Rent Collection Disasters and How To Avoid Them
An inevitable truth for most landlords is that they will eventually have a tenant that misses the rent due date. Even the best renters can have a problem come up and the most consistent of us can forget things sometimes. However, there are also rare exceptions who either habitually make late payments or refuse to pay their rent at all.
Ignoring or actively allowing a tenant to make late payments with
out consequence can lead to a string of complications for the property owner or management group. It puts the owner in a financial bind when they don’t receive payments by the expected dates. There are often mortgage and loan payments involved on the owners’ side that could potentially be missed when a renter doesn’t make their rent payment on time.
To avoid these complications, property managers and owners have to be prepared for them. Here are three key ways you can prevent rent collection disasters for your property.
The process of eliminating rent collection issues starts the moment a potential resident applies to move into your property or community. This is where gathering background information about the tenants comes into play. This includes criminal background checks, credit reports, and their past rental record. In many cases, it’s also beneficial to reach out to the potential tenant’s previous property managers to see if there were any payment issues while they resided at the previous property.
Another aspect of this is the simple question, “Can the tenant actually afford to rent my property?” This is as simple as gathering proof of income in the form of a pay stub. In some cases, such as students, the tenant may not work enough to cover the rent or at all. In these cases, you can require a cosigner with a reliable track record and adequate income to accept the terms of the rental with the resident. This gives both the property manager and the occupant a safety net in case they’re ever at risk of missing rent payments.
For property owners, property management groups, such as Contre Property Management, can help you weed out bad tenants, along with a slew of other managing benefits. Taking care of your future renters in these early stages can really pay off months down the road.
Be Clear and Concise About Your Policies
The quickest way to cause confusion between tenant and landlord is to be unclear about what you expect from the tenant and what they should expect from you. Make sure all of the necessary aspects of the rental agreement are explained and provided in writing to the tenant before they move in. These aspects include the following:
- The due date and grace period of the rent
- Where/how rent is to be paid, including acceptable payment methods
- The exact amount of the rent and all associated fees
- Name of recipient if paying by check or certified funds
- The period of time a rent payment covers (Week, Month, Quarter, etc.)
- Exact mailing address for checks or other documents
- Clear instructions for lost payments
- Associated late fees
- Procedures to follow as soon as a tenant realizes they cannot pay rent
- Warning policy
- Grounds for eviction
- Clearly stated penalties for any other breach of the rental contract
- Consequences for returned payments
Making sure the resident has all the knowledge they need about your management policies will help them stay on track during their tenure.
Help Your Tenants Be Consistent
Everybody loses when the landlord makes it difficult for tenants to make payments. Modern property managers have to realize that the days of checks and paper money are quickly going away. With the digital age in full swing, more and more renters expect to find landlords who accept direct deposit or online payments. Even with modest property assets, owners have access to direct deposit via several programs optimized for small business owners. These programs not only allow you to provide various payment paths for your tenants, but they also often include tax guides and organization solutions for your leases, invoices, receipts, and other business documents.
You can also help your tenants stay on track by setting up automated phone and email reminders when rent is due. Even the best of us make mistakes. A quick, automatic message sent on a predetermined day that you set up one time can mean the difference between missed and on-time payments. It is the occupant’s responsibility to stay on top of their payments, but it will help build trust if you show them you care about them making on-time payments.
These few tips can help your rent income stay consistent and dissuade disruptive behavior from residents. Moving on to more extreme collection solutions, such as legal action, should be a last resort, but at times it will be necessary. In these situations, the landlord will have to accept being perceived as a villain in that renter’s narrative. At the end of the day, a property manager or owner has to enforce their rental agreements and collect rent.
If you need management solutions for your property, Contre Property Management can help! Feel free to contact us today for more information on our services!