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The Proper Way To Collect Rent
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The Proper Way To Collect Rent

Rent collection is the heart and soul of the real estate business. I say business because that's exactly what it is and how it should be treated. There have been may great investments that have turned into terrible investments because of the landlord's/investor's inability to effectively collect rent. Below I list some helpful guidelines that will make that great investment a brick cash station.

Rent Collection:

From the very beginning the landlord/manager should be clear as to when rent is due, where it is to be paid, and the penalties for being late or not making a payment at all. It is very important to establish a viable system for collecting rent and dealing with uncooperative tenants. Tenants should never be accommodated at the expense of the owner. Whether the leased space is an office, a store, a warehouse,or an apartment, it should be standard practice for rentals to be paid in advance.

When To Pay:

For convenience, accuracy and speed in rent collection and record keeping monthly rental should be due and payable on the first of the month. The promptness of tenants payment will be directly related to the landlord's/manager's collection policy. Communication with tenants and tracking their payment progress is very important. Tenants lose respect for landlord's/manager's who are apathetic about rent collection.

Encourage Prompt Payments:

The most effective way to elicit prompt payments from tenants is to start with a clear-cut precise understanding of the need for prompt payments. Explain in a firm but friendly manner that after a specified time, the tenant will be treated as a delinquent and that the appropriate legal action will be taken if necessary. It is very important not to bluff. Follow an established procedure that will be rigorously adhered to without exception.

Many tenants will agree and actually prefer to authorize regular , timely direct deposits. Direct deposits benefit both the landlord and the tenant. A good program will notify the tenant when a withdrawal for rent is going to be made, and then will notify the landlord/manager when the deposit has been made. A concession to the tenant can be made by slightly lowering the amount of rent for opting into the program.

Late Fees:

Late charges are necessary to affirm rigid collection procedures. The payment habits of the tenant is a direct reflection of the landlord's/manager's attention to and enforcement of strict rent collection policies. An alternative to rent late fees is to offer a discount for payment on or before the rent due date. Another variation is to offer cash payment for a certain number of on-time payments. There are many incentives the landlord/manager can offer the tenant for timely payments (i.e) gift cards, shopping discounts etc. Be creative, show your tenant your appreciation for their being attentive and responsible to their obligations. A little appreciation goes a long way!!!!


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Hello Kenneth, Thank you for another rich and informative article.

Reply
  about 9 years ago
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