5 Ways to Reduce the Chances for Late Rent Payment
If you want to run a successful Property Management Business, You have to acquire more tenants to get rents for the property leased but the most crucial part which annoys most of the landlords is the late payment of rents. There is always that one tenant in the apartment who says that they don't have money but you can see them buying expensive gifts for their sweetheart.
Late Rent Payments can affect your business' Cash Flow Negatively. If your only source of income is from the rents, then late payment also hinders your ability to pay back your bills, which traps you in a vicious cycle of late payments, starting from your tenant and ends with you saying the same to your creditors. Although this fiasco could be over if you follow the top 5 ways to reduce the chances for late rent payment which are provided below.
Although this fiasco could be over if you follow the top 5 ways to reduce the chances for late rent payment which are provided below.
- Improving the Tenant Screening Process:
The Tenant Screening Process is one of the most important steps while reducing the probability of late payments. You need to analyze your tenants' credit report, their income report, and IT filing to check if he/she can afford to pay the rent. While analyzing the reports you need to remember that tenant usually spends 30% of their total income to pay the rent. If a Tenant pays 40% of their Total Income to pay the rent then they might have difficulty paying it every month (according to studies).
- Using Different Methods for collecting rent:
I know after reading the title point you might be thinking I am suggesting hiring goons. But no, That is a highly unethical thing to do. You can create different channels both online and offline to pay the rent like debit cards, credit cards, net banking, WhatsApp, and also Bitcoins (If you love cryptocurrency).
- Having clear communication about Payment Dates:
Having clear communication about the payment amount and date to pay rent is crucial to avoid late payments. You can follow it by mentioning it in the lease agreement. You can also send reminders about rent payments 3-4 days before the deadline by sending notices through post or emails. If the tenants are fully informed then they won't forget to pay rent on time.
- Creating penalty and rewarding policies to combat late payment of rents:
If the above three tips don't work then you should create a penalty clause in the lease agreement where the tenants have to pay 5 or 10% more on the agreed rent amount. You can also create a reward clause that if they pay the rent before the last date or in advance then they get a 4% discount on the current month's agreed rent. These policies will increase the chances that the tenants pay the rent amount beforehand.
- Arranging meetings with Rent Defaulters:
Sometimes a tenant may be unable to pay the rent due to personal issues. Therefore you should ask him/her personally about the reason for the late payment so that you can give some grace period to pay back the rent.
Although strategizing and implementing these plans are quite easy but keeping track of each tenant is quite difficult and time-consuming. Therefore having property management software can provide you huge benefits. At Property360 we will help you solve this issue by providing our software that can solve most of your problems relating to tracking information, sending notices, Screening your tenant application, Keeping records, and many more!