact. Take the time—make yourself a record.

Insurance Policies

As I said in section 10, the managing agent will probably inherit the job of maintaining the property’s insurance policies. Most managers keep insurance documents under lock and key and in fire-resistant cabinets. This includes the policies that are in effect as well as those that have recently expired. The responsibility that goes with keeping the policies includes tracking policy expirations and alerting the owner to upcoming renewals. The manager who maintains the insurance records will have a difficult time dodging some level of liability in the event that a loss occurs and the applicable policy has been allowed to go un-renewed. Tickler files used to remind you of crucial dates must be unfailing when it comes to insurance policy expirations.

Property Taxes

Real estate and personal property taxes are commonly called ad valorem taxes. An ad valorem tax means “according to value” or “according to worth” (of the property), as opposed to an income tax, which is “according to income.”

In some cases, real estate taxes are the largest single item of expense for the buildings you manage. Proper record keeping requires the maintenance of a separate tax file for each property. This file should contain the following information:

1. A legal description of the property.

2. The permanent tax identification number.

3. Information concerning the valuation of the land and the building.

4. Timetables and procedures for handling assessments.

5. History of the tax rate to the present day.

6. Name, address, and telephone number of the tax attorney assigned to the property.

7. Copies of paid tax bills.

8. Special assessments and other taxes.

9. Correspondence regarding protests, appeals, and complaints.

In addition to the permanent tax file, a “tickler file” is also needed here as a reminder of approaching payments and protest dates. As managing agent, you are obligated to make sure that real estate taxes are paid whether or not you receive a bill. If you don’t get a bill, it’s your obligation to find out what’s wrong. When you do receive the tax bill, check carefully to see that it applies to your property.

Some localities also collect personal property tax and sales tax on rents. If this is true in your area, you must set up and maintain a record of payments made and returns filed.

Employee Time Records

As explained in section 3, building employees (including most managerial help) are entitled to at least the minimum hourly wage for the first forty hours of the workweek and time-and-a-half for overtime. In effect, this makes all building personnel hourly employees, whether they are paid a salary or an hourly wage. Therefore, it’s important to keep records of all time worked and to pay overtime when necessary.

A record system is initiated by giving each person a timecard each week. Have your employees fill in the hours worked each day, and then collect the cards at the end of the workweek. Be sure to keep these cards on file and inspect the times before issuing payroll checks. If an employee works more than forty hours in one workweek, overtime must be paid.

Actual time records are essential in any investigative hearings. The vast majority of Wage and Hour Law settlements are made on “proof of the record”—that is, what the timecards show. Without a card, it’s your word against an employee’s.

Canceled Checks, Deposit Receipts, Copies of Paid Invoices

Provide space and a system to preserve and retrieve records of rent payments, bank deposits, and invoices that you have paid on your clients behalf. Five years is the minimum holding period. In a well-run management operation, there is little need to fall back on these records, but there will be situations when the recovery of these documents is crucial to solving a dispute or claim.

Computer Records

Almost all management records are generated and saved though the use of computers because computers are so reliable that little thought is given to protecting data stored in them. Every manual written about the business applications of computers stresses the importance of making backup CD-R or DVD-R copies of all data stored on hard drives in addition to the data on internal hard disks. Some people make backups and then store them right next to the originals. Others invest in expensive tape backup devices and then fail to make regularly scheduled backups. It is simply a matter of time until one of your disks becomes damaged or destroyed or your system “crashes,” leaving you with the difficult and often impossible job of recreating your records. Backup should be a daily requirement, and the backup disks should be taken to an off-site location in the event that your offices are physically damaged. Arrangements should also be made to run your programs on standby equipment should your machines or your facilities become nonfunctional. Owners, employees, residents, and vendors will usually have some patience with you after learning about a major break down, but that grace period rarely exceeds one week.

In addressing a subject like data backup, I am reminded that the subjects of computers, accounting, and record keeping are very closely related in our business. Accounting and record keeping are more difficult and tedious tasks without computers, while record-keeping activities have a significant impact on the accuracy of one’s accounting. This seems to be a fitting conclusion to Practical Apartment Management because there is so much interrelatedness among the skills and responsibilities of a property manager. The discerning property manager learns how to integrate duties and employ a variety of talents to manage his or her properties successfully .

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