For many landlords, collecting delinquent rent from a renter can be one of the most difficult aspects of property management short of eviction. Unlike evictions, which have legal action and a formal process that landlords can use as a roadmap to navigate, there is no such formal process in place for how to collect delinquent rent.
This leaves many landlords unsure of how best to handle delinquent tenants. The good news is there are substantive steps you can take to be a successful landlord when collecting delinquent rent, avoiding late rental payments as a whole. By implementing the latest property management trends and practices, you’ll minimize the headaches and stress of dealing with delinquent tenants and create a lasting framework you can apply to each of your rental properties as you continue to grow. Offering services for property management in Raleigh, NC to property management in Austin, TX, we’ve seen it all which is why our team of property management experts has the expertise to help you avoid this common landlord issue.
The Delinquency Problem
Whether it’s a new tenant who misses their first rent payment, a long-term tenant that frequently sends their rental payments days or weeks late, or a tenant who just drops off the radar, delinquent rent can have a big impact on your bottom line and the relationship between tenant and landlord.
If you haven’t dealt with it before, delinquency occurs when a tenant does not submit their required rent payment on time. Delinquent rent can occur for nearly any reason, some of which the tenant may have little control over. Things like an unexpected health emergency, the loss of a job, or a death or illness in the tenant’s family can lead to delayed rent payments.
But there are also more common and mundane reasons for a tenant’s failure to pay rent, which are largely within the tenant’s control. These include simple forgetfulness, inadequate funds for rent, poor time management, and much more.
Most landlords will need to deal with delinquent rent at some point during their property investment tenure. Understanding how to handle tenants who pay late is beneficial even if you have never had a late rent payment. Identifying excellent tenants, setting clear expectations, offering multiple convenient avenues to make rent payments, and outlining concrete consequences for late rent payments are all steps you can incorporate into your property management toolbox to avoid delinquent rent in the first place. Read on for our 7 tips on how to handle rent delinquency.
1. Be Proactive
If your rental payment is even a day late, don’t sit around and wait to find out how late the tenant is going to be. If you have a new tenant, it’s not a bad idea to send a notice to pay before the first rent payment is due. The rent notice should include the expected rent date, and outline how they can pay their rent.
If the rent is late, reach out to the tenant concerning rent collection. A call may be sufficient if you don’t live locally, but if you are nearby, a personal visit may be appropriate as well. An email reminder of the delinquent rent notice has the benefit of also creating a written record, which will be useful if you have to begin eviction proceedings. To avoid these types of proceedings, learn more about common eviction mistakes and how to avoid them.
2. Keep an Open Mind
It may not be wise to immediately jump to conclusions if your tenant’s rent is a bit late. There may be a perfectly reasonable and understandable cause for late rent. Communicate with your tenant to find out why the rent is late during this grace period. Your tenant may not even know the rent is late, but if they do, they should have a clear reason for the late payment.
However, communication should flow two ways in any conversation with your delinquent tenant. If you come to an accommodation for the late rent, be sure there is clear communication outlining what the accommodation is. Follow up with an in-person or phone conversation or with an email or letter that provides a document trail for the conversation. While keeping an open mind, it’s also important to clarify the path forward and what actions are expected.
3. Set Clear Expectations
Setting clear expectations is essential for effective property management, and is a great way to minimize delinquent rent. The most important aspect of this is creating a clearly written lease and ensuring your potential tenants understand exactly what is expected of them throughout their tenancy. If there are any questions, clarify those expectations before the tenants sign the lease.
If you are already dealing with a delinquent tenant, defining clear expectations throughout the process is a fundamental best practice. If you have come to an accommodation, there should be no ambiguity for the tenant about when the late rent payment is expected and what the consequences of late rent payment are.
4. Enforce Consequences
As the landlord, it is important to enforce consequences for late rent payments as they are outlined in the lease. This may be uncomfortable, but remember the tenant voluntarily committed to abiding by the terms of the lease. A critical aspect of those terms is the consequences for failing to meet their end of the lease agreement.
A key component of enforcing consequences for delinquent rent payments is clearly outlining the consequences for late payment in the lease such as a late fee. Before enforcing any consequences or fees, be sure to consult with the lease agreement to ensure those consequences are clearly spelled out in the text of the lease. Assuming they are, enforcement of those consequences will communicate to the tenant that you will follow-through on the requirements set forth in the lease, which may help you avoid any delinquent payments in the future.
5. Enhance Your Tenant Screening
One of the most effective ways to avoid dealing with delinquent rent in the first place is to have a robust tenant screening process in place. At Great Jones, we firmly believe our tenant screening process minimizes headaches and maximizes income on your investment. Our screening process includes a credit check, background check, and personal reference checks.
If you haven’t implemented a stringent tenant screening process yet, you should strongly consider doing so. Though tenant screening requires an investment in both time and money, it is an essential requirement for placing consistently high-quality tenants in your rental properties. If you find the process is too time-consuming or hasn’t been as effective as you’d like, consider investing in property management services with Great Jones.
6. Expand Your Rent Payment Options
An important substantive step you can take to decrease delinquent rent is to make it as easy as possible for your tenants to pay rent you are owed. Your tenants are more likely to pay rent on time if the payment process is as convenient as possible.
Great Jones’ property management technology that offers the ability to pay their rent in multiple ways. These include collecting rent by cash, electronically or through Automated Clearing House (ACH), and by cashier’s check or money order. By integrating multiple payment options into your property management toolbox, you ensure there are easily accessible payment avenues for your tenants. Tenants can choose the payment method they find most convenient, which will save you time and money tracking down tenants to collect late rent.
7. Outsource Your Property Management
Dealing with delinquent rent can be difficult, and this process becomes exponentially more difficult if you are juggling multiple rental properties. Relying on an iron-clad lease agreement, selecting the best long-term tenants for your properties, maintaining multiple convenient payment avenues, reaching out to delinquent tenants and following through on consequences for delinquency, and handling eviction if it is necessary are all very time-consuming.
One of the most effective ways to maximize your income from your rental properties, while also maintaining an ideal balance between work and life outside of property management, is to outsource your property management.
At Great Jones, we have the tools, expertise, processes, and resources to minimize how often delinquent rent occurs. We start by placing the highest-quality tenants possible to ensure you are investing in one of the best places for rental property. In addition, our iron-clad lease agreement clearly outlines expectations and consequences for delinquency. If delinquency occurs and the tenant is advised to vacate the premises, we handle eviction notice and outreach to the tenant and follow-through with escalation steps if necessary. If eviction ends up being the only recourse available with a tenant we’ve placed, our team at Great Jones will handle the legal processes.
Why choose to work with a property management company like Great Jones? At Great Jones, we can leverage our scale, resources, and expertise to find you the best tenants available. We’ll help keep occupancy rates high through effective marketing of vacant properties and keep your tenants happy through industry-leading responsiveness.
Dealing with delinquent rent tends to be one of the most frustrating and dreaded aspects of rental property management for landlords. Many of the most effective methods of dealing with delinquent rent involve creating the structures and processes which enable you to avoid it altogether. By setting clear expectations and adopting a clearly written and legally enforceable lease agreement, enhancing your tenant screening process to develop a more informative picture of your potential tenants and adopting multiple rental payment avenues to enhance convenience, you’ll be able to avoid this common landlord issue.
Once a tenant has gone delinquent, it’s important to be proactive with your communication. Document communication to your tenant, and clearly communicate escalation steps as they occur. Enforce delinquency provisions as they are outlined in your lease agreement, and maintain consistency in enforcement. Of course, it’s also important to be flexible. If the reason for delinquency is outside of the tenant’s control, working with the tenant to navigate the issue can help you maintain an amicable and beneficial working relationship moving forward.
If you have found yourself frustrated dealing with delinquency issues or simply don’t have the time or resources to create the structures and processes we’ve outlined here, consider outsourcing your property management to Great Jones. Our expert team has developed clear and consistent processes and structures that will minimize occurrences of delinquent rent and a formalized response for when delinquency does occur.
Even if you’ve invested in one of the best places to buy rental property, your investment won’t be successful if you don’t prevent rent delinquency. With the investment of professional property management, you can increase tenant satisfaction and free up your bandwidth. To learn more about how Great Jones’ property management services can help your real estate investments succeed, please contact our team today.