Rent collection is essential for your portfolio’s financial stability and profitability. Ryan Barone shares strategies to simplify it for you and your renters.
Rent collection is the most critical aspect of managing rentals; however it can also be challenging, and sometimes even unpleasant. Landlords and tenants face many hurdles, including scheduling the payments, payment methods and how to deliver or transfer the funds.
Exploring these different challenges and uncovering ways to eliminate them is particularly helpful in making rent collection pleasant for both landlords and tenants.
Because rent collection is the linchpin of building a real estate portfolio and becoming profitable, it’s important to set up a system that makes the payment transfer process easy and straightforward. Consider the following tips and best practices to make rent collection a more pleasant experience for everyone involved.
One of the top concerns for landlords and tenants is the timing of rent payments. Most landlords need to collect rent in time to make their mortgage payments, whereas tenants rely on their paychecks to make the payments.
For long-term, traditional rentals such as single and multifamily homes, setting up recurring payments on the same day of every month allows both parties to plan their finances accordingly.
However, non-traditional rentals may require different schedules. For example, student housing may require payment in full for an entire quarter or semester. Salon owners generally prefer to collect rent every week to manage high turnover more effectively. This makes their terms more attractive to stylists who crave flexibility and may not want to pay large monthly lump sums for rent.
Regardless of the payment schedule, landlords must properly outline the terms in the lease contract so that both parties are held accountable for their portion of the renting experience. This goes a long way to ensuring that landlords and tenants have a pleasant renting experience together.
Carefully outlining payment schedules and late payment policies reduces anxiety from the unknown for both parties. When everyone understands their responsibilities, it’s easy for landlords and renters to establish a pleasant relationship.
When it comes to rent collection methods, landlords that offer various payment options will have more appreciative tenants. Advancements in technology have provided a wider range of resources to enable renters to submit payments, from cash and credit cards to electronic fund transfers made between banks and credit unions (ACH) and property management apps.
Apps may provide the most desirable method of rent collection and payments for both parties because they make tracking and organizing payments seamless. Landlords receive payments directly to their phones and no longer have to deal with lost checks or cash.
Tenants also benefit from using property management apps with features that allow cash deposits at retail locations and the ability to set up auto payments, make early or partial payments, and bundle payments with utility bills and other fees.
How the rent payment gets delivered from landlord to tenant can be the cornerstone of creating a pleasant experience for your tenants. It’s important to develop an efficient and convenient system for tenants. For example, let tenants know where they can send checks, drop off cash, or what digital payment options are available to them.
Property management technology has come a long way regarding online payments, so most tenants can use their phones or computers to pay rent. This is likely the most effective way for landlords and tenants to collect and pay rent. The main benefits of this method include convenience, immediate electronic receipts upon payment, and ensuring all transactions are documented to avoid mistakes and miscommunication.
Perks and benefits
Providing additional perks and benefits to tenants always works in the landlord’s favor. For instance, credit reporting rewards renters for paying rent on time. Landlords and tenants should use tech tools that report on-time payments to the three major credit bureaus. This helps tenants build and boost their credit while increasing on-time payments for landlords, presenting a win-win proposition that transforms rent collection into a desirable transaction.
Several years ago, TransUnion reported that 7 in 10 renters are more likely to make on-time rent payments when their landlords report payments to a credit bureau. As an additional incentive, the report found that 67 percent of renters said they would choose an apartment that offers payment reporting over one that does not offer that feature.
When landlords report on-time rent payments, 60 percent of renters see improvements to their credit scores after the first month, and there’s an average increase of 26 points to credit scores after 12 months of on-time rent payments.
Moreover, upgraded features that streamline historically tedious tasks like screening tenants and tracking repairs keep the renting process automated and running more smoothly, making the rent collection process more pleasant to both parties.
Ryan Barone is the co-founder and CEO of RentRedi, an award-winning rental management software that transforms the way landlords and tenants manage their renting experience.