Rent collection can be a real hassle if you have a large portfolio of properties spread across the city or even the nation. But rent is what keeps a real estate business and the landlords going.
Due to the steep inflation, the economic slowdown due to the pandemic and rising rates, Bloomberg news reports have found that more than 8 million Americans are running late on their rent payments. How do you, as a real estate business owner or property manager, get out of this loop and make tenants pay on time? You need to plan and strategize better. Read this blog to know more about collecting rent on time and stablizing your business cash flow.
Top 10 Tips for Collecting Rent on Time
We have a few prop tips and best practices in project management ideas for you to ensure on-time rent collection for your company. And if you are having rent payment issues, here are all the ways you can solve them. Check them out below.
Directly communicate with tenants
There are many tenants who are habitually late in paying their rent on time or keeping up with any deadlines. As property managers, these people can be hard to manage and work with. But the only way to get around this problem is to talk directly to your tenants about the financial obligations of paying rent. Let them know the eviction guidelines and penalties that can be levied in case of long-term non-payments.
Start a fine for late payments
According to market reports, the average fine for late payment of rent is around 5% of the rent if the rent is due for over 5 - 9 days. These stats can vary a little between states and where your properties are located or whether they are commercial properties or residential. But penalties are a must. Otherwise, it opens up a floodgate of late paying tenants.
Though many landlords and real estate business owners gave a lot of rent rebates during the pandemic, things are getting back to normal now. You need to set a concrete penalty policy and mention that in the lease agreement during tenant onboarding to avoid any future confusion.
Use online and easy payment methods
Online payment methods encourage a lot of tenants to pay up faster. Old school methods are sometimes time-consuming, like cash payments and cheques. Especially if you deal with a millennial or Gen Z group of tenants, students and such, then it is best to have online rent collection options.
You can use a selection of technology in project management, like the Yardi or MRI software, to automate this process. Tenants can directly pay you through the rent collection portal, and they do not have to worry about cash payments. McKinsey data says that more th 82% of Americans are using digital payment methods. Your tenants may be one of them. Use the right technology selection to cater to this audience.
You can also collect rent in person
Though online payments are trending and faster, some tenants, especially the older generations like to pay directly to humans and not electronic machines. You must have an option for these tenants to pay in person. Also, if you or your representative shows up in person, tenants are more likely to pay up due to a direct moral obligation.
Send automated reminders before the due date
When you use property management software like Yardi or MRI to automate rent collection, it comes with its own benefits of sending reminders to tenants about due dates. You do not have to send individual reminders to them. The system will automatically keep reminding them and help them keep up with the timelines and get the money rolling on time.
Screen tenants before onboarding
There are many tenants who are habitually late payers and some who do not have any stable income to pay. You can surely identify the second set of people with tenant screening software. Before you onboard a tenant, it is better to do a thorough screening and background check to ensure the tenant has a stable source of income and enough financial stability to pay the rent. Otherwise, your business will suffer in the long run.
Employee a property manager
If you think running to and fro to collect all the due rent is becoming a burden for you, you can employ a property manager to take care of every task like rent collection. Having a human to contact and talk to directly will incentivize and push your tenants to pay on time rather than deal with a faceless business.
You can set up a rent drop box in properties
Due to the pandemic, many tenants who like to pay through offline methods have been finding it difficult to travel and pay rent. This has caused a lot of pending dues. It is a wise idea to set up a payment drop box in each of your properties where you rent out multiple units to ease the process.
Start collecting rent through partial payments
You can start taking payments in instalments throughout the month. This will help you get your money and also not put a lot of extra burden on your tenants. Due to the pandemic, it is better to go for partial payments when you understand that your tenants are struggling to make rent, but you also do not want to hand them an eviction notice.
Go for the old-school rent collection with the cheques method
The old-school rent collection system of paying through cheques still works for some older generations and businesses who want to keep physical records. So you need to keep this avenue open for such clients and not just become strictly digital.
Automating rent collection with property management software
The best way to cater to the rising digital payment age is to integrate property management software to automate the rent collection process. There are many property management software options like Yardi, MRI and more. Get in touch with our team to find out which one is the best fit for your business.