Effective rent collection procedures are key to investment property success for a couple of reasons.
First, it’s the best way to keep your cash flow consistent and reliable. You can’t make money if the money isn’t coming in every month.
Second, it prevents eviction and reduces turnover. When you have a good system in place for collecting rent on time, you don’t have to worry about chasing tenants down for the late rent. You don’t have to threaten eviction, and you don’t have to follow through by evicting them. Not only is the eviction itself an expense, the resulting vacancy and turnover period is also an expense.
Rent collection might seem like the most basic part of managing a property, and you might expect that it’s going to be easy. You know it’s your tenant’s responsibility and contractual obligation to pay rent.
What’s so hard about that?
Being a landlord is a business, and you should be thinking about your tenants as your customers. Proper rent collection techniques will improve the tenant’s rental experience and reduce delinquencies.
Here’s how to ensure you are collecting rent consistently and on time every month.
Start with Clear Rent Collection Expectations and Instructions
At Property Services of Atlanta, we set expectations with our residents early, communicating our firm but fair rent collection policies up front. Your lease must be explicit in what tenants are expected to do. A good rent collection policy will:
State when rent is due
State how much needs to be paid
Provide information on how tenants should pay
It’s also important to include information on any grace periods and late penalties that might apply. When you’re meeting with your tenants to sign the lease or go over its particulars, have an open and transparent discussion about the rent. Let them know that you take it seriously, and you will enforce the terms of the lease when it’s late.
When your tenants know what you expect of them, there is less confusion, fewer conflicts, and your residents will have an easier time meeting those expectations. Every tenant who moves into your property should understand his or her responsibilities in terms of rental payments.
Always enforce your rent collection policy. If rent comes in late, make sure you charge any late fees that you have included in your lease. It’s important not to waive these fees. Tenants need to know they will be held accountable when rent isn’t paid on time.
Provide Reminders to Atlanta Tenants
You can send reminders to tenants about rent coming due. You don’t have to bother them with phone calls or even text messages. Send emails. Three or five days before the first of the month, you can schedule a brief and easy email to go out reminding them that rent is due and providing a link to your online payment portal or listing instructions on how to pay.
When rent does not come in immediately on the first, send a message reminding them that rent needs to be paid.
Good tenants who are forgetful or prone to putting things out of their mind will appreciate this. Good tenants don’t want to be late, but sometimes things happen. Avoiding those “things” will help you and your residents.
If your tenants do pay late, stay on top of it until the rent comes in. Call, text, and email. Communication must be established, and you want to find out why they’re late. Maybe their car broke down or something happened with their job. Get the story in writing. If it turns into an eviction, you don’t want your tenants to later claim they didn’t pay because the heat wasn’t working. You want to have the explanation in writing; it’s a valuable tool.
Invite Multiple Payment Methods When Collecting Rent
You want your rent paid on time.
It’s important to your earnings and the stability of your investment property. One of the best ways to ensure your rent comes in on time is to allow payments to be made in a variety of ways.
This is an online world, and the most of the tenants in your property will likely expect to pay for just about everything electronically. Very few people write out paper checks anymore, and you want to make sure you’re keeping up with the needs of your residents. Allowing tenants to pay online will help you collect rent faster because it’s efficient and convenient for tenants. There’s less of a chance that those tenants will forget to pay or pay late.
Atlanta property managers have innovative technology-driven platforms to collect online rent payments. This has been a huge benefit to us and our tenants. Residents can easily log into their tenant portal and pay rent online. Funds are then electronically deposited into the owner’s account via ACH.
With electronic and online rental payments, tenants can increase their security by setting up regularly recurring rental payments. When they do this, rent automatically comes out of their bank account on the first of every month. It’s the most efficient way to avoid late fees and rental collections. If you don’t have property management software that allows you to collect and track online rental payments, make sure you have a way to let tenants pay electronically. It will save you both a lot of headaches and ensure you receive your rent when it’s due.
As with everything, there are exceptions.
You may have tenants who are not comfortable with online payments. They might want to pay with a check. They might prefer a money order. They might want to mail it to you or drop it off to you in person.
Be willing to work with multiple payment methods. Accepting rent in all of these forms is a good idea. While we always caution against allowing cash payments, there are ways that you can have tenants pay in cash at a retailer like Walmart or 7-11, and then the payment processing platform used by those retailers will deposit the amount into your account. It’s worth looking into if you have a high demand from tenants to pay in cash. This, however, is unusual.
Provide Tenant Incentives for On-Time Rent Collection
On-time payments should be expected. They’re a condition of the lease.
However, it doesn’t hurt to offer tenants incentives for paying rent on time. Most good residents really appreciate the fact that they can work towards these rewards. It will ultimately contribute to a better tenant experience and lead to higher tenant retention numbers.
Consider offering $25 off of rent if payments are made on time six months in a row. Or, you could enter them into a drawing for a gift card to a local coffee shop or restaurant. Providing incentives like these is a great way to motivate tenants. They’ll want to be sure they get their rent in on time so they can take advantage of whatever perks you’re providing. It shows them that you appreciate their attentiveness to their financial responsibilities and it helps to build a better relationship between tenants and landlords.
Document Your Rent Collection Process
Have a reliable record of rent collection. This will likely be electronic, or maybe you’re still using a paper ledger. Whatever your process happens to be, you want it to be clear and easy to follow. It must demonstrate when rent was paid, how much was paid, and whether there was anything else included, such as a late fee or pet rent.
This is another example of how automation and technology can benefit your commitment to collecting rent on time effectively every month. If you do have to go to a judge to evict a tenant, you’re not sharing the details of your own bank account or digging up the written receipts you provided to tenants. You’ll have a clear and easily accessed record of when the money came in and when it didn’t. Having records in order will help you be effective.
Tenant Screening and Tenant Relationships
Let’s take a moment to talk about where effective rent collection really begins: in choosing a tenant.
Your tenant screening process needs to be rigorous and consistent. You want to choose a resident who can be trusted to pay rent on time. How do you know you have such a resident? When you’re reviewing the results of the screening report, you’ll find:
No prior evictions
No court judgments
No history of unpaid bills to landlords or apartment communities
You’ll want to conduct landlord reference checks, too. Don’t be afraid to get in touch with current and former landlords. Ask if rent was paid on time and if they’d rent to this tenant again.
When you have a positive and professional relationship in place with your tenant, there’s less of a risk that rent will be late or ignored. Your tenants will want to perform the way you expect them to. It’s worth it to invest in good screening and an excellent tenant relationship.
Collecting rent on time and choosing responsible tenants are two excellent reasons to work with a professional Atlanta property management company. If you’d like some assistance, please don’t hesitate to contact us at Property Services of Atlanta.