Rental income is one of the primary reasons why people invest in rental properties. Unfortunately, getting the rent from tenants is not always a smooth process. At times renters might fail to pay when the rent becomes due, while others might deliberately withhold the rent in protest to their unaddressed concerns. Still, a property manager or landlord needs the tenant to pay the rent promptly in order to pay off the mortgage and any other fees they may have. If you are constantly having trouble getting your tenants to pay their rent on time, the following rent collection strategies should get you inspired.
Screen the tenants
The first approach to getting your rent on time is to ensure you have reliable and high-quality tenants. As such, when trying to fill your vacant property, carry out an extensive background check on each potential renter. You could utilize any of the traditional tenant screening resources to ascertain a tenant’s credit report, criminal record, history as well as previous payment information. Even though gathering all this data might cost time and money, it will help you eliminate unpleasant rent collection related conflicts.
Set out the rent rules
Once you have the right candidates, make sure you have a clear guideline concerning the rent included in the rental agreement. Illustrate explicitly, the due date, the grace period if any, the exact rent you expect, and the mode of payment. Also include, who is to collect it, as well as the consequences of late payment, bounced or returned checks. Finally, review your rent policy to ensure that it is not only practical but precisely reflects how you want to handle the rent collection.
Detail the rent policy in the lease agreement
If you are satisfied with the content of your rent guideline, introduce it as a clause in your rental agreement for the tenant to see. In no uncertain terms, the tenant should understand how much, when, where and how he or she ought to pay the rent. Similarly, the agreement should clarify what the costs are for defaulting on rent. For instance, do they attract fines, or do repeat violations warrant an eviction from the premises?
Set up a reliable payment system
Make sure you don’t give your tenants a reason not to pay the rent when it is due. Have in place an efficient system through which he or she can submit the payments. You could use an Automated Clearinghouse deposit, which will automatically draft the due amount each month. Similarly, you could have the tenant in your Denver property set up an automated bill payment or debit payment system, to automatically transfer money from the tenant’s bank account to your account each month. To spice it up, you could offer a $10 to $35 off the rent incentive, to clients who sign up for the automatic debit plan. Also, if you choose to work with a local property management company, many today have an online portal for tenants and landlords to pay and collect rent.
Do not accept cash or partial payments
In as much as you want the tenant to pay, do not accept cash payments. Let him or her make the rent pays using checks or money orders, which will leave paper trails. Cash payments, on the other hand, are tough to prove, especially if the tenant made partial payments. Similarly, always make it a habit of documenting any monies you receive from the lessee. If your client wishes to make partial payments because of logical reasons, make sure he or she signs an agreement acknowledging the partial rent payment.
Come up with incentives to encourage prompt payments
Be creative and think of ways you can reward your tenants for paying their rent on time. For instance, when a tenant pays before the due date, he or she gets entitled to a few dollars off the due amount. Alternatively, you could inform the residents that for each before, or on due date payment they make, they earn a specified sum of money, which you will award them at the end of the year or lease period. However, be careful not to give out too much money. After all, you are in business to make money.
Report rent payments to Credit Bureaus
Take advantage of the Credit Reference Bureaus to encourage your tenants to pay rent on time. It is more of a reverse psychology approach where maintaining a good record is the sole motivator. Since the majority of residents would wish to keep a clean credit standing and even improve credit ratings, the high chances are that they will be prompt with their payments.
Whenever a tenant defaults on paying the rent when it is due, be swift in taking action. Make an initial request the following day after the deadline via email, phone calls or if possible appear in person. Delaying will send the wrong message to your tenants. If the tenant fails to pay up after the request, go ahead and serve him or her with all the relevant legal notices.
Once you have in place a policy for prompt rent collection, try as much as possible to stick to it, and apply the same rules without discrimination. However, although you are running a business motivated by profit making, bear in mind that tenants are human beings, and you have a reputation to maintain.