Renting out your property can be a great investment – providing cash flow issues don’t cause endless headaches. Every landlord is at some point going to have to deal with a tenant that fails to pay rent on time. What matters is how you deal with the issue. Having a plan in place to deal with delinquent tenants goes a long way towards solving those headaches. Here are five steps you can take towards problem-free rental ownership.

 

 

1. Choose tenants wisely

 

It’s highly important to screen tenants before choosing new residents for your property. Before doing so, please bear in mind that discrimination laws dictate the correct way to do this. You must have set criteria that you abide by for all tenants – for example if you turn down one for having too low an income, you must turn down every other candidate with that income. Here are some important screening checks to employ:

  1. Check their references. Make sure to call any previous landlords and ask them if they would want to rent to these tenants again.
  2. Credit check: Make sure you obtain an up-to-date consumer credit report. This may not show rent payments, but will show any past evictions. We advise that tenants with past evictions are automatically disqualified.
  3. Criminal record check: Make sure to ask permission to run a full criminal record check in all states the tenant has previously resided in.
  4. Income verification. Your tenant needs to be able to earn at least twice, ideally three times what they would pay you in rent. Don’t be afraid to verify they have this income.

 

2. Make paying rent easy

 

You can cut out the human error aspect of late rent payments by making payments automatic. You can either set up automatic withdrawals from their bank account using ACH debit, or require your tenants to set up their own automatic payments direct to your bank account. The easier you make it to pay rent, the fewer late payments you will have to handle. For example, Peebles property management employs an online rent-payment system, as well as an office and mailing address to receive checks and a secure drop-box where tenants can deposit checks outside of hours. It might be tempting to allow cash payments, however this is to be discouraged as it provides no paper trail and as easily lost. It’s better to have a ‘no cash’ policy clearly advertised in your rental agreement.

 

3. Be prepared to enforce your lease

 

A strong lease agreement is vital. It should lay out exactly how much rent is due, the monthly due date, acceptable payment methods, any grace period, late fees, and consequences for late payments or bounced checks. However, a lease agreement is only as good as your commitment to enforcing it. There may be times when you feel sorry for tenants and want to cut them some slack, however failing to enforce late fees is likely to lead to a pattern of late rent, with tenants no longer taking you seriously. You need to know the terms of your lease and be prepared to enforce them exactly as stated.

 

4. Communicate effectively and often.

 

Communicating regularly with your tenants is a great strategy to avoid payment issues. Make sure to contact your tenants within 24 hours when a payment has not been made. A simple text reminding them to pay can make a big difference. If a tenant needs to pay a few days late, make sure to find out exactly when they will pay, and by what method. When communicating about late fees or serving a three day notice to pay, make sure to keep your communication straightforward, kind, and devoid of emotion. Even if a tenant becomes heated or emotional, you need to remain calm and keep the conversation about the facts – the lease agreement they signed and the consequences of late payment that they agreed to.

 

5. Enforce both positive and negative consequences

 

It’s vital to always enforce your lease agreement, applying late fees where appropriate and beginning the eviction process as needed. Bear in mind a notice that you intend to file for eviction may be enough to prompt tenants to solve the issue. Evictions are rare – for example, Peebles Property Management deals with perhaps three eviction per year while managing over 350 properties. However, make sure not to overlook positive patterns! If a tenant pays on time and obeys all your rules, make sure to thank them with a gift basket or gift card – perhaps after 6 or 12 months of positive behavior. Making sure good tenants feel appreciated will make it more likely that they stay with you.

 

If you have questions about property management or want to find out whether a professional property manager could be right for you, we would love to hear from you! Please contact Trisha at trisha@propertiescal.com or call Peebles Property Management on (530) 370-9188.

www.peeblespropertymanagement.com

Trisha Atehortua

Posted by: sarahbudd on July 30, 2018
Posted in: Tenant Issues