Collecting rent can be one of the more frustrating aspects of being a landlord. Chasing payments can be a headache that takes valuable time. However, you can completely remove the stress by using three strategies.
By setting clear expectations, using technology, and following a consistent rule, you can avoid almost all the worry and hassle. This will ensure not only your cash flow, but will also help you manage a more professional relationship with your tenants.
Let’s take a closer look at how you can build these systems.
Setting Clear Expectations with Your Tenants
Good communication can help mitigate potential issues before they arise. When your tenants understand what is expected of them, it is simple to build respect and trust, as well as alleviate you from having to manage the situation.
Here are three simple ways to set that expectation from the get-go.
Understand your lease agreement
Make sure your lease agreement is clear on how much it costs to rent, when it is due, any grace period, and when late fees will be assessed. Never assume anything is obvious; you need to spell out every single rule and financial obligation.
A comprehensive lease is not only a shield for you legally, but it will also help prevent misunderstandings about the most important elements of your transaction.
Provide a detailed welcome package
This document should serve as a supplement to your lease that provides simple, scannable information. It should include instructions on how to pay rent, submit maintenance requests, and handle emergencies.
By providing this timely and key information, you have proactively answered questions that will make tenants feel supported, while reducing confusion and unnecessary calls to you later.
Communicate proactively and confirm understanding of the lease
While moving in as a tenant, go through the lease and the welcome package together. Encourage the tenant to ask questions and clarify on the spot. Follow up with an email summarizing the highlights.
This reinforces that they’ve got all the important details and is reflective of a trustworthy, organized professional landlord.
How to Collect Rent Payments Efficiently and Securely
Landlords often struggle with how to efficiently collect rent payments without delays. However, know that using cash or paper checks in today’s world is slow and insecure. There are now faster, automated ways that will save you time, reduce errors, and ensure you are paid on time.
Use the following 5 recommendations to collect your rent in a fast, efficient, cashless manner.
Implement property management software
Use a dedicated platform such as AppFolio or Buildium. Each offers full-service tenant portals that allow them to pay you online.
All transactions are tracked and receipts generated, eliminating the need for manual entry and creating a perfect digital paper trail for your accounting.
Mandate ACH bank transfers
Promote or require tenants to make their payment using direct ACH transfer via your portal. This is a very safe way to pay: the money is withdrawn straight from their account. It is much more dependable than a third-party app, and it greatly reduces the chances of a bounced check or delayed or missed payment.
Set up automated payment reminders
Set up your software to send tenants an automated email reminder to pay a few days before the due date. This is an easy way to help your tenants do the right thing and avoid forgetfulness.
It also removes the awkwardness for you, and tenants are always kept up to date with clearly articulated expectations.
Establish a single, clear payment policy
Decide on one principal payment method and consistently use it. Be sure to state the payment method clearly in your lease. Avoid confusing your tenants by offering inconsistent payment options, such as cash one month and Venmo the next.
You no longer have to worry about confusion because all tenants use the same secure method.
Maintain impeccable electronic records
Take advantage of the management software’s ability to keep all payment histories and receipts in one place, as well as tenant communication. If there is ever a dispute, all you have to do is find the excruciatingly long history of transactions, not sweat half the time from the beginning to the end.
While being more than legal protection, it shows the best professionalism in the way you conduct your business.
Handling Late Payments and Avoiding Common Pitfalls
Despite transparent systems, you could also encounter late payments. Your reaction in these situations is an indication of your professionalism and protects your income. Here are five vital, basic approaches to establish consistency and fairness with your tenants.
Define a clear late fee policy in your lease
The grace period (if any), the amount of the late fee, and the application date of the late fee should all be clearly stated and documented in your lease. You should also ensure that the policy complies with local rent control laws if you want it to be enforceable. A well-defined policy will provide a clear, non-subjective standard for all tenants.
Automate late fee reminders and invoices
Start sending out late fee reminders and invoices from your property management software as soon as the rent due date has passed. Once you automatically enforce this policy, there is no room for subjective judgment of whether or when to do so.
Automation also creates a repeatable and consistent legal paper trail, in case you need to escalate the situation if the tenant is unresponsive.
Communicate promptly and professionally
Once the rent has become overdue beyond the grace period, for whatever reason, it’s time to get in touch with the tenant directly. The first step in your efforts to do this is to send the tenant a notice.
While it’s best to send a written notice, try to call the tenant directly, in a polite manner. Avoid accusations and simply ask if there is an issue, and remind them of their obligations under the lease. Be sure to create a file for everything as you get to this point.
Know and follow local landlord-tenant laws precisely
Rental agreement laws can differ greatly across the country. Be sure to understand what your area legally requires in terms of late fees, notice periods, and eviction. No matter what, being in compliance with all landlord-tenant laws is important because it protects you from challenge and liability. Do not do anything that isn’t legal!
Be firm but flexible for the right reasons
Apply your policy uniformly to avoid creating a precedent. However, if you have a steady tenant with only one verified hardship, a business decision may be to allow a one-off payment plan. Just be sure to have any alternative arrangement noted in writing to protect yourself.
Conclusion
Collecting rent ultimately rests on three systems: clear communication starting from day one, modern automated payment platforms, and a reasonable, but consistent late payment policy. Each of these systems offers a real way to create an easy and stress-free process, ensure you get paid each month, and help you act professionally with your tenants.
Protect your investment and sleep well at night by making them integral parts of how you manage your rentals. Your rental business will be the better for it.
However, if incorporating these strategies by yourself seems difficult or confusing, consider contacting property managers. Choosing the right property managers in Northern Virginia can make a big difference in your rental business. They handle communication, rent collection, property management, and more.
