09 Jul Paying Rent
Paying rent something you expect your tenants to do on time all the time. Regrettably, collecting rent is one area many landlords give little attention to. That is, until the rent is actually late. As a landlord, you do your best to keep your tenants happy and satisfied. Unfortunately, there are times that, no matter what you do, you will have to deal with a tenant not paying rent. It’s one of the risks that come with investing in rental properties. And, no matter how well you screen applicants, you will probably still get a few tenants that pay their rent late.
Whether it simply slipped their mind or they are struggling financially, dealing with late rent payments can be a huge hassle. Not only do they cut into your profits they also make managing properties more difficult. In a perfect world, paying rent on time is something every tenant would do. But, as long as there is a human element in the rental process, lateness will always be a factor. So, it is important to prepare for the inevitable. With this in mind, here is some insight on how to make paying rent easier and less confusing for your tenants.
Rent Collection Policy
A rent collection policy is a documented system that you use to enforce late fees and lease terms. Establishing a clear and consistent rent collection policy will not only help you avoid late rent payments but also tenant excuses. A rent collection policy goes beyond simply saying rent is due on the first. It should include information about acceptable ways to pay rent and what happens if rent is late, or never turned in. Remember, the lease agreement is the most important tool in preventing late rent payments. Here are a few items you should include in your rent collection policy:
Provide A Clear Payment Policy (Lease):
- The exact amount of rent due and what is included in the amount (utilities, etc.)
- Period of time the rent payment covers
- When and/or how rent payments are made (online, via mail, etc.)
- Acceptable payment methods
- When rent is due
- What day rent is considered late (i.e. is there a grace period for payments)
- Who checks should be made out to
- The mailing address for checks or payments, if applicable
- Instructions for lost checks
- What to do if rent payments can’t be made
- What late fees will be issued if the full rent amount isn’t received on or before it is due
- How non-payment of rent will be handled
- How rent will be collected
- Consequences for returned checks
Late Rent Fees
Rent is legally due on the date specified in your lease agreement. If your tenant does not pay rent when it is due, you can begin charging them late fees. But remember, your lease agreement must provide information on late fees before you can charge them. That said, late rent fees are typically based on a reasonable percentage of the monthly rent rate (5%) or a flat fee. Implementing a late fee policy is a good way to make sure tenants remain diligent about on time rent payments throughout the course of their tenancy.
Tips for Collecting Rent On Time
When tenants fail to pay their rent on time, most landlords think their only course of action is to evict those tenants. Whilst it is an option, it should only be used as a last resort. That’s because the process itself is both time consuming and costly. There are several things you can do as a landlord to prevent late rent payments. With this in mind, here are some tips for collecting rent on time.
Collecting Rent On Time:
Managing rental properties can be a profitable business as long as you manage your cash flow and collect the rent on time. As with most things, it is easier to set up a system that helps you avoid late rent problems, rather than dealing with them as they occur. One of the best ways to encourage tenants to pay on time is to make paying rent easy. Even if you do everything right, there is always a chance your tenants will pay late. For any landlord struggling to collect the rent on time, you might want to consider hiring a property management company to do the work for you. Contact us today at (858) 576-2176 to learn more about our property management services.