Part of managing your rental property effectively is collecting your tenants’ rent on time. Some tenants don’t need any prodding since they are responsible for paying promptly.
Unfortunately, other tenants pay late, and others skip payments altogether. As a landlord, it is one of the most awkward and stressful situations to go through.
There are some great ways, however, to efficiently collect rent. This article will provide you with key strategies for collecting rent so you will not have to constantly worry about chasing payments.
Moreover, you will save time and effort by not having to look for new tenants or bring the matter to court.
The Advantages of Collecting Rent on Time
- Able to meet your financial obligations:
There is less burden on you to pay your mortgage payments, insurance payments, and utility bills from a different source of income.
- Less opportunities for conflict:
Not paying the rent on time is a common reason for conflict between the tenant and the landlord. The landlord will see the tenant who does not pay on time as untrustworthy, and the tenant will see the landlord as bothersome and impatient. If this issue can be avoided, it can keep both the landlord and tenant happy.
- Less stress for the landlords:
You do not have to spend time constantly chasing the tenants for reminders to pay their unpaid or late rent. A landlord can spend their time on other things, such as renovation projects and plans for their property. They also have the option to pursue other worthwhile investments.
Here are some tips you can implement to help you collect rent on time:
1. Automation system
Make it easy, convenient, secure, and automated for your tenants to pay rent. There are several options you can use for this:
- Post-Dated Checks
Having a tenant issue a post-dated check will keep you from worrying since you can deposit each check on its due date.
- Bills Payment
It is easy for a tenant to enroll your account under the bills payment option online, so transferring money is more convenient any time of the day.
- Auto-Debit
This fixes the issue of forgetting to pay on the due date. Auto deduction is direct, and the landlord can view and check it right away on their account every due date. A tenant just has to make this arrangement and sign an authorized form beforehand.
2. Wisely Select Tenants
Many problems associated with late rent payments or non-payment can be traced to accepting bad tenants in the first place.
It is essential to be vigilant in welcoming only quality and responsible renters. Adhere to the proper procedure and do not skip the tenant screening process. Here are the most important things to look for:
- Income requirements
Check that an applicant’s income is at least three times higher than the rent amount.
- Secure consumer credit report
It will be in your best interest to check if an applicant has a good credit report. This will inform you of how responsible they are with their accountabilities.
- Check references
It is a good screening practice to verify the information and contact previous landlords. Make sure they have an excellent rent payment history.
3. No-Cash Policy
Accepting cash as rent payment can be risky. It does not leave a paper trail for proof of payment, so it is best to ask for payment in the form of personal checks, money orders, or cashier’s checks. Even more convenient would be payment via electronic fund transfers.
It might be tempting to think cash is better since you do not have to wait for it to clear, like checks. But in addition to finding ways to keep the cash safe, you might also forget to provide a receipt or log the payment in your system.
This might result in confrontations and lingering conflicts. It is best to be clear in the leasing agreement that you have a no-cash policy.
4. Enforce your rent collection policy
Strictly adhere to your rent collection policy. Otherwise, tenants will abuse your leniency. Worse, if the tenants who pay on time hear that you are okay with late payments, they might follow suit. It is best to establish a consistent pattern from the start.
Your lease should contain the following details, and the tenant must sign or initial each page of the agreement with the date. This ensures that they have read the contract.
- Exact rent amount due
- Where payments are made
- Acceptable payment methods
- Date the rent is due and allowable grace periods
- Consequences of bounced checks or payment default
5. If a tenant is late in making payments, have a conversation with them
The discussion with your tenant about the late rent should cover the following:
- When will they be able to make a payment?
- What channel will they use to submit their payment?
- What is the full amount that they will be paying?
- What will be the method of payment?
It is crucial that you understand the situation first. Did they forget to make a payment? Is there a situation keeping them from paying? How soon are they able to pay?
You might adjust the due date when a certain date is more suitable (for example, if it is nearer their payday). There are also special events that you might consider extending payment grace for at your discretion.
However, it is best to be lenient or make a consideration only once in order to discourage a pattern of behavior. This also prevents abuse of your kindness, since you are operating a business first and foremost.
6. Offer rewards to responsible tenants
Practice positive reinforcement by showing appreciation to your consistently prompt-paying tenants.
You can show it by giving gift cards, baked goodies, or a fruit basket. If they have completed a year of timely rent payments without skipping, reward their good behavior.
You can offer a discount or send in a pizza delivery. This lets them know that you acknowledge their being responsible tenants.
It is tough being a landlord when it comes to reinforcing payments, but it is not impossible. Whatever tips you decide to follow, always remember to be professional. Prioritizing a good business relationship will earn and show respect.
If eviction is necessary, follow the right procedure in your state and seek legal intervention to avoid further stress. However, to prevent conflicts like these, seek quality tenants first.
You might also be better off hiring a property management company like Realty Management Associates to perform the rent collection on your behalf.