Table of Contents
As a real estate investor the last thing you want to deal with is late rent payments. Not only can it throw a wrench into your finances as you cover all of your property expenses without the payment but chasing tenants down for missed or late rent payments can be a lengthy process.
So, how can you take the steps to be proactive and avoid dealing with late rent payments to begin with?
There are a variety of things that you can do in order to avoid dealing with late rent payments from your renters and simplify the process of collecting any late rent payments that do occur.
However, before we look at the ways to ensure your tenants are not making late rent payments, let’s take the time to help you ensure your mortgage payments are on a schedule you can manage, and your mortgage is insured against late rent payments.
To get started, simply click the link below to book a free strategy call with our team here at LendCity.
Make it Easy To Pay Rent
One of the first steps you should take as a real estate investor to encourage your renters to consistently pay their rent on time is to make it as easy as possible for them to pay. By offering multiple options to your tenants for how they can pay, you can ensure each tenant has the best possible chance to avoid late rent payments. However, you should offer these options at the beginning and convince your tenants to primarily stick to one method and only offer alternatives when they need to use them.
One of the most reliable methods you can offer your tenants to make it easy to pay rent on time is by setting up automatic payments. Instead of waiting for tenants to make their payments each month, you can offer to have their rent automatically deposited each month from their account so that they do not even have to think about it. Then, as long as they have the money, you will never have to think about late rent payments.
Online Rent Payments
If automatic payments are too much of a hassle to set up or if your tenant is hesitant trusting that the system will take their rent payments out on time or that is will not overcharge them, you can always choose to offer online rent payments. This can be through a system such as PayPal or a simply as doing it through online e-transfers through their bank.
Finally, another option you can offer to your tenants is in-person payments. Whether this is you or a property manager coming by to pick up the payment themselves or offering an in-person location where they can drop off their rent each month. This option is primarily suited for investors with smaller portfolios because once your portfolio begins to scale this can become far too time-intensive to keep up with very quickly. It also is not ideal if you are an out-of-town investor.
Discover Rent To Own With This Step By Step Guide
Report Rent Payments to Credit Bureaus
Another way to incentivise tenants to pay their rent on time is to report all of their rent payments to credit bureaus. By reporting all of their rent payments – both on-time and late rent payments – you can increase their motivation to never miss a payment date.
Firstly, no tenant is going to want to miss a rent payment or make a late rent payment if they know that by doing so they are going to negatively impact their credit score. Therefore they will work harder to make sure they pay on time.
Then, if they do pay on time and you report those payments, it will help to boost their credit. This means that by simply making their rent payments on time, your tenants will be capable of improving their own financial standing. This can help benefit many aspects of their life such as buying a car and qualifying for loans. (This includes any instances of them potentially requiring a cash advance or payday loan to ensure that they make their rent payments on time.
Communicate With Your Tenants
Another important factor to consider when trying to incentivise your tenants to pay their rent on time is communication. You need to have an open line with your tenants to talk to either you or a property manager so that if something does come up, they can properly inform you of it.
Talk About Tenant Pay Periods
One of the most common causes of late rent payments is misaligned pay periods. Sometimes, a tenant may need to make a rent payment on the first of the month, but they are a week away from their next paycheque and do not quite have all of the funds they need to pay in-full and on time. This is especially prevalent amongst contractors and freelancers who may not have a consistent payday, as well as tenants who are in the process of starting a new job.
However, if they have the ability to communicate their situation with you, it may be possible to work out an agreement to accept partial payment on the first and the remainder of the rent as soon as they are paid. Obviously, you will not want to do this every time, but it can be worth making an exception occasionally.
Help Your Tenants Connect with Financial Support Services
If your tenant suddenly finds themselves in a position of financial insecurity or if they are having trouble making payments, you may want to consider offering to help them connect with financial support services. This way they can regain their financial stability and you can rest easy knowing that both your tenant’s wellbeing and their rent is well taken care of.
Bonus: Remember to Check Landlord References When Screening Tenants
Finally, before you accept a tenant, make sure to follow up on their landlord references and confirm with their previous landlord that they were reliable with rent payments. Sometimes late rent payments are left unreported and are not reflected on a tenant’s credit score. So, by asking their landlord you can double check and confirm all of the information is accurate.
If you would like to learn more about the world of real estate investing and how you can become a better landlord and investor, give us a call at LendCIty. Our number is 519-960-0370 or you can visit us at LendCity.ca Alternatively, you can book a free strategy call with us at the link below.