There are several things you can do as a landlord to prevent late payments. As with most things, it’s easier to set up a system that helps you avoid the problem, rather than dealing with it once it occurs.
The best way to encourage tenants to pay on time is to make paying rent easy for your tenants. You can do this by setting up online rent collection with automatic rent payments and rent reminder emails.
Encourage On-Time Rent Payments
Here are seven ways to encourage on-time rent payments:
1. Choose Tenants Carefully
As you’re considering applicants for your rental property, it’s important to thoroughly screen each applicant. You should:
- Review rental applications
- Contact prior landlords
- Reach out to employers and verify income
- Check credit score and payment history
- Request tenant background checks
The two most important steps are verifying your tenant’s income and viewing his or her credit report. You should be looking for a tenant who earns enough to afford your rent price. The typical rule of thumb is to make sure monthly income is 3x the monthly rent price.
Similarly, you should check potential applicants’ payment histories, from their credit report, to see if they make payments on time or have debt.
You should also reach out to prior landlords to find out if the tenant paid rent on time.
2. Provide Clear Instructions For How to Pay Rent
Once you accept tenants, the next step will be signing your rental lease and getting your tenants set up to make rent payments. It’s important that you explain the rent payment process to ensure they understand how to pay rent and when to pay.
Let your tenants know:
- What day rent is due
- How you expect rent to be paid
- Instructions for how to pay rent
- If you’re having your tenants pay by check, then make sure they know what address to mail the check to and who to make the check out to.
- If you’re having tenants pay rent online, then make sure your tenants understand how to log in and pay.
If you’re collecting rent with Rentalutions, we offer tutorials in case tenants need help scheduling payments. You can offer these resources to your tenants and let them know support is available seven days a week.
Visit our Help Desk to find more answers to common landlord and tenant questions.
3. Enforce a Late Fee
As we discussed in the last chapter on late fees and grace periods, it’s best practice to have a late rent fee in order to motivate your tenants to pay on time. Make sure to communicate ahead of time the consequences of not paying rent on time. If tenants understand they will be charged additional money for paying late, they’re more likely to pay rent on time.
If rent is late, show your tenants you don’t accept excuses and enforce your rule on late fees. Otherwise, if tenants learn you’re lenient, you’ll start to see rent paid later and later as the months go by.
Being consistent also shows your tenants what to expect. If your tenants are certain they will be charged a late fee, then they’re less likely to pay late. This rule applies to more than just your late fee. You should also be consistent and follow through when it comes to all of your rules. That way, your tenants get the idea that you also expect them to follow through.
4. Offer Incentives For Paying On Time
Offering incentives is a great way to encourage your tenants to pay rent on time. Here are a few incentives you can offer:
- Offer $25 off the rent price if the tenant pays rent before the due date.
- Every month the tenant makes a payment on time, you can set aside $10 — $20 and either reward the tenant with the money or buy him or her a gift card to Target or Amazon at the end of the lease.
- If the tenant pays rent on time for a certain number of consecutive months, you can offer a percentage off the next month’s rent.
Incentives are effective because they reward tenants for paying rent on time, rather than punishing them for not paying on time.
5. Discuss Late Payments With Your Tenants
Any time a tenant pays late, it’s important to talk with him or her about it. Find out the reason for the late payment. This will help you play a key role in helping solve the problem.
If the tenant simply forgot to pay, you can send reminder emails in the future. If your tenant did not have sufficient funds, you can offer a different due date so the tenant receives his or her paycheck before having to pay rent.
There could be many different kinds of solutions to offer. And, if not, at least you will better understand the situation so you can address how to move forward.
Communicating with your tenant and making an effort to understand the situation also proves you are a helpful landlord, which will, in turn, help motivate your tenant to do the right thing and pay rent on time.
6. Don’t Allow Sob Stories
It’s not your job to be a therapist or friend to your tenants. While it’s important to communicate with them, you should not allow sob stories to sway you. You still need to enforce your rules and require rent to be paid on time.
Ultimately, you are running a business. You have to pay your bills with rent money, and you will be assessed fees if you can’t pay your mortgage. It’s as simple as that.
7. Make it Convenient
As we mentioned in the introduction to this chapter, it’s important to make paying rent easy.
Using an inconvenient payment method, like requiring tenants to pay by check, typically means you’ll deal with more late payments. When it’s inconvenient, tenants will think, “I’ll do it tomorrow.” You don’t want tenants to put off paying until the last minute, or until they forget.
Similarly, if you’re requiring them to find a mailbox or deposit a check at your bank, then expect rent to be late when they’re sick, or it’s cold, or it’s Super Bowl Sunday.
Most tenants are on their computers or phones all day, so if you move the payment process online, you become a part of the forefront of your tenants’ day-to-day lives: online and in emails. Plus, you won’t have to walk out in the cold on Super Bowl Sunday to deposit the check either. You’ll also get the added benefits of online payments, reminder emails, and automatic payments.
To make paying rent convenient, we recommend collecting rent online.
Here’s a breakdown of when landlords in our system receive rent:
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Handle Late Rent Payments
It’s important to screen tenants, create incentives, add convenience, be consistent, and avoid leniency in order to encourage tenants to pay rent on time.
Even if you do everything right and follow our advice on encouraging timely payments, there’s still a chance your tenants will pay late. Sometimes, it’s due to forgetfulness or lack of funds. Other times, it can be malicious. In our next chapter, we’ll provide guidance for how to handle late rent payments.
Originally published at Rentalutions.
