When you purchase a rental property, it might not occur to you that you might spend the rest of your life as a landlord chasing down payments. Rent collection is one of your most important tasks because it's how you get paid.
Unfortunately, something that should otherwise be a formality can turn out to be a source of stress. Preparing yourself adequately for the task is essential, and part of that preparation involves being aware of some of the most common rent collection challenges landlords face.
Read on to stay ahead of the game.
Rent Default
A defaulting tenant is a landlord's worst nightmare. They disrupt your cash flow and can even cause you to pay some of your property expenses out-of-pocket.
A tenant can fail to pay their rent due to a couple of reasons. Job loss, poor financial management, and inconsistent income are some of the most common.
When that happens, you should act quickly to start an eviction process under local laws. You can recoup any lost rent from the tenant's security deposit.
Although financial challenges can occur to anyone, you can reduce the risk of dealing with defaulting tenants by doing thorough renter screening. Checking an applicant's credit history and verifying their income source will help you get tenants who are more likely to meet their rent payment obligations.
Late Payments
Late payments might not be as bad a nightmare as missed payments, but they can also disrupt your cash flow. Most tenants will pay late only when there's a problem with their finances since late payments typically attract late fees. However, others simply forget to make payments on time!
You can avoid late payments by implementing effective rent collection solutions. For instance, you can offer multiple rent payment options, so that no tenant has to feel inconvenienced when it's time to pay rent. You can also use a tenant portal to automate the rent collection process.
Having a clear rent payment policy is also key. In the lease agreement, indicate the due date for rent payment, and the consequences for late and missed payments.
Poor Record Keeping
Record keeping is an integral part of rental property bookkeeping, yet so many landlords struggle with it.
Keeping accurate records is important because it not only helps you have a clear picture of your property's financial performance but also comes in handy during tax time. Landlords are entitled to a raft of deductions, but you'll only make successful claims if you have the receipts to back them up.
Digitizing your rent collection solves many of the recordkeeping challenges landlords face. You can also hire a bookkeeper to handle your financial tasks.
Streamline Rent Collection
Rent collection is a challenging task, especially for new landlords, but with a good strategy, you can make it an easy job. Now you know the challenges that await you and how to beat them.
Better yet, you can take a hands-off approach by hiring a full-service property management company to handle all your tasks, including collecting rent.
In Columbia, MD, PMI Real Asset Management is ready to offer you rental collection solutions. We are part of a rapidly growing franchise that has been transforming the property management industry for nearly 20 years.
Call us for more information about our services.
