One of the reasons investors turn to buying real estate is the fact it provides such a great income stream. Here we discuss how to stop late rent payments.
Having the ability to generate a weekly rental income paid monthly has been one of the key drivers to buying an investment property. The better your tenant, the better your investment experience. If we hold the property long enough, we are often rewarded with good capital growth. However on the immediate basis the income is quite important.
The rent can be used to service a loan that was used to acquire the property, it may be a means of generating a retirement income stream or may have other cash flow benefits.
Unfortunately with all investments there is risk. With real estate the risk of selecting a bad tenant can truly be a miserable experience and a costly one at that! However even the best tenant can have a life event that can cause an issue to you or your investment property. The tenant may lose their job, fall sick or perhaps go through a relationship break-up. Other times, it’s simply a case of a bad tenant selection or not being clear about your expectations.
Here are some useful tips to stop late rent payments:
1 – Employ a Property Manager – Don’t try to manage a lease on your own. It can be onerous, time consuming and plain crazy! A Property Manager can do the due diligence on a proposed tenant. They will ask the right questions, obtain evidence and play an important role in meeting your best interest.
2 – Organise a direct debit – Some tenants often ask to pay the rent manually so they have control over paying the rent at any given time. Don’t get to excited to get an application that you accept a tenant on their terms. A good tenant will appreciate a monthly direct debit will help ensure the tenant doesn’t pay late and cause issues for everyone.
3 – Review the tenant’s financial position – Make sure your tenant can afford paying rent. If they are in-between jobs, make sure to obtain feedback from their employers. Ask what has lead to this change. If they are unemployed and low on funds, take this as a potential sign that they may not pay the required rent, which is worst than late rent.
4 – Sign a lease agreement – A lease agreement will set the expectations and standards. It will record the rental amount, rental frequency and due dates. It also stipulates penalties for late rent payments and what happens if they don’t pay their rent.
5 – Maintain consistency with your lease agreement – If your tenant pays the rent late, enforce your potential penalties. If you are entitled to issue a breach, do so, you can always rescind it if you need to. This means you may want to give a tenant notice to vacate on the 15th day that they get behind with the rent. If you become loose with your expectations this may cause more problems for you and more late rent payments. This may end up in a situation where you are not being paid any rent at all.
6 – Lease renewals – When sourcing a good tenant, look to renew your lease. However, if the tenant is constantly behind in rent, don’t reward them with an extended lease term.
7 – Clear instructions – Make sure your instructions are clear and non-negotiable. Have this in writing over a verbal agreement. Have your Property Manager go over the lease agreement before they move in so they understand exactly what your instructions are.
8 – No split bills – Like going to a restaurant… no split bills. Avoid multiple rent payments from shared tenants. Having a single payment process will make both people responsible. Never accept part payments if a tenant or share tenant falls behind. This will create the flexibility to do this more often.
We hope the above tips to stop late rent payment helps. No landlord or tenant wants o be in this position. We wish you the very best of luck with your investment property!
While we have taken care to ensure the information above is true and correct at the time of publication, changes in circumstances and legislation after the displayed date may impact the accuracy of this article. If you want to learn more, please contact us. We welcome the opportunity to assist you.
Apr 2018
