Managing a property yourself rather than using a Property Manager is not for everyone, and requires a lot of responsibility and time. However, if this is your chosen path then one of the most important things that you are responsible for is collecting the rent on time.
For some, this can be an easy task, but there may be times that you have to deal with troublesome tenants that always pay the rent late, or don’t pay at all.
Here are my top ten tips for collecting the rent on time and the best ways to deal with nightmare tenants who have trouble paying the rent.
1) Choose your tenants carefully
One of the best ways to avoid troublesome tenants in the first place is to choose tenants that have a great rental history, who pay on time and look after the property. This information can be obtained through references and these details should be checked. It is also wise to choose tenants that can actually afford to rent the property as this will mean they are less likely to fall behind in payment. Typically, you should stick to the 33% rule, where the rent is no more than 33% of the total household income. If possible, you should also obtain the latest consumer credit report to check their credit history.
2) Set your criteria
You should make the criteria very clear to the tenant what expectations must be met. This should include what the rental amount is, when payment is due and frequency of payment. You should also cover relevant procedures for instances such as late payment and breach process.
3) Set up automatic payments
The best way to ensure that tenants pay the rent on time is to set up a direct debit or an automatic payment system. This avoids the excuse of “forgetting to pay the rent”.
4) Never accept cash payment
There are many reasons as to why you should not accept a cash payment. Firstly, cash could get lost easily and secondly there is no paper trail. The rental agreement should clearly state that cash is not an acceptable method of payment.
5) Be clear on your rent collection policy
Ensure that you provide your tenants with written instructions in the lease of the payment details. This should include:
- Exact rental amount
- Frequency of payment
- Where this payment should be made
- Acceptable payment methods
These terms should be non-negotiable, but if a tenant has not paid the rent by the required date and you genuinely believe that this is a one-off occurrence then you might want to let them off just this once. However, it should only be ONCE and you should reiterate this to them.
6) Only ever accept one payment from share tenants
If you have more than one tenant living in the property, for example a group household, then you should insist that one single payment should be made. If one share tenant falls behind in payment then you should never accept part payments.
7) If payment is late, ask why
You should always enforce the rules around late payment and you should find out the reason as to why they are late. If you are allowed to issue a breach, this can be done as it can always be rescinded. If by the 15th day they have not paid the rent, you can give them a notice to vacate.
8) Keep a paper trail
All communications that you have with the tenant should be in writing so that you have a record, should you need to provide evidence in the case of legal action.
9) Do not renew the lease of a tenant who has made late payments.
If you have had problems with your current tenant and they have reached the end of their lease then it is wise not to renew the lease, end your agreement and start afresh.
10) Reward tenants who are responsible
If you are lucky enough to have responsible tenants that always pay the rent on time and keep the property in good condition then you may want to offer them a reward such as cinema tickets as a thank you. This will keep your tenants happy and may motivate them to renew their lease.
Published on 26th of November 2014 by Marty Stanowich