In the last article that we published, we covered how to find and place a qualify tenants for your rental property. In article we covered six main steps:
- Get Your Property “rent ready”
- Determine Rental Rate.
- Market the Property.
- Select a Qualify Tenant.
- Signing The Lease.
- Hand Over the Key.
You can find our last article here: Tenant Placement
Now that the tenant signed the lease and moved in what is the next step? It is rent collection and lease enforcement.
Rent Collection:
Every person that rents out their home will need to set up a process for collecting rent from their tenants every single month. The more streamlined and efficient this process is the better it will be for both landlord and tenants. Typically collecting rent is done on 1st of every month, so for a landlord who owns one or more properties, you might set a time on the 1st of every month where you head out to your property or multiple properties to collect the rent from your tenants.
Some landlords are extremely busy or have a full-time job and they might want to hire a property management service company to help with the process of collecting rent each month. A property manager is great to have because it will take a lot of work off of you as the landlord and reduce the stress that comes with owning and rental properties.
In this article we will cover a couple of different methods for collecting rent so you have good understanding of each of those process. So that you can make your rent collecting process as easy as possible with the least amount of headache and frustration. It is important to note that whichever rent collection method you do decided to choose, you will need to state it clearly in your lease/rental agreement so that your tenant know exactly what to expect when it comes time to pay their rent for the month. In most situation if you have more than one rental property you might need to offer multiple way for the tenants to pay the rent depending on the situation.
There are multiple factors to take into consideration when choosing your method of collecting rent which we will dive into when we go through each one of those different methods of collecting rent. Here a list of the most common way to collect rent:
- Online Rent Collection
- Rent Drop-Off Location
- Collecting Rent in Person
- Sending The Rent in the Mail
Let us jump right into the first method
Online Rent Collection
This is the most recommended method, collect your rent online will save you a lot of money and time in the long run. The benefit of collecting rent online is you don’t have to spend time driving and meet up with the tenant. This is a great option for people that don’t like in a face-to-face interaction, especially if you have to do it every month for every tenant. It is also help avoid long conversation on none-related topics with the tenant which could take up a lot of your time.
There are multiple ways in which you can set it up. You can provide banking details to your tenant in the lease agreement and have them make a rent deposit into your account every month. In some case a bank will let your tenant set up an automatic bill payment that will automatically draft the specified rent amount, and send it directly to your account on a pre-determined day on a monthly basis. This is the best option if its available and your tenant open to it, it also great for planning your finances and expenses that related to your rental property since you know exactly when you are getting pay.
Beside the direct banking method there are multiple online payment services option that you can use if you don’t want to go directly with a bank. We will not cover the topic of which service is the best in this article and save it for another day. However, if this something you are interested in you can start by simply google “online rent collection software/service” this should pull up a several options that you can go through and evaluate which one will be the best for your use case.
Drop-Off Location
This is good option if you don’t want to collect rent online and don’t want to drive around town collecting rent each month. It is also a great option for your tenant if they are not comfortable online processes. The down side of this method is there a small-time lag between when the tenant drop of the rent and when you pick it up. It has it a hard to keep track of which tenant already pay rent and which one have not. It will take up more time management on your end to make sure the tenant pays the rent on time and who you should you talk to for late rent.
The best option for this method is when you have an office location that the tenant can drop the rent off at. Since you or someone there at the office could record the drop off and process it on the daily basic. It also provides a level of security for you and your payment because the money is delivered, received by a person or locked away in a safe location.
Another option that could be use if you don’t have an office location is to set up a P.O box as a drop off location. If you go with this option, make sure that the P.O box location is set up where there is a security camera present so if anything go wrong you will have that extra layer of security. It will also come in handy if a tenant says that they dropped off the money in your P.O box but it not there when you get it. You can always go back to check the security camera see what happen to the money.
Collecting Rent in Person
This is most often the least preferred method of collecting rent. When collect rent in person you have to spend money on gas, spend time drive over to the rental and, talk to the tenant. Which could possibly put you in to a long conversation or get into situation that you don’t want to be in with the tenant. However, collecting rent in person does come with some positive benefits; one its force you to see your rental property on a monthly basically, even if you only able to see the outside of the property it will help you gage the condition of the property. Which will enable to you address any problem that might stick out during the visit. Another benefit is that it will increase the chance of you actually receive your month each month.
If your tenant having trouble of paying the rent for the month, you will have a face-to-face opportunity to discuss to make sure that they have a valid reason and come up with a solution that you can both agree on. Doing this method will likely increase your chance of collecting rent dramatically because the tenant knows that your will be knocking on their door each month to collect rent, its help increase the sense of obligation and urgency in the tenant. If you decided to use this method, make sure you are consistence in the time of when you visit and the communication when you are there.
Sending The Rent in the Mail
While this is an option, it is not the most efficient and secure way to go about collecting your rent. When the money is sent in the mail it will take a couple of day to get to you and there also a risk of it being lost or stolen during the process. Typical the check will take 3-5 day from when the tenant sends the mail till when you get it, if you set you rent due date to be on the 1st of every month even when your tenant sends it on time it will not get to you by 3rd-5th of the month. In addition to this if you have a late rent fee process this will make it a lot hard to keep track and enforce, since the tenant can fault the mailing process for it being late. One of the things you can do to mitigate that potential issue is to ask for a proof slip that the money was actually send in the mail and the date it sends.
Hire a Professional Property Manager to Collect Your Rent.
If you have a budget to hire a property manager this will be your best option. It will save you time of having to drive around, figure out which is the best method, and set it up to collect rent from your tenant every month. Property manager have the experience in collecting rents and they will make sure you are paid on time and in full each month. Property management companies employed the best screening method to make sure to place the best tenant in your property that will honor the lease agreement and pay your rent on time every month. In addition, most of property management company will keep track of all the rental payment/income which help tremendously with tax filling at the end of each year.
Now that you decide on which method you want to use to collect rent there is another piece of the puzzle that you need to look into if you want to manage your property affectively and protect your asset which is Lease Enforcement. Instead of combine both Rent Collection and Lease Enforce into one article, we have decided to breaking it into two parts since each one of them desert its own spotlight.
If you have any question or concern, feel free to reach out to us here at PMI Heritage. With years of experience and well build method/process in the property management space, we are more than happy and qualified to help you with anything you might need. Our service area cover all of Northwest Arkansas (Bentonville, Rogers, Fayetteville, Bella Vista, Springdale, Centerton and all the surrounding areas)
We hope you find is article information and useful, until next time!
