Having an efficient rent collection process will not only help reduce the stress that is often the case for both landlords and property managers at rent time, but it can help reduce the likelihood of late and missed rent payments.
“…late rent payments rose over 4% between November 2020 and February 2021” ~ Landlord Studio data
This is especially important now with clear trends suggesting that an increasing number of tenants are falling into rent arrears. In fact, according to aggregated data collected by Landlord Studio of over 12,000 active leases across the US, late rent payments rose over 4% between November 2020 and February 2021. And as late and missed rent is the leading cause of evictions in the US, it’s not surprising that vacancies were also up 2% over this period, despite eviction moratoriums being in place.
In this article, we take a look at tips to simplify and improve rent collection processes.
Have a process in place
Collecting rent can, at times, be tedious. You shouldn’t have to chase tenants each month, yet sometimes you do. And the more units you manage, the more of a challenge it becomes to keep track of who has and hasn’t paid. Because of this, landlords need processes in place to efficiently keep track of the rent payments.
To reduce the potential for late rent, these processes should include steps to help remove any potential barriers for tenants, as well as systems to automatically chase those tenants that, for one reason or another, are late.
For example, if you’re still going to collect rent via check, make sure you’ve clearly stipulated where and when the rent checks need to be sent. If you’re going to collect rent online, you need a clear and easy method for tenants to complete their payments, and also a process in place to help them get set up.
Efficient tenant communication
Once you’ve got your processes established, you need to communicate them to your tenants. Your lease needs to clearly state the rent amount, due date and frequency, and how you expect rent to be paid, your late fee and grace period policies, and what happens should rent not be paid. Additionally, we recommend reiterating these points clearly in a welcome email or letter.
If you are in any way uncertain if your tenant has a clear understanding of the rent payment process, it could be worth checking with them in person (with COVID-19 precautions in mind).
Finally, you can use software to automate some of these communications. For example, your rent collection system could create a welcome email template to quickly send to each new tenant. Also, you can set up automated rent reminder emails or invoices. These friendly reminders will increase the likelihood that tenants remember to pay and thus result in more timely rent payments.
Collect rent online
While some people still collect rent via cash or check, this is an outdated, insecure, and inefficient method. Many tenants simply don’t have cash on hand, and if they are mailing the money to you, it could get lost in the mail. It’s also not traceable, meaning there is no proof of where the money is, when it was sent, or if it got lost.
If you’re still collecting rent in person, then you have to physically go down to the rental to do so. This isn’t so bad if you live nearby, but most tenants don’t want to deal with their landlord on such a regular basis.
Finally, this method just isn’t professional. Every other business in the world has been making digital payments for years. I even recently came across a street musician who was accepting donations by credit card. Digital payments aren’t the future anymore; they’re the present.
This means that you need to be looking for an efficient online rent collection platform – one that can integrate with your current workflow and tools.
I even recently came across a street musician who was accepting donations by credit card. Digital payments aren’t the future anymore; they’re the present.
Automating Rent Collection
When searching for the right rent collection solution, you should look for a few principal features that will help you optimize your processes and increase on-time rent.
First, tenants should be able to see their historical and upcoming payments. They should also be able to schedule and set up automatic payments so that they don’t have the onerous task of remembering each month. The system should also allow you to set the payment amount and block unpermitted partial payments.
Property management specific solutions for rent payment do all of this, as well as enabling you to set up automatic late fees, rent reminder emails, and automate your income tracking in a professional income and expense tracking system.
Ben Luxon has worked with real estate professionals all over the world during his role as Head of Content at Landlord Studio, NARPM® Affiliate Member, in Wellington and Wairarapa, New Zealand. He has distilled their knowledge into ebooks, guides, and articles which can be found on various sites, such as Forbes and Mashvisor. Landlord Studio is a NARPM® Member Discount Program participant, offering industry-leading property management and financial tracking solutions.
April 2021 Issue | Volume 32 | Number 4
If you would like to set up a process for automating rent collection with a company that excels in efficient tenant communication, please contact Rogue Real Estate Sales & Property Management today.