Last Updated on March 30, 2022 by azamqasim
Did you know that 36 percent of households in the United States of America rent their housing rather than buying or owning it? The most important part of being a landlord in the United States is finding an effective way to go about rent collection. Anyone can hire a rent collection agency for help, but there are other routes you can take to ensure that your tenants are paying rent on time.
Some younger landlords might turn to collecting rent through a mobile option like a rent collection app. Still, there are other options like working with rent collection services that will take that burden off of your shoulders.
No matter what you do, you need to make sure that you’re getting the rent on time from all of your tenants each month. The good news is that you’re in the right place to learn about the different approaches that you can take when it comes to proper rent collection.
Keep reading this article to learn all about some helpful tips that will make collecting rent a walk in the park.
1. Screen Your Potential Tenants
The first thing that you should do each time that someone applies to live at one of your apartments or properties is to take steps to screen that potential tenant. The primary reason that landlords encounter trouble with renters defaulting on the rent that they owe you is that you didn’t screen them well enough.
The worst thing that you can do as a first-time landlord is getting too eager to find tenants. Getting overeager will lead to accepting tenants that will take poor care of your housing units and won’t pay their rent on time. Accepting tenants without doing any background research on them is setting yourself up for many headaches and difficulties when it comes to rent debt collections.
It is of vital importance that you get the software to help you with background checks on any potential tenants that submit an application to live at your properties. These background checks are great for making sure that your potential tenants have enough money to pay their rent each month.
You’ll also get a much better picture of their financial history and how well they’ve done when it comes to paying their rent in the past. Taking these steps to do a proper check into your tenants will save you a ton of money and stress. A good rule of thumb is to avoid accepting any tenants that don’t make more than three times what their monthly rent costs.
You should also make sure that they have a very good or great credit score and some great references from previous landlords. You’ll have peace of mind that your new tenants will be reliable and trustworthy when it comes to collecting rent each month.
2. Make the Lease Agreement Clear
Your lease agreement with your new tenant is the document that defines your relationship as the landlord to the new tenant. You need to make sure that you’re putting the right rules and clauses into this important document as these clauses are binding once you and the tenant sign the lease agreement.
Before you sign the lease agreement, make your expectations for your renters as clear as you can. This should include information on when you expect the rent to get paid and how you expect the tenants to maintain and care for the housing facilities that they’re living in.
You need to include important information like the amount of rent due for each month that the tenant lives there. You also need to be clear about the due date for paying rent when it comes to signing a new tenant up. It is easy for both you and your tenant if you consider using a rent collection app for easy payment each month.
Another thing to highlight when you create your lease agreement for renting your properties is the repercussions or consequences for missing rent payments. This should also include information on what will happen if your tenant breaks the terms of the lease agreement that they’ve signed with you.
This is the place in the lease agreement where you’ll want to be clear in stating that there are fines that tenants face when they fail to pay rent on time.
3. Inform Your Tenants of Consequences
Building off the previous point, you need to make it clear to your tenants that there are consequences for failing to pay rent. Informing your tenants that there are fines for late payments is a good start, but there is still more than you can do. You need to have harsher consequences ready to go so that you’ll have no problems collecting rent going forward.
Some tenants will default on paying rent to you multiple times in a row. A great consequence for that could be reporting that tenant to credit agencies in your area. One of the worst things that can happen to any consumer in the United States is suffering from a negative credit score.
A negative credit score will make it much tougher to find future housing to rent or purchase. It also has a negative impact on your ability to secure financing in order to purchase a new vehicle or pay for an important service. Going this route could feel cruel, especially to new landlords.
You need to remember that the purpose behind these harsh consequences is that you want to deter your tenants from ever reaching that point. No landlord looks forward to punishing their residents. It is important that the landlord gets residents that would rather pay their rent than face serious consequences for defaulting on rent each month.
4. Use Automatic Rent Payment Options
Another great route that you can consider when it comes to collecting rent from your tenants is an automatic rent payment option. You’ll find a boost in efficiency when you make automatic rent payment an option. It saves you a ton of energy and time since you won’t need to manually collect rent each month.
Consider using a direct debit option or electronic options for paying rent. You’ll find that going this route will automatically transfer the rent from the accounts of your tenants right into your bank account. You won’t experience any inconvenient cases of human error for rent collection if you use an auto-pay method.
You should also try to learn more about Landlord Rent Collection and how it will make your life easier. Many people start life as a landlord as a second job or a way to make passive income. If you can’t dedicate all of your hours each day to running your properties and collecting rent then you should look into hiring rent collection services for help.
In addition to these rent collection services, you should look into getting automatic bookkeeping and automated clearinghouses. You’ll find that it makes your job as a landlord much easier to manage on a day-to-day basis.
5. Speak With Tenants That Are Late With Rent
There will be times as a landlord when you’ll need to speak with your tenants that are late when paying rent. There are a number of reasons why your renters could end up late with paying their rent. When there are a lot of things going on in your life, it is easy to forget little details like the due date for rent.
That also isn’t taking into account complications with money due to the COVID-19 pandemic. You’ll never know the circumstances that someone is facing if you don’t take the time to speak with them and understand what is going on. Another potential issue is the date on which your tenants receive their paychecks.
Depending on when they get paid, they might not have the money to make rent on the due date each month. If you understand the situation then you can change their due date to accommodate when they get paid during the month.
It won’t make the situation any better if you react by getting angry with these tenants. A good landlord will meet with their tenants and get to the bottom of the issue while also trying to find a solution. You’ll show your tenants that you care about them as people, which will also make them more eager to work with you towards paying their rent.
If it is something simple like forgetting the due date then a simple reminder will help them remember. You can also suggest that they start using the auto-pay feature that you provide to your tenants. It is also wise to look into changing the due date to accommodate payday for tenants that get paid after the rent due date each month.
Provide Rent Collection Incentives
One of the most effective ways to go about collecting rent each month is by providing incentives to your best tenants. Everyone loves a reward much more than they love a consequence. Pavlov’s dogs are a perfect example of rewarding someone for taking the right action.
There are a number of rewards that you should consider offering each month to tenants that pay their rent on time. Little things like discounts on the following month’s rent payment will encourage all of your tenants to make sure that they pay on time.
There are also prizes and gift cards that you could give out to tenants that have a pristine record of paying rent on time. Gift cards to local restaurants are a fun reward and they’ll also help to contribute to your local economy.
Tenants that pay their rent on time each month make your job and your life much easier. They deserve a reward for allowing you to save yourself time and stress when it comes to rent debt collections. Sometimes rewards are much more effective for getting tenants to make their monthly rent payments on time.
Evict Tenants That Don’t Make Their Rent Payments
This bit of advice will sound cruel, but it is important if you want to form a good reputation as a landlord. There are a variety of valid reasons why your tenants might not be able to make their rent payments on time each month. At the end of the day, you’re a landlord and you’re running a business.
Businesses need to make a profit in order to continue functioning and growing. If you’re allowing renters to stay that are consistently late or defaulting on their rent payments then you need to have a backbone and evict them. By this point, you’ve made the terms and conditions on the lease agreement quite clear to any potential tenants.
You’ll regret allowing troublesome renters to stay at your properties. It will show other renters that there are no consequences for being late with rent or even not paying rent at all. You can’t force your tenants to pay their rent, but you can evict them if they choose not to live by the agreements in the lease documents.
Evicting tenants is arguably the most difficult part of being a landlord, along with collecting rent. Make sure that you try each strategy listed in this article before you resort to moving forward with the eviction. If you don’t want to handle this aspect of owning a rental property then it is a good idea to hire a seasoned property manager to help.
Combining a property manager with a reputable rent collection agency will make running your rental properties a breeze. You’ll never have to worry about vetting tenants and chasing them down for rent ever again.
Take Your Rent Collection to New Heights
Being a landlord is a difficult position to hold, and it is important that you make your expectations clear with any potential tenants that want to rent your housing units. It is a wise move to make use of a rent collection app that offers an auto-pay option for tenants. You should also speak with tenants that are late with their payments to understand why.
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