How to Minimize Late Rent Payments

by Chris on April 28, 2014

If there is one universal problem that plagues virtually every landlord it’s tenants who pay late.

Late rent interrupts needed cash flow, and can force a landlord to make mortgage payments late, incurring extra costs. Even more problematic, a late-paying tenant presents a more systemic problem: someone who is paying rent late likely is also falling behind on maintenance and other tenant responsibilities.

tenant screeningMany landlords are bound to keep rents low, so there’s no margin for increased costs or damage to a rental unit. Landlords can’t tolerate chronic late-payers.

So, how can you get your tenants to pay rent on time?

Despite the infinite number of excuses concocted by tenants who pay late, there are generally only two reasons this is happening to you: You are choosing the wrong tenants, or your tenants don’t respect you.

Either way, you can take steps to improve your statistics and minimize late rent payments:

Improve Your Tenant Selection Process

No matter how long you must keep a property vacant, never accept a tenant if you are not able to verify his or her rental history. Speak with a previous landlord — the current one may gloss over problems. Don’t beat around the bush; ask the landlord if the tenant has a history of on-time payments.

Review an applicant’s credit report to determine if this is an individual who takes other financial obligations seriously. A history of late payments on credit cards, phone bills or other installment loans is a bad risk because this person will show no more respect for a lease agreement.

Use a Carrot and Stick Approach

Allow your tenant to control their own destiny by signing up to¬†Report Tenant Pay Habits. Either the tenant will end the lease with a Certificate of Satisfactory Tenancy to share with the next landlord, or they will have trashed their reputation — making it more difficult than before to find new rental housing. That added incentive can keep so-so tenants on track.

Make the Right Thing Easy

Explore all feasible options for automatic payments of rent. That may involve signing up with a vendor who manages electronic transactions, or something as simple as speaking with your bank representative to see what it would take to set up an automatic withdrawal from the tenant’s account.

Automated payment eliminate a number of excuses, from the classic “the cheque is in the mail” to the less acceptable “I’m out of town right now.” If your tenant is having trouble managing bills, you don’t want to fall to the back of the line.

If you can’t swing automatic or electronic rent payements, at least consider invoicing the tenant for the rent. It’s surprising how many tenants wait to receive a bill for rent, just like with other creditors.

Make the Wrong Thing Difficult

You need to earn your tenant’s respect to get on-time rent payments. Be clear during orientation what the options are for rent payments, but make sure the tenant understands that the due date is nonnegotiable. Go over the procedure for late payments, and tell the tenant, “I take this seriously, and I will file for an eviction if you are late on the rent.” The tenant may think twice before taking you on.

The way that you behave throughout the tenancy will have a strong impact on the timing of rent payments. For instance, don’t waiver on other rules, or ignore problems that are happening at the rental property. The tenant will take note of your hesitation or lack of professionalism, and take advantage of the situation. You need to show by example that the lease agreement means something.

That’s why it’s important to keep the property in good condition, to respond quickly to tenant complaints or questions, and to stay in communication with the tenant throughout the lease term.

Say what you will do and do what you say. That way the tenant will take you seriously.

Don’t get in the habit of making deals with tenants who are paying late. Chances are, they are testing the waters to see what they can get away with. Serve your eviction notice as soon as you are allowed to, and use the pending eviction as an incentive to resolve the rent issue.

It should hurt to do the wrong thing, and feel good to do right.

This post is provided by Tenant Verification Service, Inc., helping landlords reduce the risks of renting with fraud prevention tools that include Tenant Screening, Tenant Background Checks, (U.S. and Canada), as well as Criminal Background Checks, and Eviction Reports (U.S. only).

Click Here to Receive Landlord Credit Reports.

Disclaimer: The information provided in this post in not intended to be construed as legal advice, nor should it be considered a substitute for obtaining individual legal counsel or consulting your local, state, federal or provincial tenancy laws.

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