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We all know that any good investment property relies on a solid foundation. A business is built in much the same way. Don't wait until you manage five or ten properties before developing the infrastructure to support them. If you aren't willing to put in the preparation to build your back office, chances are you have no business in the real-estate business. Consider the following five essential components when creating a functioning office.

Design Your Workspace

Your workspace should be more than a corner of your kitchen table or the end table next to your bed. If you want to dedicate yourself to the business, you should dedicate a room as an office. In addition to the practical nature of a self-enclosed office, tax benefits are available when you designate a separate room as a home office.

Invest in a good desk and office chair. A comfortable workstation is a great way to maximize your efficiency. A good desk should support three basic work areas: a space for your computer setup and a phone, a space for paperwork, and a space for stackable storage. Apart from surface space, it's handy to find a desk that includes built-in file drawers and drawers/cabinets for supplies, but you can achieve those storage needs in other ways. Many desk configurations are available—my favorite is a corner desk unit or u-shaped configuration. This type of arrangement allows you to keep everything within arm's reach by rotating in your chair. If you can reach an item, you are more likely to use it. If you structure your office so you constantly have to get up and down or cross the room to retrieve things, you may be designing a future headache. It is acceptable, however, to keep equipment like printers, faxes and scanners on another table or storage shelf so they don't occupy valuable surface space on your desk. Make sure these items are located in a place that makes sense to you.

If large furniture purchases aren't in your budget, it's possible to work temporarily from a sturdy folding table. You'll still need to find a standard-sized file cabinet and stackable boxes to accommodate your daily filing needs.

Once your desk is set up, you'll need a basic list of supplies. Office-supply stores stock a variety of accessories for desk organization, but you may want to wait to start your shopping spree until you have fully defined your office needs. Begin with the following basic supplies:

• Legal-sized file folders, both hanging and manila
• Labels
• Printer paper
• Staples and a stapler
• Paperclips and binder clips
• Pens
• Notepads
• Stamps
• Envelopes

Develop a Filing System

Structure and simplicity are the keys to developing a filing system that you will actually use. Start by labeling a hanging folder for each property. Each hanging folder should contain a manila folder to hold property expenses/financials and a manila folder for each tenant. You might want to create detailed subfolders or tabs within these main folders, but try not to get so complex that you won't use the system.

Use stackable storage boxes or shelves to maximize the efficiency of your filing system. Create an In box for incoming mail, an Out box for outgoing mail, and a To Be Filed box where you temporarily stack paperwork to file at the end of each work day. As long as you keep these boxes separate and current, you'll always know where to locate paperwork in a hurry.

Note: At a later time, you may need to create file storage areas for tenant and property files that are no longer current. Your financial advisor or CPA may provide requirements for the length of time you must store these records. In general, it's a good rule of thumb to keep files for 3-5 years.

Create Basic Forms and Letters

You can find many real-estate investment packages on the market that include necessary forms for your business. At the very minimum, you'll need a basic tenant application form and a leasing agreement. Most states require that any residential agreement for a year or longer be documented in writing. Tenant application forms save valuable time in the future by helping you screen your tenants. If you decide to purchase a product that includes real-estate forms, make sure that the forms are relevant to the state in which you are conducting business. Not all forms are applicable in all states, due to differing real-estate laws.

In addition to business forms, it's also important to create basic form-letter templates for communication with tenants, so you don't have to reinvent the wheel each time you send a letter. When you start your business, you may not be sure which kinds of letters you will need to send. You can slowly build your library of templates by saving a generic form of each letter you create. In this way, you'll save future time and energy by only having to change a few parts of each letter, rather than retyping a new letter every time.

Invest in Financial and Administrative Software

While a good computer is key to running a successful business, true efficiency comes from using the right software applications. It's possible to start your business with only basic office software, such as Microsoft Office or Open Office. However, you can save time and effort by investing in a financial program such as QuickBooks and an administrative program for contact management. I learned very quickly how essential these components can be to a business's success when I worked as the office manager for a real-estate investment company. The company started small, but it was amazing how quickly the demands of our business outgrew our office's initial software capacity. After we purchased financial and contact-management applications, daily operations ran much more smoothly.

Financial programs will help you design invoices and statements for your properties as well as keep up with operating costs and generated income. Many programs include reporting features that can help you create visual documentation of the status of your business's success. Administrative software will help you organize and schedule appointments, phone calls, to-do lists, and projects. If you have difficulty navigating software packages or reading manuals, consider taking a tutorial class to learn specific programs. In the end, the money you spend in office preparation can repay itself tenfold.

Open a Separate Business Bank Account

The last step in office organization, but certainly not the least, is to open a separate bank account for your business. If you want to begin your accounting system by including initial costs/overhead for building your office, you may want to make this your first step. It's much easier to use your accounting software to keep track of your finances if you are able to separate your business expenses and income from your personal account. In this way, you can build your own paycheck into the operating expenses of your company rather than worry from month to month about whether you've dipped too far into the company budget. From an IRS standpoint, this is a necessary legal step to keep from commingling funds and can provide solid documentation in the event of an audit. If you find it necessary to purchase items for your business on credit, consider obtaining a separate credit card. To make sure all your bases are covered, speak with your CPA or financial advisor about the best way to organize your business financially.


With these office basics in place as your foundation, you'll be well on your way to building a strong, successful real-estate business. It's much easier to establish these systems before you start work than to retrace your steps and sort through a mess later. Your end goal is to create a structured system of processes and procedures that you could potentially train an assistant to perform after your business grows large enough to require additional support.