Screening tenants and signing a lease are half the battle for successful landlords.
Collecting rent, in full and on time, is key to keeping rental properties profitable.
Below is a compilation of the top ten methods that landlords and property managers utilize to collect rent. Take a look to see if there’s a trick or two you haven’t tried yet:
1. Offer a variety of payment methods, including credit card payments, e-checks, and automatic bank transfers.
2. Send a monthly tenant invoice ten days before rent is due.
3. Hire a property manager. Important if you live far away or don’t like the hassles of collecting rent. The other advantage: the manager will know how to set the highest rent, and will be able to market vacancies and screen tenants.
4. Add or shorten the grace period in new leases. If tenants are pushing the limit, it may be too long. The method of payment you choose will affect the grace period – five days is typical for checks to make if through the mail.
5. Include a legally appropriate late fee in new leases, and point it out to tenants. It only works as a deterrent if you make a big deal about it at lease signing.
6. Provide self-addressed stamped envelopes at lease signing. Of course, those could get lost. When that happens, replace them, or include them with your monthly invoices.
7. Call ahead and pick it up in person. Gives you the added advantage of checking up on the place.
8. Deposit checks promptly. Tenants watch to see when the checks clear. If you wait until the 20th to deposit their check, they’ll consider being late next time around. When they do, you have a weakened argument for charging late payments – apparently, you didn’t need the money to pay your mortgage.
9. Enforce late fee penalties. Otherwise, you will actually train the tenant to be late next time.
10. Offer incentives for good payers. Make sure rent discounts are legal in your area before you try that, but rent is not the only effective incentive. Create a point system with a prize that good tenants are sure to earn, or offer a lease extension bonus. At the very least, place a pile of cookies in the leasing office at the first of the month. Amazing what a little ‘carrot’ can do.
See our feature, Behavioral Economics: The Science of Paying Rent.
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.