You go through the screening process, sign the contract, the tenant moves in, and now it’s time to get paid. One of the biggest hurdles for landlords is collecting the rent. As many as 40% of renters pay their rent late. There are a few things you can do to make the rent collection more manageable.
These six tips will make the process smoother. The key is to communicate clearly and make payment easy for the tenant.
1. Offer Automatic Processing
When your tenants set up automatic payments, they won’t have to remember to send their rent payment each month. Each month your payment will get automatically processed on the designated day.
You have a few different options for prescheduled payments, such as ACH debits, online payments, bank bill pay, or post-dated checks. Decide what works best for you and your tenants.
If you work with a property management company, you can use their payment processing system. Then you don’t have to worry about setting up one up.
2. Have a “No Cash” Policy
Never accept cash as payment for rent. There’s no paper trail, and it's easily lost. It also implies that your tenant has an unstable income or is involved in some illegal. Not accepting cash will discourage potentially unsavory tenants from trying to rent from you.
3. Screen Tenants Carefully
One way to ensure that you receive on time and in full payments is to screen your tenant applications carefully. Only approve those who have a strong payment history on their credit report. While this won’t guarantee payment, it puts the odds significantly in your favor.
To have an effective screening policy, you should set hard criteria for approval.
- Limit the amount of credit card debt.
- Have a minimum income level.
- Have good credit.
- Check their references.
If you aren’t confident about performing tenant screening, you can work with an agency to manage the screening for you. You can leverage their experience to choose the best tenant for your property.
4. Be Clear and Consistent with Your Policies
You can’t expect your tenant to comply with your expectations if they don’t know what they are. Help your tenant pay on time by making these policies clear.
- The exact amount that’s due.
- Where they should make payments to.
- What methods of payment you accept.
- When the rent is due.
- If there’s a grace period.
- The consequences of late payments.
- The consequences for a bounced check.
Be prepared to enforce your policies. Let your tenants know that you will report late payments to the credit agencies. Then if they are late, follow through with reporting.
5. Speak Up
If you have a tenant that’s late, you need to speak up and ask what’s going on. If their answers are evasive, then you know to move forward with collection or eviction once the tenant becomes in breach of your contract.
It may sound like babysitting, but you can improve your on-time pay rate by sending reminders. If rent is due by the 5th, and it’s late on the 6th, then send a reminder on the 4th. This gives your tenant a chance to pay the rent before it becomes late.
6. Offer Rewards for On-Time Payments
One way to encourage on-time payments is through positive reinforcement. Reward your tenants that pay in full and on time consistently. These are tenants that you want to hold onto because they make your job easier.
Show your appreciation by sending them a gift basket or gift card. You could send this thank you gift after they make a year’s worth of on-time payments. This show of appreciation can encourage a tenant to renew their lease.
Contact our office today and let us help you manage your rental property.
