Ask 10 property management companies what worries them most, and the majority — if not all — will mention late payments are a top concern. No matter where you are located or what type of community you operate, residents are going to come up short from time to time.
That puts you in a tricky spot. Push too hard by chasing down renters, calling them dozens of times, or slapping embarrassing late notices on their doors, and you could destroy your relationship with them. They may cut and leave without paying you, or worse, stay without paying you and force the long, expensive process of eviction.
Here are proven ways to encourage residents to pay on time.
#1. Clearly communicate your policies
Review the lease in person with applicants to ensure that they fully understand the terms of the agreement. Avoid vague statements, such as “I’d like your rent by the end of the month” because it leaves too much room for interpretation. Be very direct about rent costs, due dates and how residents should pay, for example, online or in-person.
Also be straightforward about possible consequences for late rent. Explain what late fees they can expect, and how quickly you will move to evict. That will help prevent misunderstandings down the road.
#2. Enable automatic online payments
This may be the surest way to reduce late payments. The extra time it takes to mail in a check or drop it by the leasing office can often make payments late.
Plus, offering residents the flexibility to pay online or from their mobile phones, or better, setting up automatic payment is a convenience for them, while helping to ensure payments come in on time. Also consider offering a small discount on the monthly rent for residents who sign up for automatic withdrawal.
Just make sure that online payments aren’t the only option for residents. While it’s getting rarer and rarer, you have to assume some residents may not have access to a credit card or computer.
#3. Require late fees for being late
Late fees and payment policies can motivate residents to make their rent payments a priority. Just make sure you check your local housing laws so you know how much you can charge and at what point.
#4. Keep detailed payment records
Moving to online payments, instead of check or cash, will make it much easier to track payments.
Specifically, when it comes to cash payments, you have no paper trail, and it’s easier for residents to disagree about whether they paid you. If you do accept cash payments, be diligent in record keeping, and write payment receipts so both you and the resident have a record.
#5. Send reminders
Roughly 10 days before rent is due, gently remind residents that rent is coming up. If you use an online rent payment system, it may do it for you.
Send the reminder via email, text or mail. Although, it’s cheaper to send them electronically, produces less trash, and residents will receive them even if they are out of town, which can be important during the summer months or holidays.
#6. Report rent payments to TransUnion
If residents know you are reporting rent payments to a consumer reporting agency like TransUnion, it can create a strong incentive to make payments on time. After all, late payments can affect credit scores, making it harder to buy a car or house down the road, and that could make the difference between paying rent on time or putting it off a few days.
Reporting rent payments has another benefit too: It can actually help you weed out renters who are inclined to be late and attract more high-quality renters if you advertise that you’re doing it.
#7. Be consistent
Enforcing your policies in a consistent and professional manner will discourage residents from taking advantage of your inconsistency. The last thing you want is for a small pardon to become a pattern of undesired behavior, or for a resident to feel slighted because you addressed a situation with his neighbor differently.
Additionally, if you pick and choose how late fees are applied and forgiven depending on the resident, it could be a direct violation of laws such as the Fair Housing Act, which could come with some hefty fines. Avoid the hassle by ensuring that you are treating all renters equally and fairly.
#8. Prevent late payments by getting the right residents to start with
Your best defense against late payments is finding the type of renters who are unlikely to be late — and that starts with a thorough screening process.
A full credit report with a ResidentScore offers you a clearer picture of potential residents’ ability to pay on time. Gain the insight you need to better assess risk — and extend leases to more qualified applicants. Learn more.