How to Collect Rent Money & Get Paid on Time?


August 18, 2021

Having some issues with tenants and rental money? Let’s find out how to deal with them and how to collect rent money and getting paid on time!

If you’re a landlord or work for a property management company you’ve probably spent more than your fair share of time thinking about rent. 

All in all, collecting rent is an unavoidable part of the property management business.

As for the best way to collect rent – that depends not only on who you ask.

But who you’re renting your property to?

Many landlords swear by online platforms and services, while there are others who still prefer to do things the old-fashioned way by having their tenants mail them checks. 

Whether you’re a brand new landlord or have years of experience in the property rental business, there’s always more to learn about how to collect rent from tenants.

Are you looking to maximize the value of your rental properties? 

Here are seven rules you can follow to make sure your tenants pay their full rent on time each and every month. 

 

1. Choose your tenants wisely

There’s no more important rule for landlords than taking the time and trouble to screen potential tenants. 

If you are careful with who you rent to, you’re less likely to have issues when the rent payment comes due. 

One of the top considerations for who to rent to is income.

It’s important to verify potential tenants’ earning ability by requiring pay stubs or a letter from their employer that clearly states how much they are paid each month. 

It’s also a good idea to check your renters’ references, whether those are from former landlords, former or current employers, or former or current business partners. 

If you’re speaking to another property manager, be sure to ask whether the person paid their rent on time each month. You will stay secure when collecting rent money when you have some personal assurance that the tenant has a good record of paying their bills on time.

 

2. Maintain a “no cash” policy

Online payment

Another important rule for anyone who’s interested in how to collect rent from tenants is to refuse cash payments. In many areas of business around the world, cash is king.

But commercial and residential rentals are a critical exception to this rule!

When your tenants pay the rent in cash, there’s no bank record of the transaction. 

Although cash may be convenient, a cash payment leaves the landlord with no record of the payment other than the cash itself. 

The tenant is also unable to prove that they paid the rent beyond furnishing a paper receipt – a document that could easily be forged by either the landlord or the tenant.

A “no cashpolicy is good insurance for both the landlord and the tenant. When there’s an electronic record of the monthly rent payment, everyone can rest easier.

 

3. The old-fashioned standard: checks by mail

It may not be the best way to collect rent.

But putting a check in the mail is still a tried and true business practice for landlords and renters alike. 

Keep in mind that every check that is written from a commercial or personal checking account is backed by a bank so that the transaction is safe and secure. The canceled check also serves as a receipt of the rent payment for the tenant.

Another advantage of accepting rent by mail is that it’s relatively inexpensive compared to more sophisticated online payment systems. 

Overall, the cost to the landlord is practically zero, as you will only need to take a trip to the bank once a month. The tenant only needs to pay for a postage stamp. 

Be sure to make a photocopy of each check for your own records before depositing the funds into your bank account.

 

4. Talk to your tenants about payment delays

Talking women

One of the biggest difficulties that landlords and property managers face is confronting tenants about late or missing rent payments.

If it’s just a matter of a delay, that’s an easier conversation but still not a fun one to have.

If you’re wondering how to collect rent from tenants who don’t have a great record of paying on time, we have some great advice for you. 

All in all, it’s best to be direct with your problem tenant and talk to them right away after a late rent payment. Tell the tenant that you’re delighted that they have chosen your property.

Also, don’t forget to mention that you have a strict no-tolerance policy for late rent payments.

It can be useful to refer to your tenant’s lease as a reminder for them. Remind them they should pay the rent by a certain date each month. It’s not essential to talk about the consequences of late rent payments in this initial confrontation.

However, it’s not a bad idea to be ready to present your errant tenant with a fee structure for future late payments or some other monetary penalty.

It’s not necessary to talk face to face with your tenants when they are late in paying the rent. 

Instead of dropping by the rental property, you could call them. This has the advantage of a personal touch without the potential embarrassment of catching them at a bad time at home. 

Another option is to send the tenant an email. The advantage to this approach is that you don’t have to waste your time with a real-time interaction – and you now have a written record of the late payment of rent by your tenant.

 

5. Develop some consequences for late payments

If you’re a property manager at a real estate company — or even a large building! — you probably have experience with tenants who don’t pay on time. 

But newer landlords or anyone just getting started renting out a unit may feel shy about imposing consequences on deadbeat renters. 

Bottom line, if you’re wondering how to collect rent money from your tenants you also need to be thinking about collecting extra money when they fail to pay promptly.

Late fees are the most obvious and straightforward consequence of tardy rent payments.

Ideally, you would set up a structure for late fees even before a lease is signed.

Typically landlords impose either a flat rate fee or a percentage of the rent for each day that the rent is late.

For example, you could choose to impose a $20/day late fee. Or tack on an additional 5% to the following month’s rent if your tenant pays late.

6. Send your tenants to rent reminders

Gmail - rent reminder

One way to ensure that your renters pay up on time is to use property management software to send email reminders before rent is due each month. 

In general, using automation is one of the best ways to collect rent because it frees up time and resources once the initial setup is complete. 

All you have to do when you rent a new unit is add the tenant’s details and lease into the system, and the algorithms take care of the rest of the work.

Even if you don’t use property management software, all you need to send reminders to your tenants before rent is due is an email account. 

Simply create a template in your favorite text editor and customize each message to include the tenant’s name and the exact date that their next rent payment is due.

 

7. Reward responsible tenants!

Landlords and property managers who impose consequences and send out rent reminders will see their revenue soar.

But that’s not the only measure of success in terms of how to collect rent from tenants.

Just as you penalize irresponsible or forgetful tenants when they fail to pay rent on time, you should reward responsible tenants who always pay their rent in full on the day it’s due, if not earlier.

When you reward your responsible tenants you show them that their integrity matters to you and your business. The reward could be financial, like a gift card to a restaurant or a local shop, or experiential, like a backyard BBQ or a free car wash in the building’s lot.

When tenants feel appreciated for their patronage, they’re more likely to stay longer.

Considering that much of the upfront cost of managing rental units is the time and labor involved in renovating apartments between tenants and showing the property, a happy tenant is literally someone you can take to the bank.

 

Conclusion

So what’s the best way to collect rent? 

Our recommendation is to carefully track rent payments and to send proactive reminders to tenants each month to ensure timely payments. 

It’s also a good idea to impose consequences for anyone who fails to pay rent on time. 

Again, the best offense is a good defense. When you carefully research your tenants and collect all of the necessary documents from them before you have the lease signed, you’re making all the necessary steps to ensure the payment is made on time each month.

Today, we’ve covered how to collect rent money, as well as the wisdom of a no-cash policy, the pros and cons of online payment management systems, and how you should penalize tenants who don’t pay their full rent on time.

If you follow the mentioned simple rules for collecting rent you will hopefully never worry about deadbeat tenants again.


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