Being a landlord can be rewarding. However, it comes with a share of rewards and challenges. You made a significant investment by renting out your property. But then you need to protect your investment and build a steady income. This is where smart investment management will come into play.
Read on and let’s explore some practical strategies that you can follow to maintain a healthy cash flow while protecting your investment.
Preventing Late Payments: Strategies for Landlords
You don’t expect to chase down rent payments every single month. However, you can prevent most payment problems even before they start. Here’s how you can set yourself up for success.
Set clear expectations from the first day
Your lease agreement is your best friend. Hence, make sure that it clearly explains when rent is due and how tenants should pay the rent. You should also mention what happens if the rent is late. By doing this, you can make sure that there is no room for confusion. When your tenants are aware of the rules upfront, they will end up with fewer surprises later.
Make it easy to pay rent
If there are challenges with making rent payments, people are less likely to do it on time. This is why you need to make it easy for anyone to pay the rent. To do that, you can set up multiple payment options. A few such options available to consider include online portals, automatic bank transfers, and mobile apps.
You can also make it the responsibility of your property managers to collect rent. With deep local market knowledge, Atlanta property managers know exactly how to price rentals for optimal occupancy.
Send friendly reminders
Life gets busy, and tenants sometimes forget to make rent payments on time. This is where you need to implement a system to send friendly reminders. You can send a reminder about 3 to 5 days before rent is due. Sending these reminders will also show that you are organized and paying attention to the monthly rental payments.
Build a buffer into your budget
As a smart landlord, you need to plan for the unexpected. This is why you should not rely on every single rent payment to cover your expenses and mortgage. It is better to have at least 3 to 6 months of expenses in a reserve fund. This cushion will protect you if a tenant suddenly decides to leave or falls behind on rent payments.
What Happens When Unpaid Rent Goes to Collections: A Complete Guide
Understanding what happens when unpaid rent goes to collections can help landlords protect their investments. Let’s explore it in detail.
The first 30 days
You need to start communication when the rent payment doesn't arrive on time. You can call the tenant within a day or two of the missed payment. Make sure that you remain professional and assume the best will happen. There can be a valid reason why your tenant missed the rent payment. Maybe they changed the bank, or the paycheck got delayed. If they need a few extra days, you need to put that in writing.
Sending formal notices and taking legal steps
If communication doesn’t solve the issue, you need to send formal notices. Most states will require a “Pay or Quit” notice. It gives tenants a specific timeframe to make the rent payment or move out. It is usually three to five days. You can check your state regulations to figure out the exact information.
Working with a collection agency
What would happen if a tenant moved out owing money? Then you can send the debt to collections. Collection agencies can work with you to recover unpaid rent. However, they will usually keep 25% to 50% of the amount that they collect. Hence, you can’t expect to get back all the money that you owe.
Maintaining Positive Tenant Relationships While Protecting Your Investment
You can still be a good landlord and be firm about finances. These two aren't mutually exclusive. The best landlords can manage both. Let's explore how you can do that in detail.
Communication is everything
You need to return your tenants' calls and emails promptly. When tenants have problems with making rent payments, they will often try to communicate. This is where you need to respond swiftly.
Regular communication can help you to build trust as well. Tenants who trust you are more likely to make the rent payment on time. They will also take good care of your property. On top of that, such tenants are more open about the problems that they have with making timely rent payments.
Be fair and consistent
You need to treat all tenants equally. Imagine a situation where you waive off late fees for one person, then you need to do it for everyone who is facing a similar situation. Inconsistent enforcement can create resentment, and it can also lead you to legal problems.
Make sure that your policies are clear and reasonable. This will provide you with legal protection. It will also help tenants to feel that they are treated fairly.
Invest in your property
Good tenants expect to live in well-maintained places. This is where you need to address maintenance issues fast. You need to keep all common areas clean and make timely upgrades when possible. When the tenants feel valued, they will take good care of the property. Moreover, they will tend to make rent payments reliably.
Final Words
As you can see, you need to follow a balanced approach to manage a rental income successfully. This is where you need to set clear expectations and make it easy for them to pay rent. When an issue arises, you need to handle it professionally. Throughout it all, you need to maintain positive relationships with tenants. It will protect your financial interests and the investment property. Always keep in mind that the best landlords are both firm and fair.
