Collecting rent can be a major source of stress for property managers. Late payments can significantly disrupt cash flow, which could endanger your business's viability and damage your relationships with your clients.
But with a little patience and some savvy strategies, you can encourage more on-time rent payments, make rent collection less of a chore, prevent client churn, and protect your profitability.
1. Set clear expectations
A detailed lease agreement is the first line of defense against late payments.
Property managers can prevent misunderstandings from the get-go by thoroughly outlining a payment schedule, acceptable forms of payment, and penalties for late payments. Make sure tenants understand the terms of the lease before they sign it.
2. Make payment convenient
As consumers become more and more time-starved, convenience is king. Thirty percent of consumers believe automatic recurring payments would make it easier to pay bills on time, and many young renters prefer some form of online payment to checks or cash. Happily, property management platforms like PayProp make paying rent fast, easy, and secure.
With the help of easy-to-implement and use PropTech, property managers can offer self-service portals for tenants and automate the rent invoicing and collection process, allowing tenants to pay the rent at any time, from anywhere, with hardly any effort.
By the same token, it pays to accommodate traditional payment options such as checks or money orders. Providing multiple ways to pay allows tenants to choose the method that works best for them, improving payment rates.
3. Provide flexible payment plans
Tenants may also find it easier to manage their money and keep up with their rent if it can be paid in smaller (e.g. biweekly) installments rather than all at once every month.
Flexible payment plans help preserve cash flow since you and your landlords continue to be paid the same amount – just over a longer stretch of time.
As the pandemic has taught us, payment flexibility during tough times can control arrears in a way that accommodates tenants in genuine distress (see 6 below).
4. Send invoices at predictable times and follow up with reminders
Similarly, even the most responsible renters can lose track of time and overlook a rent payment when life gets hectic.
Automated invoices at the same time every month can help tenants embed rent payment into their routines.
Providing reminders a week or couple of days before the rent falls due can help ensure that payments are made on time, possibly even early – and also that tenants have no excuse if they miss the payment. These reminders can be sent via email or text message, and can also be automated with PayProp.
5. Impose late fees
Just knowing they may be charged late fees may be enough to remind tenants to pay rent on time.
But there will be times when you must enforce late payment penalties as laid out in the lease. Tenants hit with late fees won’t want to repeat the experience, and are less likely to miss payments in the future.
The standard fee is 5% of the monthly rent.
6. Build a positive relationship
Don’t underestimate the power of kindness. Establishing a good rapport with your tenants is a simple yet effective strategy for getting them to pay rent on time.
Property managers can earn tenants’ trust and loyalty through small but meaningful actions, such as responding quickly to maintenance requests, keeping lines of communication open, and showing empathy for tenants in financial hardship.
It's not wise to regularly give people a pass on late fees, but it pays to be understanding and flexible on occasion (see 3 above).
On time, all the time
In a perfect world, rent would always be paid on time and in full.
But it doesn’t always work out that way, so property managers need to be patient, proactive, people-oriented leaders to ensure that their clients get the rent they are owed.
With the right strategies in place, you can stop feeling like a debt collector and get back to being a property manager connecting people with their dream home.
