There are a lot of perks to being a landlord, but they’re all predicated on having your tenants pay their rent on time. As soon as tenants stop paying, the entire system collapses like a house of cards. So, with that being said, do you have a plan to increase your chances of getting paid on time every time?
Why Do Tenants Pay Late?
Before taking a deep dive into some of the tactics you can use to get paid on time, let’s explore the three most common reasons why tenants pay late:
- Financial problems. If you’ve been a landlord for any length of time, you’ve had a tenant tell you they don’t have the money to pay their rent. A lot of times they’re playing you. But there are situations where this is true – like when a tenant loses a job or suddenly has to pay an emergency medical bill and can no longer afford rent.
- Laziness. A lot of times, tenants have the money – they’re just too lazy to actually cut the check, go to the bank, or drop off your payment.
- Low priority. More often than not, a tenant doesn’t pay rent because they see it as a low priority expense. How could that be? Well, they understand the rules and know how to game the system. If they don’t pay for groceries, they don’t eat. If they don’t pay their electrical bill, the utility company shuts off the power. But if they don’t pay rent, it typically takes months for any sort of eviction process to come to fruition. (Guess which one gets pushed to the back burner.)
There are typically multiple factors involved in a late payment situation, but you can almost always tie it back to one or more of these issues. The more you understand them, the better you can optimize your processes to reduce risk and keep the cash flowing.
4 Tips Get Paid on Time
Understanding why tenants don’t pay rent on time and actually getting them to fork over that check on the first of the month are two different things. In light of what we’ve just discussed, here are some helpful tactics to increase your odds of getting paid on time:
1. Be Transparent in Communication
The best way to get paid on time is to communicate about rent early and often. Not only should you discuss the rules prior to, during, and after signing a lease agreement, but it’s a good idea to develop a cadence leading up to the first of every month (or whenever you rent checks are due).
For example, you might remind your tenants the week before and incentivize them to get their check in early with a small discount (like $25 to $50 off). Then you can send out another reminder 24 hours prior. By staying in touch, you reduce the chances that a tenant will genuinely forget.
2. Set Clear Consequences
Positive reinforcement and incentives to pay on time will work with some. Others need negative consequences to whip them into shape. A stiff late fee is a good idea – though you’ll have to make sure you stay within the legal limits that your state allows.
3. Work With a Property Manager
A property manager can remove much of this burden from your shoulders. Not only do they take on the responsibility of collecting rent, but some will further reduce your risk by covering the rent payment if the tenant doesn’t pay. For example, this San Marcos, Texas property management company offers rental income guarantee where they protect the landlord’s income stream if the tenant was properly screened and placed according to their requirements.
4. Screen for Better Tenants
Speaking of screening, you can eliminate much of your risk by conducting more thorough tenant screening and weeding out high-risk tenants who have a history of not paying on time. (Talk with current and past landlords to get the scoop!)
Adding it All Up
If you can avoid late rent payments, you’ll solve half of your problems right off the bat. Not every rent collection system is the same, but you’ll find that the good ones typically share some common strategic steps.
Keep this in mind and develop a plan of action that works for you and your properties.
Keep being AllDayChic!