Get the Rent Paid on Time
Rent is the lifeblood of the landlord business. Collecting it can sometimes be the issue that causes the most tension between landlords and tenants, and ultimately causes the landlord a great deal of financial losses and stress.
Without rent payments, your business probably would not survive for long. So, let’s say it’s a necessity to keep you afloat, not an option. With that in mind, you may want to institute some methods that make it easier for you to collect the rent, and easier for your tenant to not only pay, but to pay on time.
Here are some suggestions that will help you to get your rent on time:
Start by having the right approach- Lose the Amateur Landlord Attitude. Do not be permissive when it comes to collecting the rent. Leniency only causes greater difficulties to a greater extent later on. Tenants must understand that paying the rent is a necessity and must be prioritized.
They must also know and respect your payment policies. The further you allow the tenant to get behind in the rent, the harder it is for them to catch up, and the longer you wait for the money. Sometimes, they decide that it’s easier to move out than to catch up. Or worse yet, they might not move out and continue not paying, forcing you to evict. If that happens, you are stuck with not only empty pockets from the loss of rental income, but also the costs of eviction. So, let’s start from the beginning.
When you have that “new tenant orientation”, make sure you discuss an “on time” payment policy. Let the tenant know they will be held accountable for paying on time.
Let them know that you will report non- payments to the credit reporting agencies. Let them know that the relationship they have with you will have positive or negative benefits for years to come.
By offering alternative methods of paying the rent, you will be inducing positive payment behavior and lowering the risks of late payments. It will work out in both yours and the tenants’ favor. Give them a choice of these worry-free payment methods:
Request permission to draft or debit the tenant’s checking account for the rent every month on an agreed upon date. There are two common forms of automatic rent payment plans: Electronic and automatic paper drafts.
Request Automatic Payments
Electronic Fund Transfers (EFT’s) – or Direct Deposits: This method is where the appropriate rent amount is transferred from the tenant’s bank account directly into your account. It eliminates the need for paper checks, and mailing. The tenant will have to complete a one-time set-up. This direct rent payment method is safe for the tenant because Federal Regulation E safeguards consumers against the inappropriate movement of funds from their account. The money will be electronically transferred into your checking account every month on the day designated at the time of set-up. So, you will get your rent on time every month, unless of course, there is not enough money in the tenant’s account to cover the transfer.
Automatic Paper Drafts: With this method you get written permission from the tenant to use pre-authorized checks for paying the rent. There is no computer access into their checking account, which will erase their biggest fear). The payment gets re-created each month either by the landlord or a third party company that provides this service. You will receive and deposit the check each month on an agreed upon date. You can even hold the check, if the tenant has an unforeseen circumstance arise.
Offer a Discounted Rent Method
This is a great incentive to get the rent on time if the tenant does not want to participate in direct deposit or direct payment method. With the discounted rent method, the tenant is offered two rent amounts-one is the gross amount and one is the net amount. The gross amount is the normal (actual) rent. The gross rent is the amount that is stated in the lease agreement. They get to pay a discounted amount (anywhere from $20 to $50 less) as long as the payment is received by an agreed upon date. If the rent is paid after that date, the landlord gets paid the normal (gross) amount ($20 to $50 more).
This method eliminates the need for imposing a late charge. Just make sure that the normal (gross) rent is the amount that is stated in your lease just in case you end up in court. That way you can get a judgment for the gross rent amount, because late fees are rarely included in a non-payment judgment. Also, before implementing a discount rent option, be sure to speak to an attorney. As with any contract, this agreement should be in writing and your lawyer can best advise you as to how to go about it.