You invest in rental property because it’s a smart way to generate monthly income and grow your wealth. But the only way that happens is if your tenants pay their rent on time. Unfortunately, there’s no way to guarantee that you will always receive on time rental payments. However, you can take several steps to reduce the risk of late rental payments.
Try these six tips for avoiding late rental payments with your properties.
1. Screen Tenants Carefully
One of the best ways to avoid late rental payments is to have quality tenants who pay their rent. You can reduce the risk of placing non-paying tenants by carefully screening applicants. Require a background and credit check for each applicant. The background check gives you the ability to find out the applicant’s rental history and whether or not they have a history of paying their rent. The credit check lets you check their overall financial health and ability to pay their rent and other debts.
2. Offer Online Payments
Your tenants are more likely to pay their rent when you make it easy for them. Online payments are the easiest for the majority of people. They can then use their checking, savings, or credit card. This gives them plenty of options.
3. Include Late Fees in the Lease
Including consequences for late payments encourages some people to pay their rent on time. Many landlords include a grace period of a few days. This gives the tenant some leeway in paying their rent on time. Then impose a late fee when the tenant is late with their rent.
North Carolina law limits how much you can charge for your late fee. You cannot impose a late fee until the rent is five days late. Your fee cannot be higher than $15 or 5% of the rent owed, whichever is greater. You can only impose the late fee one time per each rental payment. You also can’t deduct the late fee from future rental payments, rendering the next payment incomplete and ensuring a late fee.
4. Communicate With Your Tenants
You can also send out reminders of their upcoming rent due date. This could be through paper mail with a letter, with an email, or text message. Try to keep the reminders in text form so that you have a record of it. The best option is an automated email reminder that includes a link to your online payment portal.
5. Work With a Property Manager
If you have a tenant that hasn’t paid their rent, you need to act quickly. The faster you act, the more likely you are to receive your payment. Waiting and not acting could result in multiple payments being late. The larger the owed money gets, the more the tenant will struggle to pay the debt.
Working with a property manager can help you act quickly. The property manager will monitor your tenant’s rental payments and act quickly when a tenant is late. They can also move forward with the eviction process.
6. Report Payments to the Credit Bureaus
Tenants are more likely to pay their rent on time when they know late payments could negatively affect their credit score. Include in your lease that you will report late payments to the credit bureaus. Tenants that won’t agree to this may be more likely to not pay their rent on time. You will avoid having them as a tenant. Quality tenants that care about their credit score will agree and be sure to pay their rent on time.
Contact our office today and let our team of experienced property managers help you manage your rental properties.
