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Handling Rent Collection Effectively in Property Management

Collecting rent on time is one of the major responsibilities of property management, and arrears and late payments can seriously affect the cash flow and profit margin. Even when you have screened tenants thoroughly, there are marvelous chances they may not pay the rent on time for various reasons.

This can further complicate relationships with tenants and lead to several issues. However, most of the problems with rent collection can be avoided by having a reliable and convenient collection system, professional attitude, and setting down certain strict rules.

Convenient Rent Payment Options

On most properties, there is an automatic deduction system or ACH for withdrawing the rent money from the tenant's account directly. The tenant will sign an authorization document, which enables property management to withdraw a fixed amount on a recurring basis. This is the most convenient system; however, the tenant should make sure there is enough money in the account for the rent withdrawal to go through.

Other than automatic payment solutions, setting up an online payment portal is the next best option. Tenants have the convenience of making payments from anywhere and at any time of the day or night, before the due date. Secondly, updating accounts becomes much easier and tenants can receive their payment confirmation in a flash.

Do not Accept Cash

Implement a strict no-cash policy for rent payments, since cash is easily “lost”, and there is the risk of staff committing fraud which falls under the “lost” category. Secondly, it is very difficult to keep a paper trail on cash transactions, and in many cases, tenants who are involved in illegal activities mainly prefer to pay in cash. Therefore, by having a no-cash policy, you can eliminate several risks.

Spell Out the Policy for Rent Collection in the Lease

It is important to have a strict rent collection policy and the best way to inform tenants about this, is in their lease. The lease document should clearly state:

The exact amount due as rent each month

The last date for paying rent each month, and grace period if any

The various options for making a rent payment

Penalties for late rent payment and bounced checks

Consequences of repeated late payments or non-payment

 

Apart from mentioning these details in the lease document, the property manager can also inform new tenants directly about rent collection policy.

When to Cut Slack and When to be Strict

This is a tricky decision for property management, and cutting a renter some slack can sometimes backfire. Tenants are likely to fall on hard times; however, feeling sorry and not charging a late fee on a regular basis is just not prudent.

If it is a stellar tenant and he seems to have slipped up just this once, then cutting them some slack could be a long term smart move for you to make. But it should not be the norm and if it is crossing that boundary, then you should warn this person that cutting ties with them is not out of the question. Under no circumstances should you compromise and enable tenants to take advantage of you.

Adhere to the Law

Follow the legalities and rules while taking punitive measures in case of the non-payment of rent. It should never be a protracted battle. If someone is late on their rent payment and not listening to the increasing fines that are being levied on them for every passing day, then you need to evict them. You should only want to be around responsible people.