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Recovering rental payments is a perennial struggle for landlords. No matter how stringent your screening process is, you’re still likely to end up with at least one tenant who struggles to pay on time.
Sometimes, even the best tenants are unable to keep up with rental payments. Whether they go out of town and forget to send in their check or experience a sudden financial emergency, anything can happen. Regardless of what does, it’s important to ensure you’re reaping your rental payments on a consistent schedule.
After all, your mortgage lender still expects you to pay on time. However, there is an option available in the event your tenant cannot always pay on time by insuring your mortgage against missed payments. To learn more about this option to ensure you can pay on time, click the link below to book a free strategy call today.
The importance of consistency
Without consistent rental payments, you may end up experiencing monthly losses as you struggle to keep up with your mortgage and your operating expenses. The lack of consistent, timely rental payments will significantly impede your journey toward financial independence. And, it’ll reduce your ability to make future real estate investment purchases.
If you’re struggling to recoup rental payments from your tenants promptly, change your strategy immediately! You’ll have to work to redefine your relationship with your tenants and change the way they view you as a landlord. But be advised: It’s important to be tactful about reclaiming tenant payments and making them pay on time in the future, so you don’t damage your landlord-tenant relationship in the process.
Encouraging timely payment
The best way to obtain timely rental payments from your tenants is through encouragement, rather than coercion. Every tenant knows they’re supposed to pay their rent on a certain date. If they’re failing to pay on time, punishment is unlikely to result in a positive outcome. Instead, work with your tenant to determine what it takes to pay their rent when they’re supposed to. Consider one of these tactics:
One of the most significant things you can do to ensure consistent rental payment is maintaining clear communication. Talk to your tenant about why timely rental payments are important, and ask them if there’s anything you can do to increase the likelihood they’ll meet their obligations each month.
Ask about payment failures
If a previously reliable tenant begins to struggle with meeting their rental commitments, ask them about any financial problems they may be facing. If possible, offer an alternative payment schedule. It’s better to receive your rental payment consistently on the 15th of each month, rather than inconsistently on the 1st.
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Create on-time payment incentives
Consider offering small discounts or other types of incentives for timely payments, or if the tenant agrees to use your payment method of choice. Discounts as small as 1 percent could go a long way toward incentivizing your tenant to meet their financial obligations on-time. This is often the last resort and should only be used if you have a longstanding, positive relationship with a previously stable tenant.
Report rental payments to a credit bureau
If you aren’t already, begin reporting your tenants’ rental payments to a credit bureau. This way, tenants are rewarded for good behaviour and penalized for bad behaviour. The onus won’t be on you to penalize the tenants for late payment – instead, their credit score will deflate.
Offer discounts for paying in bulk
One way to ensure your tenant will pay on time is by offering significant discounts for tenants who choose to pay rent in multi-month blocks. You should offer a fairly large discount for tenants able and willing to pay for many months of rent upfront. This provides your investment business with a noteworthy, one-time influx of cash.
Making it Easier to Pay
One way you can encourage timely rental payments is by making it easier for tenants to pay. Here are a few strategies to consider implementing at your rental property business to make it easier for tenants to pay their rent in a timely fashion:
Offer debit card payment: Today, most people use their debit cards daily. Debit cards are more prevalent than cash and virtually every other payment method. Consider offering an online debit card payment portal for your residents. Many property management services offer this as an add-on convenience. It significantly reduces the burden tenants feel about paying their rent.
Consider credit card payment options: Processing a credit card payment often includes higher fees than debit card payments. Paying the rent with a credit card can also present a financial risk to the tenant because credit cards feature aggressive interest rates that could trap them in insurmountable debt. Offering this type of payment method, however, allows tenants to pay on time, even if they don’t currently have the cash-on-hand to do so.
Electronic check payments: Using an e-check payment method, tenants can pay their rent directly from a bank account. It’s usually possible for tenants to set this payment method up as a recurring payment that comes out automatically. This can make it easy for tenants to “set it and forget it,” significantly increasing the likelihood your tenant will pay on time. Consider offering an incentive for e-check use.
Accept money orders: If you’re renting an apartment to an under-banked person, such as a foreign student or a recent immigrant, it can be difficult for them to obtain checks necessary to pay their rent without paying high foreign transaction fees. Consider accepting money orders, which can be purchased with cash, as an alternative payment method.
Don’t let rental payments become a sore spot
Providing your tenants with more ways to pay their rent and reducing the amount of effort necessary to pay will increase the chances they pay on time. Strive to make rental payment as easy as possible for your tenants, and ensure you have a clear, open line of communication where you both feel comfortable enough to voice your concerns.
If it becomes necessary to evict a tenant due to a lack of timely rental payments, ensure you’re meeting the legal requirements necessary to proceed with an eviction. Don’t forget to observe all locally relevant tenant rights. And, of course, do everything possible to retain tenants with a history of payment and who treat your property with integrity.
Staying On Top of Tenants So You Can Pay Your Mortgage On Time
One of the biggest reasons you need to ensure your tenants pay on time is because your mortgage lender is going to expect you to pay on time as well.
You cannot reasonably expect to pay in advance and wait on your tenants month to month in order to keep the lender happy. However, there are ways to insure your mortgage to protect it against late rate payments.
To learn more about how that would work, book a free strategy call with us at the link below.