One of the best ways to build wealth with your property is through rental income. However, numerous issues come about that cause a lot of headaches. Non-paying tenants can put unnecessary stress on your income, and it’s best to find efficient ways to collect your rent.
There are many reasons for tenants not paying on time, including unforeseen financial constraints, withholding due to disputes, or nefarious reasons. Fortunately, Colorado has a steady rate of rental collections at 97.9%. That’s good news for property owners as it provides confidence when entering the rental market.
To ensure you receive your rent in full and on time, look at ways to make the process easy and efficient. Here are tips to streamline the collection process and to maintain a professional relationship with your tenants.
1. Know your tenant
Properly screening your tenants ensures you’re working with a reliable, trustworthy person. After looking over the tenant’s documents, do credit checks and background checks. Contact the tenant’s previous landlord to get an idea of their reliability.
2. Put together a detailed rental agreement
Make sure you sit down with the tenant and go through all the clauses of the agreement. Discuss any issues and come to an agreement that suits both of you.
Discuss points such as:
- Agreed payment date
- Grace period for missed deadline
- Payment methods, such as debit order, bank transfer, etc.
- Penalties for late payment
- Incentives for early payment or bulk payments
Communication is vital at all times during the length of the lease. Always be open to discussing any issues with your tenant and be flexible on payment methods.
3. Work with an experienced property manager
If dealing with tenants is too much for you to handle, consider acquiring the service of a reputable property manager. Property managers will draw up the lease agreement, handle rent collections and handle all disputes. Evernest has reliable property managers in Colorado Springs, Denver, and many other areas throughout Colorado.
4. Consider various payment systems
To ensure consistent rental payment, choose one or more reliable payment methods. One way to incentivize tenants to pay on time is to make the process easy and secure. There are a variety of payment methods you can choose from. Traditional methods consist of cash, cheques, and bank deposits.
Although, in the modern world, online payments and payment apps make the process far more streamlined. There are several payment platforms designed particularly for rental properties. These digital platforms ease the burden of rent collection with far cheaper transfer costs. These include:
Additionally, another method is direct debit orders. Payments via credit cards should be a last resort and avoided. Make sure you cover these issues with your tenant in the lease agreement.
5. How to Consider Which Payment Method is Right For You
Many factors could determine which payment method works for you. How hands-on you are with your properties is another factor to consider. With digital platforms, labor costs reduce. Additionally, if you own several rental properties, have a digital platform to keep track of all the collections, and maintaining accounting records is a huge plus.
When choosing the best payment method and platform, consider:
- The service fees
- Accounting and record-keeping
- Synchronizing listings, so your property ads appear on multiple sites
Keep in mind that receiving payments digitally means you could forget to inspect your properties. Maintain regular contact with your tenants to avoid any maintenance issues.
6. Remind Your Tenants of Due Payments
It might make sense to set up an automated message to remind the tenant of upcoming payments. You can set this up through an email or text notification or use a payment platform like Avail to send rent notifications.
7. Set Up Incentives and Consequences with Rental Payments
To make sure your rental collections happen fast and easy, incentivize your tenants to pay early. Offer discounts for repeated early payments or if they pay in large lump sums.
Conversely, you need to be strict on any issues with late payments. Charging late fees is a sure way to make tenants keep up with their rents. In extreme cases, you can file a report with the credit bureau, which negatively affects the tenant’s credit score. Make sure to communicate with your tenants and be accommodating where possible.
Collecting rental can be a time-consuming process, not to mention stress-inducing if you have unreliable tenants. There are many options available to you to make the process easier and more efficient. Explore your options and make the rental collection truly passive and carefree.