4 Smart Tips For Collecting Real Estate Rent - What to Know
Buying and renting out properties is a fantastic way to earn a passive income without having to monitor your assets full-time. Some of the duties associated with being a landlord include maintenance and repair, collection of payments, and documentation.
The most challenging part of renting out a property is collecting rental income from all of your tenants. While some tenants may pay their rent on time without having to be reminded, others require check-ins. There are, however, solutions to late or defaulted payments.
Here are four tips to help you collect real estate rent the smart way:
1. Check the credit standing of rent applicants
Before accepting an applicant as a tenant, it is imperative to conduct a proper credit investigation. A credit investigation involves checking whether the applicant has overdue debts or eviction judgments against them. This will give you some idea of how well they have handled their payments in the past. The applicants must have a good credit standing to make sure that they are capable of fulfilling their payments over the entirety of their lease.
2. Establish a rent collection policy
The best way to ensure that the monthly rent collection process goes as smoothly as possible is to establish a rent collection policy. Landlords and property managers must clarify the amount due every month and establish a clear due date. They must also set rules regarding grace periods in case of late payment or the possible repercussions of bounced checks. To ensure timely rent payments, rent collection policies must be enforced strictly.
3. Avoid accepting cash as payment
One of the mistakes that inexperienced landlords commonly make is accepting cash for rent payments. During the signing of the contract, it is important to clarify the payment method in the lease or rental agreement. Cash payments involve the risk of non-payment in the future since it is a payment method that does not allow continuity. For accounting purposes, it is ideal to accept automatic payments that are credited monthly.
4. Set up automatic rent payments
Rather than accepting checks and run the risk of them bouncing, landlords are recommended to set up automatic rent payments. There are several ways for renters to pay their rent through an autopay or auto-deduct system. One is to set up online payments wherein all payments, including monthly rent, security deposits, and move-in costs, go through one online facility. Some landlords also prefer an ACH or automated clearinghouse that automatically withdraws money from the renter’s bank account. However, this latter option involves the same risk as PDCs as the draft is at risk of bouncing.
To avoid the inconvenience of default payment, landlords may choose to enlist the services of a property management company that offers the collection of rent payments as part of their service. This is an ideal option for those who want to delegate the grueling task of rent collection while making sure that all payments are timely and in order.
For assistance on rent collection, find a property management company that provides automatic rent collection. True Management NYC is a company that offers automated collection via ACH, Credit Card, or e-Check that is absolutely free to the owner.