How to Make Sure Tenants Pay Rent On Time
As a landlord or property manager, you rely on timely rent payments to operate your business. As you well know, however, life happens, and your tenants may not always make paying you their highest priority.
There are various methods landlords and property managers use to handle rent collection and ensure stable cash flow. What systems should you put in place to make sure your tenants pay rent on time?
5 tried-and-true strategies landlords and property managers use to ensure rents get paid on time
- Screen your tenants carefully. When you have clear guidelines for how you screen prospective tenants, you eliminate some rent-collection headaches before they start. At a very minimum, you want documented assurance that any tenant you consider has a reliable track record when it comes to paying their bills, and that includes rent.
- Stress-test your rental rates regularly to ensure that what you are charging is reasonable for the neighborhood and the property itself. If you’re charging above-average rent for a standard property, it might be too high for your market. An online tool like Rentometer can help you keep your rents in line with what tenants can pay, so you keep the property occupied and maintain your ability to cover expenses.
- Set a rent collection policy, and communicate it clearly, in writing, to all new tenants. Explain the timeframe you expect rents to be paid, highlight any late fees they could incur, and spell out what happens if they fail to pay their rent. When they know upfront what’s expected of them, tenants are more likely to pay rent on time.
- Be specific at the outset about which payment methods you accept and which ones you do not. Most experienced property managers avoid accepting cash except as a last resort. If cash is a tenant’s only option, ask them to get a money order instead of paying with cash – it’s safer and more secure for both parties.
- Communicate with your tenants! If you notice a tenant falling behind or unable to make a full rent payment, reach out to speak with them about what’s going on in their lives. Perhaps you can propose a different payment arrangement – for example, have them pay bi-weekly instead of monthly to help them stay consistent with rent payments.
Here are 7 tips to get your tenants to pay rent on time.
1) Make it easy.
When you can accept rental payments via an online app or payment portal, tenants can pay using their credit card or set up a secure withdrawal from their checking account. Your best case is to have them set up recurring payments, so rent gets paid regardless of busy lives and unexpected circumstances.
2) Set up a secure dropbox for rent payments.
Place a secure drop box onsite or at your management office. This makes it easy for tenants to deposit their rent payment directly and safely at any time of day.
3) Collect rents in person.
Some landlords and property managers cut to the chase and always collect rent in person. Tenants know you or your property manager will arrive on a set day of the month to collect rent, with the expectation that they’ll have payments ready. This also gives you a jump on late payment notices. If you don’t have a payment in hand that day, you can send notices out immediately.
4) Cover service fees for online payments.
Some providers charge users a fee for debit or online payments. It’s a smart (and relatively inexpensive) business move to cover those fees on behalf of your tenant to reduce the friction of paying rent. Landlords can make arrangements with the online payment service.
5) Offer a discount for a record of timely payments.
If tenants consistently pay on time, you might offer a small discount in the form of a rent credit. After they’ve made a series of consecutive payments on time, you could offer reduced rent for a set number of months and renew the offer with continued compliance. You could also consider an upfront discount if they are willing to pay rent early or no later than the day it is due.
6) Help a tenant improve their credit score.
You can report the status of rental payments to the credit bureaus; make it clear to incoming tenants that it’s your practice to do so. For tenants who want to keep their scores strong, this may be the incentive they need to pay on time consistently. For others struggling with their credit, the information you provide about their timely payment record could be a way to restore their credit. If a tenant is perpetually late, let them know you intend to report the delinquency. This may help persuade them to prioritize paying their rent on time.
7) Politely and cheerfully remind tenants to pay.
It’s obvious in your world that rent is always due on the first of the month. Like it or not, some people operate in a bubble where the days seem to sneak up on them. Send out a pleasant reminder message via text, email, or even a letter a week in advance to help tenants remember to pay rent on the first of the month. If you are willing to offer an incentive for early and on-time payments, make that part of your message. These friendly communications can keep tenants on track and open up the dialogue if they know they won’t be able to pay on time that month.
To be successful as a landlord or property manager, you need to get paid for the housing you provide. Timely payments will support your operation’s cash flow and allow you to maintain the property. When you keep your rent amounts reasonable and appropriate for your neighborhood – and make it easy for tenants to pay rent – you’re in a good position to ensure your tenants pay on time. And when you make an effort to keep open communication channels between you and your tenants, you can head off problems before they get out of hand.
This article was written by the Rentometer Content Team. The Rentometer Blog features fresh takes and insights on rental housing topics, services, and technology. If you liked this article, subscribe to Rentometer’s email newsletter to stay up-to-date on the latest trends in rental housing.