A tenant ledger, also known as a lease ledger or a rent ledger, is an important document that tracks the status of each tenant’s payments by property. If you own multiple properties, a tenant ledger is a critical piece of historical information to help run your business efficiently. This blog will help you understand the tenant ledger, provide an example of what to include in the document, and help you understand the legal implications of these tools.
What is a Tenant Ledger?
Let’s start with the basics of what makes up a tenant ledger. For obvious reasons, accounting of receivables is critical to your business. But for California landlords, the tenant ledger can also establish a history of slow or non-payment for tenants who breach their rental agreements. A tenant ledger puts in writing the history of what your renters have paid, when they paid it, and any fees related to their tenancy. A tenant ledger combines accounts receivable reporting with a gross income statement.
For your accountant or a real estate investor, the tenant ledger document includes critical data that can help improve financial performance and property value. Imagine the benefit of having a real-time glimpse into money in and money owed across a string of properties. However, a tenant ledger also gives you some insight at the micro level into how each individual tenant is working out within the rules of their rental agreement.
Best Example of What a Tenant Ledger Should Include
A good tenant ledger can show you at a glance the payment status of every tenant on every property you own or manage. The tenant ledger should include:
- Property owner’s name.
- Address of the property.
- Type of property (for example, a multifamily commercial rental unit).
- The size of the lot the property occupies.
- The zoning requirements.
- Unit numbers and addresses for multifamily properties.
- The name of the tenant and up-to-date contact information.
- The square footage of the rental property or unit.
- How many bathrooms and bedrooms the unit has.
- The start and ending dates of the lease agreement.
- The deposit required and received, with dates.
- The amount of the rent required, with due dates.
- Any past due fees or rent and whether a late payment fee is applied.
- Any additional fees or deposits, such as pet requirements, along with when they were paid.
- Itemization that shows when the monthly rent was paid.
- Any notes on the individual unit, such as the last time it was painted or if the carpet needs to be replaced, etc.
Ideally, the tenant ledger should be online. Rental management companies like Tenant Planet offer this type of payments received/outstanding tracking accessible anytime via an online portal. If your rental management company doesn’t offer this kind of convenience, or, if they still use manual processes for tracking rent, they are woefully out of step with the times.
Why Do I Need a Tenant Ledger?
Owning a rental property is a complex business that requires attention to detail. This is particularly true for property owners with multiple buildings in several locations. While many solo rental owners want that kind of growth for their small businesses, it takes a level of organization that they often confess they don’t have the time for. A tenant ledger is the first step toward getting a handle on their A/R and cash flow.
But that’s not all. Some of the other benefits include:
- A tenant ledger also helps you keep track of lease renewals to stay ahead of the game. That way, if the tenant declines the renewal, you are prepared and can move more quickly to find a new renter.
- The tenant ledger is also helpful when you’re trying to comparing existing rental prices on your properties with the local market rate. Accurate data allows you to earmark a property for a rent increase if needed to keep up with market rates.
- If you’re considering selling the property, a tenant ledger shows the potential income the investment offers future buyers. If you have a strong record of regular tenant occupancies with few or no slow pays, that is a selling point for potential buyers as well.
For multi-rental property owners, there is simply no better way to track tenant and financial activity in the business. That makes the tenant ledger a high-quality accounting tool that can benefit you at tax time but also if you’re dealing with a renter eviction.
How Can I Use a Tenant Ledger?
The entire idea of a tenant ledger is to maximize your profit when investing in rental units. It can give you a snapshot of profit and loss but it also red-flags problem tenants who have a repeat history of failing to pay. In the unfortunate situation that requires an eviction, the tenant ledger is the evidentiary documentation the court needs to authorize legal action.
An example of the kinds of questions a good tenant ledger can answer include:
- Has the tenant broken the lease payment agreement?
- How long has the renter lived there?
- How far is the tenant in arrears and how much money has the property owner lost?
- Have late fees been applied and are they paid?
No matter the size of your rental business, it’s hard to evict a “bad” tenant. California laws have strict protocols that try to balance the interest of the property owner with the housing needs of the tenant. Eviction is an emotionally difficult issue for property managers, but a tenant ledger can reduce the guilt everyone feels when the tenant must be “kicked off” the property. The reality of the landlord/tenant contract is that you provide a service to the renter (their home) in return for a monthly monetary exchange. The tenant ledger shows that while you have met the terms of the contract agreement month after month, the tenant has not.
Maintaining an accurate tenant ledger is critically important if you need to pursue legal action. It ensures you can prove to the courts that the tenant is in arrears with a late or no payment history. This will help the court rule in your favor, so that you can in turn move quickly to assess property damage or repairs and then q move quickly to recoup your losses by renting to someone else.
How Do I Get a Tenant Ledger?
Tenant Planet is a California property owner’s best option for accurate investment data. We offer real-time online tenant ledger documentation for each property you own. It’s a standard part of the rental management services we offer our clients. If you’re ready to get a better handle on your cash flow, call us.