Rent is what keeps a landlord’s rental business afloat. When it comes to collecting rent, it’s important to have a consistent and reliable process in place.
Although one non-paying tenant doesn’t seem like much of an issue, as the bills pile up, every dollar will count. If you’re having issues with rent collection, here are some ways you can get your tenants to pay up:
#1 Talk To Your Tenants
If you’re dealing with a tenant that is habitually paying their rent late, it may be time to give them “the talk”. Clear communication is essential in every landlord-tenant relationship. You must remind your tenant about due dates, late fees, rent, and other consequences for late payments.
Doing this accomplishes two things: first, it answers any questions that your tenant may have. It’s likely that they simply don’t understand their financial obligations. Second, it protects you in the event that your tenant alleges that they weren’t notified about the consequences of their non-payment. This is why it’s crucial to document your exchange and to stick to written modes of communication.
#2 Impose Consequences for Late Payments
Imposing penalties for late rent payments can motivate tenants to pay on time. No one wants to be charged an additional fee, especially frugal-minded tenants.
Local statutes vary when it comes to the amount you can charge, so be sure to check with your property manager. For example, a landlord in California may impose a late rent payment fee of 5%, which is considered a “reasonable” amount. On the other hand, property owners in Florida are not bound by state laws on late rent payment fees, however, the fee should be explicitly specified on the lease agreement.
As a rule of thumb, the late rent payment fee should be high enough to discourage tenants from paying late, but low enough to not be considered a financial burden. In addition, remember that you have the discretion to decide whether your tenant’s excuse is excusable.
#3 Make Use of Online Payments
Save yourself (and your tenants) a trip to the bank. More and more landlords are embracing modern technology to make rent collection convenient, hassle-free, and easy. Using an app that manages rent collection allows your tenants to pay their rent from anywhere in the world. This is especially useful for tenants who are subletting the rental property.
Setting up automatic rent payments through AppFolio lets you see which tenants are paying on time and which are not. You will also be able to send emails to remind your tenants that their rent is due. Plus, it gives your tenants multiple options to pay their rent, such as debit card and credit card.
Another advantage of online rent collection is that it appeals to the younger generation. If your rental property is located in an area that’s suitable for Gen Z tenants, embracing online rent collection is a must.
#4 Consider Collecting Rent in Person
Collecting rent in person can be a hassle, especially if you haven’t hired a property management company. However, it does provide you with the opportunity to inconspicuously inspect your property to make sure that everything is in tip-top shape. It also allows your tenants to communicate any problems they may be experiencing so that you can address them as soon as possible.
But in-person collection does have its drawbacks. For one, it can be time-consuming especially if you own multiple rental properties. Unless you’ve hired a property manager, you likely don’t have the time to drive from one location to another.
#5 Put a Drop Box in Your Building
Do you own a multi-family property? Placing a drop box somewhere on the property can be a convenient solution to rent collection. You can place it in a secure location monitored by security cameras and accessible by the building’s residents only. Avoid placing it in the lobby where guests can easily commit theft.
Do not allow your tenants to drop off their rent payments at your home. While it may seem harmless to provide them with your address, you don’t want an angry tenant showing up at your house.
#6 Send Reminders Every Month
Consider sending your tenants an email, text message, etc. to remind them that their rent is due. Although your tenants are expected to stay on top of their rent payments, remember that they have lives, too! To avoid late rent payments, send your tenants a “gentle” reminder before their rent is due.
One way to do this is by creating a mailing list of all your tenants. Set up your email to automatically forward your message to your tenants at a specific time each month.
#7 Screen Your Tenants
You wouldn’t have problems with rent collection if you had chosen responsible tenants in the first place. Tenant screening is a process that can “weed out” prospective tenants who likely won’t pay their rent in time. It involves evaluating their income, employment status, credit score, and so on.
Generally, prospective tenants who have “good”, “very good”, or “excellent” credit scores are considered low-risk tenants. That means they’re likely to pay their rent on time and in full. Keep in mind that you should also assess their job stability — you need tenants who can continue to pay their rent until the end of their lease.
#8 Work With a Property Manager
A Florida property manager oversees every aspect of your investment property for you. They screen applicants, handle evictions, schedule routine maintenance, deal with complaints, and collect rent. Hiring a reputable property manager may be an additional express, but its benefits outweigh the costs.
Not only do property managers handle rent collection, but they also stay up-to-date on federal and state regulations. This guarantees that you remain compliant with the Fair Debt Collection Practices Act, Consumer Collection Practices Act, and much more.
The Bottom Line
Managing a rental property is similar to managing a business. Hence, you must employ the best practices to ensure that your “business” runs effectively. This includes establishing a rent collection process that offers both convenience and clarity to you and your tenants.
Hiring a property management firm such as Luxury Property Care can help ease the burden of rent collection. We utilize cutting-edge technology to streamline the process, ensuring timely collection and accurate financial reports every month.