As a property manager, few things are as important as getting your rent payments on time. Late rent payments affect your cash flow and can negatively impact your ability to pay your own bills. As a landlord you need to ensure that tenants feel it hurts them to do the wrong thing, and feels good to do right.
Demonstrate to tenants that the lease means something to you by meticulously upholding your end of the agreement too. Respond to complaints quickly, keep the unit in good condition, and don’t ignore any problems that may be happening at your property. Show your professionalism by saying what you will do, and doing what you say.
If you’re still experiencing problems getting your payments on time, here are 6 tips to combating late rent.
1. Improve Your Tenant Screening Process
One of the top reasons why tenants don’t pay is that they can’t afford to. A study from the Joint Center for Housing Studies at Harvard University has revealed that record breaking numbers of people can’t afford their rent. For the average person it is unwise to spend more than 30% of their income on housing.
An important part of your tenant screening process is to verify employment and income. While it’s wise to keep the 30% threshold in mind, it should not be the sole determining factor of who you choose to rent your unit to. Nevertheless being comfortable with the income-to-rent ratio of your tenant is an important aspect of tenant selection.
Your tenant screening process needs to look at the overall payment patterns of any candidate. Taking a look at credit reports is a good indicator of an individual’s approach to paying bills. While subjective, speaking with previous landlords can fill in the gaps and be a useful tool when used properly.
2. Clearly Communicate Terms in a Comprehensive Lease Agreement
The lease agreement is the blueprint for the tenant-landlord relationship. It explains the rules, expectations, and responsibilities of each party. The lease sets the tone for the relationship. It should be clear, strict, but fair.
As far as the rent section of your agreement goes, the lease should clearly state how much the rent is and when it is due. It should also explain how you plan to handle late payments and if there are any penalties for failure to pay the rent on time. Explain every aspect of the agreement before the tenant signs it.
The lease agreement should state if there is a grace period and how long it is. Many landlords choose to charge a late fee to encourage tenants to pay on time. If there is a late fee, the lease needs to state how much you will charge on late payments. Your agreement should also say what forms of payment you will accept and where payments should be sent.
If you find yourself in a situation where you aren’t receiving your payments on time, you must follow the agreed upon procedure as described in the lease agreement. Make sure all guarantors and co-signers understand the terms of the lease as well. You have the right to go after payment from them too.
3. Accept Online Payments
Make it as easy as possible for tenants to view their bills and make payments. One of the best options is to move to an online platform. This allows for self serve options that people can access whenever and wherever.
While it’s a good idea to keep traditional rent payments available, offering the option to pay online can eliminate many of the excuses that tenants give for missing their rent payment. People can’t avoid paying by going out of town when they have the ability to pay from their smartphone. Running out of checks won’t be a good enough excuse either when they can easily play with their credit card or through ACH.
4. Send Invoices And Past Due Reminders
Sometimes tenants simply forget to pay their bills on time. It’s always best to act quickly in order to demonstrate that you take timely rent payments seriously. Sending a monthly invoice before rent is due can help keep tenants on track. If that’s not enough, a simple past due reminder might remedy the problem.
Sending regular invoices and past due reminders can be time consuming and tedious. There’s also a discomfort with sending those collection notices. You can streamline the process and take yourself out of the equation by setting up automated sequences of messages.
Good property management software can automatically send invoices to all tenants at the right time. If the rent is not paid by the due date, the system can send a reminder. If that’s still not enough, the system can send notifications of late fees and further actions you will be taking on overdue accounts.
5. Arrange A Meeting
There are times when the best approach is a face to face conversation. When meeting with a tenant to address late payments it’s important to stay calm and remain respectful. It is never acceptable to harass, shame, or intimate a tenant into making a payment.
While this type of meeting is probably uncomfortable for a landlord, odds are it’s even more uncomfortable for the tenant. Approach the situation from a solution focused point of view. Make it clear that late or missed payments negatively affect you and your business. Keep the focus on removing obstacles instead of assigning blame.
6. Keep Good Records
Keeping good accounting records is a crucial aspect of any business and it applies to rent payments too. It’s important to maintain credibility and not make mistakes when recording payments. You don’t want to find yourself in a situation where you can’t prove that money is owed to you.
If you do find yourself dealing with a tenant that isn’t making payments on time, keep a record of all the correspondence that you send and receive. It can help you avoid and settle disputes in the future. Additionally if you do end up in court, having a detailed record of how you handled the situation can do a lot for you.
Reducing the burden of late rent payments starts with selecting the right tenants and having a solid lease agreement. Making it easy for tenants to pay and maintaining communication can help too. When all else fails, taking more drastic measures should be on the table. As a landlord it’s imperative to make rules and uphold them.