Managing rental properties can be a rewarding business, provided that you are able to manage your cash flow well and collect rent on time. In fact, the biggest factor in your cash flow will be your ability to collect rent on time.
Renters are typically stereotyped as people who are not the most responsible when it comes to their finances. No matter if it is true or not, you may come across a tenant who either pays late rent or nothing at all.
Consider the tips bellow to collect rent on time and deal with tenants who have a problem in paying rent:
Require Automatic Payment
Perhaps the most efficient way to collect rent on time is by requiring tenants to pay by means of an auto-deduct or auto-pay system. There are numerous systems to automatically deposit payment to your bank account. The best advantage of this payment method is that it removes the human error factor – like tenants that forget to pay rent.
Carefully Screen Your Tenants
Choose tenants that have a good rental history. This is a no brainer, isn’t it? Screening tenants will let you see their whole credit rating scheme. There will be potential tenants that have an outstanding history in paying bills and others that have poor payment habits.
Set your Criteria
First of all, be clear regarding the criteria prospective that need to be met by tenants to be accepted. According to discrimination laws, all tenants should pass the same criteria and standards. When you deny an applicant that has a credit card debt of $50,000, you should also deny applicants that have a consumer debt of $50K or more.
Applicants should have a regular income, which is at least thrice the rent amount, as well as a good history of on time rental payments with previous landlords.
Good Credit Standing
Property managers and landlords should always get the latest consumer credit report. Though this does not include rent payments, it consists of past debts and eviction judgments. You will see how they pay other creditors as well.
Ask for References
I consider past behavior as the best thing that allows you to predict future behavior. Having said this, it is crucial to thoroughly verify the information on the application. This way, you can expect rent to be paid on time and in full. You can contact a previous landlord to ask if they would rent to them again. Though a previous landlord can keep quiet about it, there is no harm in asking.
Let Them Know the Consequences
Prepare to report a tenant that has a past-due payment to the credit agency. Most important of all, inform your tenants that you will report them, and that this can affect their credit standing.
In your lease agreement, make sure to add a statement that informs your tenants that you may report late rent payments to the major credit agencies. Also, let them know that late payments may have a negative effect on their credit standing. This, in itself, will most likely make the tenant behave well when it comes to paying rent.
Take note that there are cases when you need to pay a certain fee to report a tenant. Sometimes, you need to acquire a judgment or present the debt to a collections agency before it could appear on the credit report.