Rent Collection Tips & Tricks

So you bought that rental property?  You had done a lot of work on your own house and figured it couldn’t be that hard.  Then you realized that being a landlord is more than just managing and repairing the property.  It takes work to manage the tenants!

One of the biggest areas of problems for any landlord, old or new, is rent collection.  I see many, even seasoned, investors that just do rent collection by the seat of their pants without any procedures or systematic approach.  Unfortunately, this usually ends up costing the landlord money as the tenant stays too long after the rent was due resulting in possibly multiple months of past due rent.

As a landlord, you need to start looking at collecting rent the same way a business like a bank collects.  Does the bank wait until you are 10 days past due to call you?  With the amount of foreclosures happening these days, they probably would call you within 24 hours of being past due.  When they do call, they are courteous and helpful, but they want a definite answer on when you are going to pay.  They don’t care about [insert typical tenant excuse here].  To be successful as a landlord, you need to improve your rent collection skills and build a systematic way to handle non-payment and late payment of rent.

Developing that system needs to be a balance between being firm to get your rent (on-time) and not being a jerk that the tenants hate you.  Being too soft will just get you excuses.  Being too harsh will cause other problems.  I understand that real life crisis do happen in people lives (death in the family, divorce, job loss, etc) and I am willing to work with a tenant that has typically paid on time.  It just seems often that some tenants always have some real or imaginary excuse or crisis in their life for not paying the rent on time (or ever).  Here are some highlights of how to get your rent on time:

• My leases say that rent is due on the 1st, but you have until the 5th to pay it.
• On the 6th rent is late.  I automatically charge my late fee on all outstanding balances.  Never waive your late fee.
• On the 6th I check the mail and enter any rent checks that have come in.  That afternoon I run a report in Quickbooks that shows me who still owes rent.
• I call each tenant that has a past due amount.  This is probably the 2nd most important step (2nd only to starting the eviction) in the entire process.  If the tenants see you don’t care about getting the rent on time, they won’t either.
• When I speak to the tenant I get them to commit to when the rent will be paid and I make a note to call them a day prior to remind them.

These are tips and tricks to insure that you get paid and if you don’t how to proceed:

• Although I don’t do this, I know one landlord that drives to each one of his properties on the same day and at the same time to collect rent in person.  This way there is no excuse that the check is in the mail.  He can see what is happening and talk to the tenant face to face.
• If the tenant owes rent by the 11th of the month, start the eviction.  Unless they have a perfect track record of paying when they say they will, do not go past this date.  Worst case, they pay up and bring the money to court.
• Additionally, when speak to the tenant, if they have no idea where they are going to get the rent, file the eviction immediately.  That tenant had all last month to think about how they were going to pay this month’s rent.  They are not going to pay ever.
• Have the tenant pay whatever they have immediately.  I would rather get $200 now and then evict then have them “wait” to have it all and then I still evict anyway.  When I first became a landlord, I had a tenant who said she was waiting to pay me as she was $200 short in her rent, 2 weeks later she moved out in the middle of the night and I received nothing.  I should have taken what she had and been money ahead!
• If the tenant receives a government subsidy for part of the rent, speak to their worker to see if they can put pressure on the tenant to pay on-time or pay the back rent.

If you find that you are consistently struggling to collect rent or get it on time, you may need to look at how you are screening your tenants.  If the tenant has bad credit or evictions in their past, they will have problems again, guaranteed.

These are just some tips and tricks that I use to collect rent.  Develop your own procedures and practices.  Being a landlord can be financially rewarding if you simply collect the rent you are owed!

Tagged: investment property, rentals, tenants