“Many landlords just give up when the tenant skips and they cant find a new address. They think that if they didn’t collect the unpaid rent right away, its a lost cause, says Bill Gray, debt collection expert with Rent Recovery Service, a collection company which specializes in tenant debt.
In reality, old tenant debt can be an untapped source of cash. Even if the tenant didnt have the ability to pay when he skipped on the rent, it might be worth pursuing him now that some time has gone by. He may have reestablished himself ” he might have a new job, a bank account, and assets he doesnt want to lose.
Often, delinquent tenants think theyve beat the wrap after a year or so goes by, Bill explains. Theyre surprised to learn the problem hasnt just gone away. You can use that to your advantage to collect the old debt.
The exact amount of time you have to collect a debt depends on the law of the state where the rental property is. You might be surprised to learn the statute of limitations for debt in your state ” it may be longer than you realize, Bill explains. “Many states have landlord-friendly rules for collecting unpaid rent ” some give you as long as ten years to collect.
Landlords face two hurdles when a tenant leaves without paying rent. On the one hand, the tenant will probably just ignore any demand letters from the landlord. But to hire a collection agency to send the demand letter typically means giving up a percentage of the debt on a contingency. Rent Recovery Service offers a solution to this dilemma by providing a self-help option that allows landlords to send out collection letters through a legitimate collection agency, and pay only for the letters–starting at under $20. This flat-fee collection service is unique in the industry.
There’s no way to predict which tenant may leave you with unpaid rent, so it’s a good idea to keep good records on every tenant. This includes a completed application with a list of three personal references, three business references, and emergency contact information.
In addition, hold on to copies of all documentation required with the application. Have each adult complete the application, and sign the lease.
Keep a log of each interaction you’ve had with the tenant, and retain a copy of each rent check.
Keep your collection files secure, but accessible should you need them.
Its easy to find out if the debt in file cabinet is collectible. It doesnt take much time–just ten minutes or so to copy your file and send it out to Rent Recovery Service.
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American Apartment Owners Association offers discounts on products and services for landlords related to your rental housing investment, including rental forms, tenant debt collection, tenant background checks, insurance and financing. Find out more at www.joinaaoa.org.