Quoting a rental catch-up job: look first
Before you fix a fee for a rental property catch-up, open one full year of source records per property. The loan, the ownership and the gaps set the price.
The email arrives on a Tuesday. "Hi, I've fallen a bit behind on the rental. Can you do the last few
years? Just the one property, nothing complicated." Attached is a phone photo of a cardboard box.
You can see a folder labelled RENT and what looks like a council rates notice from a suburb you
did not know they owned in.
You reply with a fee per year. It seems reasonable. One property, a managing agent, a loan. You have done a hundred of these.
Three weeks later you have learned that the loan was refinanced in the second year, that the client lived in the place for four months between tenants, that their sister is on the title, and that the agent changed and the first agency will not answer the phone. The fee per year has stayed exactly where you put it.
My position is simple: do not fix a fee for a rental catch-up until someone in the practice has opened one complete year of source records for each property. Not the client's description of the records. The records. If you cannot do that before quoting, price the looking as its own small job and quote the years afterwards.
One year opened beats four years described
The client's description is honest and almost always incomplete. They are describing the property as they experience it: a place with a tenant, an agent who sends money, a mortgage that goes out monthly. You are pricing something else — a set of documents that has to support income, every deduction and, eventually, a cost base.
Pick the year most likely to be complete, usually the most recent. If that year is a mess, the earlier ones will not be better. If it is tidy, you have a template for what to ask for in the others, and a realistic sense of the hours.
We wrote about the general version of this in fixed-fee work that needs a stop point. Rental catch-ups deserve their own treatment because the things that blow the budget are specific and, with a little practice, predictable.
What to open for each property, in this order
- The title and the loan contract. Who owns the property, in what shares, and who borrowed. A co-owner the client forgot to mention changes how many returns carry this property.
- The loan statements for the full year. Not the annual interest summary on its own. You need to see drawings, redraws, offsets and any refinance.
- Anything showing how the property was used. Lease agreements, the agent's vacancy notes, a change of address. Periods of private or main-residence use need records of their own.
- The agent's annual statement and the monthly statements behind it. If the agent changed mid-period, expect two formats and a gap between them.
- Large invoices and the depreciation schedule, if one exists. A capital works or depreciation claim built from scratch is a different job from one rolled forward from a report.
The ATO's records page for rental properties lists records showing periods of personal use and main-residence use, and loan documents on a refinance, among what an owner should keep. It also asks for separate records for each property. That is a reasonable checklist to send the client, because it is not your opinion about what they should have kept.
The loan statement is where these jobs grow
A redraw to pay for a car. A top-up to help with a deposit on the new family home. A refinance that rolled a credit card into the investment loan. Each looks to the client like ordinary banking. Each can mean the interest has to be split between a rental part and a private part, and that split then has to be carried for every later year of the loan.
The ATO's interest expenses page works through this, including a redraw for private purchases and a loan secured against the rental but used to buy a new home. Its point for pricing is that what the money was used for decides the deduction, not which property the loan is secured against. So you cannot quote the interest work until you have seen where each drawing went.
If the year you open shows a single clean loan with no drawings, the interest work is small. If it shows a redraw, find out when the facility was first used for something private. That date can sit in a year you have not quoted yet.
Price the looking, then the years
That grid does three jobs. It tells the client, in a form they can see, why year three costs more than year one. It gives your preparer a request list instead of a box. And it gives you a basis for a quote you will not have to defend later.
A hypothetical grid for one property might read:
| Record | Year 1 | Year 2 | Year 3 |
|---|---|---|---|
| Agent statements | Held, old agent | Partial, agent changed | Held, new agent |
| Loan statements | Held | Held, refinance in March | Held |
| Use of the property | Rented all year | Client lived in it, dates unknown | Rented all year |
| Large invoices | None | Roof, repair or improvement unclear | None |
| Depreciation report | Not held | Not held | Not held |
Nobody needs to finish year two to see that it is the expensive one. The refinance, the private use and the roof each need a document and a decision. Quote that year with those three items named, and say what the fee assumes about each.
Keep the diagnostic genuinely small. If it starts turning into preparation, it has stopped being a diagnostic and has become an unpriced return.
The four discoveries that should reopen the quote
For rental catch-ups, four come up again and again:
- Another owner. A co-owner on the title means another return carries this property, and someone has to confirm the split.
- A private use of the property or the loan. Either one creates an apportionment that runs across years.
- A sale or a planned sale. The cost base records become part of the job. Our post on the records to recover when a rental is sold covers why that is its own piece of work.
- A missing agent year. If statements cannot be obtained, reconstruction from bank records is slower and needs its own reconciliation to owner payments.
Name these in the engagement, not as a list of everything that could go wrong, but as the specific points where you will stop, tell the client what you found, and agree what happens next.
Where BeforeMay fits
BeforeMay reads the source documents for a case and builds the schedules with each figure linked to the page it came from. Anything it cannot settle, such as an unexplained redraw or a missing statement period, is raised as a question rather than filled in. That makes the per-property, per-year gaps visible early, which is when they are useful for pricing. Our rental and individual working paper templates show the schedules, and the FAQ covers how documents are handled.
None of that replaces opening the box. It just makes the second look faster than the first.