Managing rental properties & collect rental can be a profitable business as long as you manage your cash flow well and collect rent on time. In fact, the biggest factor in your cash flow will be your ability to collect rent on time.
As a landlord or agent, you may have chance to have a tenant who pays rent late – or not at all.
Here are seven tips for collecting rent on time and handling tenants who have trouble paying rent.
1. Make it Automatic
Requiring tenants to pay rent via an auto-pay or auto-deduct system is the best way to collect rent on time. There are even multiple systems that will deposit the money automatically to your bank account. The major benefit is that this eliminates the factor of human error – i.e. tenants “forgetting” to pay rent.
RentGuard rental solution provides a hassle free on rental collection with credit card and debit card to deduct the tenants rent money and deposit it to landlord bank account.
2. Choose Your Tenants Wisely
Only rent to qualified tenants with a great rental history. No surprise here, right? When screening tenants, you will see the entire gambit of credit ratings. Some prospective tenants will have an excellent history paying bills, but others will have downright terrible payment habits.
- Tenant Income statement: At the very least, this should include regular income equivalent to three times the rent amount or more, and an established history of paying rent on time with past landlords.
- Good Attitude: Tenant with good attitude always easy to handle and deal with as compare to tenant with lots of request and complaint.
- Check References: I believe that the best predictor of future behavior is past behavior. Therefore, thorough verification of the application information is critical to paving the way for prompt, full rent payments. Always call the previous landlord and ask “would you rent to them again?“. Keep in mind that a previous landlord does not have to tell you anything, but it doesn’t hurt to ask!
3. Exercise a “No Cash” Policy
Accepting cash as a rent payment is never a good idea. I know it’s tempting, but as I discuss in the article “Danger Danger, Be Cautious of Cash“, just don’t do it.
Cash is too easily lost, leaves no paper trail in the event that your tenant disappears, and may sometimes imply that your tenant is involved in illegal business activities.
You can eliminate these risks by establishing a policy in which you do not accept cash as a payment for rent.
Serve a legally sufficient notice of your “no cash” policy and advise your tenants of acceptable ways they can make their monthly payments, such as check, money order or direct debit. Remember to communicate this policy in your lease or rental agreement.
4. Enforce Your Rent Collection Policy
To ensure regular, timely rent payment, keeping your collection policies firm and consistent is the industry best practice – but there are few exceptions.
In your lease, you should address all payment related issues including the:
- exact amount due every month
- where payments are made
- acceptable payment methods
- when rent is due, grace periods
- the consequences of bounced checks or default.
At one point or another you may feel sorry for a tenant falling on hard times, or simply be in too much of a hurry to charge a late fee. If you are sure that a good tenant is only experiencing a “just this once” type of issue, feel free to cut them some slack.
However, to keep them from taking advantage of your generosity in the future, be firm about your policy from then on and don’t make a habit of being lenient. Let them know that rent should always come first in regards to paying bills and that their delinquency results in costs that will be passed on to them. we suggest forgiving a late fee once, but ONLY once.
If you are so short on time that you cannot adequately collect rent or late fees, then consider hiring a reputable property manager to do this for you.
5. Offer Rewards to Responsible Tenants
A critical part of managing a rental property is holding on to good tenants. Sometimes landlords can be so focused on preventing unwanted situations that they overlook the renters who make their job worthwhile.
If you have a tenant that always pays rent on time, abides by your rules and takes good care of your property, show them how much you appreciate them with an free cleaning or air-conditioning service once a year
A perfect opportunity to show your appreciation is after your tenants have paid a year of consecutive, timely rent payments. A rewards could also provide a wavering tenant with the motivation needed to renew their lease.
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