Most people look at real estate investments and think that getting income from rental units is very straightforward. Many hurdles hinder the efficient collection of rent from these entities, and this mostly affects one’s budgeting and planning. Property managers are always tasked with the challenge of coming up with a smooth rent collection procedure that will enable them to deal with any arising issues, which are still bound to happen, and ensure the rent payments are made in good time. The best way of getting to know how to implement such procedures is by looking at the seasoned property managers and checking out how they have managed to overcome the rent collection challenges over the years. Here are some tips from an experienced property manager;
Start It All From The Documentation
The perfect place to begin your rent collection process is in the initial documentation. The lease agreement signed by the tenant and landlord should specify the terms surrounding how the rent should be paid clearly, and you need to make sure that the tenant goes through all these terms before putting pen on paper. If any vital information misses out, your tenant may use this as an excuse, and you will only have yourself to blame. Some important details that should be included in the lease document include the acceptable forms of payment, where the rent is to be paid, lateness fees if the rent is paid past the due date and other consequences for late payment. This way, the tenant knows what they are signing up for when they decide to lease your property, and they will have very limited excuses for not fulfilling their obligation.
Automate The Payment Process
We live in a digital age and forcing tenants to make payments through cash could lead to some delays, not because they do not have the money, but because they are probably too busy to go and make the payment. Coming up with an auto-deduct electronic form of payment for your tenants is the best way to collect your dues on time. This eliminates the possibility of human error which is usually used as an excuse for late payments. There are several ways you could set up an auto-deduct system where the tenant authorizes you to deduct the amount from their monthly pay before they get their net salary and you should find one that works for you.
Select Your Tenants Carefully
You need to be very careful when screening your tenants as this is where problems start. Some tenants are very problematic and have a terrible rental history. Do not expect such people to change when they move into your place as they will give you excuse after excuse every month. First, set a clear criterion that all the tenants should pass before being allowed to lease your place. The law is obvious on discrimination in such cases, and you should be very fair when going through the application process. One important thing you should look at is the income the tenants have, and a good rule of thumb is that their regular income should be at least thrice the amount of rent to be paid. If you have some time, you could do some digging and check on the past behavior of a tenant before admitting them. If you can get in touch with their previous landlord, do so and find out why they moved out of that place and if they were good tenants.
Avoid Cash And Partial Payments
You should avoid from taking cash payments from your tenants at all costs. It might be tempting, but cash could easily get lost when it exchanges hands, leading to a whole lot of new issues that you could have avoided. Cash and partial payments are also bad for record keeping, and they would only give you a hard time managing your property. However, if a tenant has a good record and comes to you with a reason why they cannot pay the whole amount within the stipulated time, have them give a partial payment and then commit to clearing the balance within a reasonable amount of time.
Enforce Your Collection Policy
The initial document customers are required to sign before leasing your property should include a clear rent collection policy. To make sure that these payments are made in good time, you should be a bit strict and enforce these policies. However, do not be too hard on the tenants such that they feel that you are harassing them, especially the ones who have leased your property for a long time and are probably just facing a hard time. Find a way of keeping them from taking advantage of your generosity in future by being firm and restricting these acts of leniency to the extreme cases that are probably extreme and understandable. Being firm gives the tenants that notion that rent should always be a priority when they pay their bills.
Spell Out The Consequences
The consequences of late rent payment are important as they could push your tenants and make them very disciplined. You should be clear about these consequences and even go ahead to exercise them when you think that your tenants are taking them for granted. One common one is reporting past due rents to a credit agency which will ruin a tenant’s credit score. If tenants know that late rent payment will get them reported to the major credit agencies around, they will get tensed a bit and make sure they clear they dues before the deadline comes. Obviously, you do not want to ruin people’s credit score, but this is more of a scare tactic that can be used to get your dues in good time.
Reward The Good Tenants
At times, you may want to remain with the good tenants, and you should be prepared to go an extra mile to do this. If you have a couple of tenants who take care of your property, pay in time and follow your rules, do not shy away from gifting them. This shows how much you appreciate them and this will motivate them to renew their lease since they will feel that they are leasing in a place where they are valued.
The mentioned tips are from a seasoned 3cre Property Management and they are helpful for managers who want to streamline their rent collection process.