On-time rent payment is a critical for cash flow. Money can’t go out, if it’s not coming in – it’s that simple. While we all want our tenants to pay on the day the rent is due, not always the case. Even good tenants sometimes make late payments.
And, with this pandemic, we are living in uncertain times. Globe St. reports that “despite the multifamily sector only exhibiting a slight decrease in rent payment defaults and rental prices, experts believe the number of late rent payments will increase as the pandemic drags on. ”
It’s never easy, but here are some tactics to get all your residents paying their rent on time.
1. Review Your Screening Process
While there will always instances of residents paying after the due date, if you find that multiple tenants are late with their rent, it can show that the problem lies upstream, in the screening process. Review this process and ensure that it is consistently applied, and that references are called, and you have proof of employment. When you can raise the quality of your tenant, you are also helping to safeguard your cash flow.
2. Be Clear from the Beginning
Clear expectations from the get-go can help reduce late rent payments. When you walk your tenant through the lease, and make sure they understand all the terms and conditions of the lease. Be sure to point out the date due date, and perhaps ask your tenant to initial this section. Highlight (literally with highlighter) any fees that are charged if the rent is not paid on time.
3. Encourage Online Payments
More and more businesses are no longer accepting cheques. Your property firm should do the same. Not only do paper cheques reduce productivity, they also raise costs and slow time-to-bank. Besides, your residents want to pay their rent the way they pay many of their bills – to have it come out of their account automatically. With an online payment portal your tenants can set up their rent to come off their credit card or out of their bank account at the same time every month. They can access the app through their laptop or phone for anywhere, anytime convenience.
4. Set Up Upcoming Payment Reminders
Create a payment reminder email through your tenant portal so that residents are fully aware of upcoming payments. Many property management firms set the reminder for 3 days prior to the rent due date. A simple polite reminder can help improve the timeliness of rent payments across your property portfolios.
5. Escalate Late Notices
Just as you need a system to notify tenants about upcoming due dates, you also need a system of escalating late payment notices to collect overdue rent. The quicker you do this, the quicker you can separate the “can’t pay right now” folks from the more problematic “won’t pay” bad apples.
6. Communicate, Communicate, Communicate
Most people are good, and want to pay their rent on time or as near-on-time as possible. If your tenant is routinely late, talk to them and find out what is going on. Perhaps changing the date the rent is due so that it is aligned with the day they get paid at work might be helpful, or change the payment method so that rent comes off their credit card. The pandemic has been very difficult on a lot of people financially, so finding a mutually acceptable payment schedule can be helpful to everyone involved.
7. Consistently Apply Late Fees
If you don’t already have a late fee stipulation in your lease or HOA agreements, you should include one. Most multifamily property companies do… the problem lies in the lack of enforcing these penalty fees after the grace period. When residents are late more than once, they need to know that rent needs to come first and be paid on time. It’s up to you to make sure your tenants are aware of the terms of their lease and follow through on your policies. Consistent application of your late fee policy acts as a deterrent and is necessary to reducing late rent payments.
If you need help with tools to help improve communication and encourage online payment, consider Property Vista’s property management solution. It makes it easy for your tenants to simply pay online or setup regular scheduled payments.