As a landlord, one of your biggest ongoing concerns is making sure that your tenants pay the rent on time. After all, you still have to pay the mortgage, whether the tenant pays their rent or not. Check out these tips for making sure that you get paid on time.
#1 – Ask Tenants to Use an Auto-Pay System
The best way to make sure that your tenants pay their rent on time is to require them to use an automatic payment system. This helps to avoid human error; tenants can’t forget to make the payment if it is set up to happen automatically.
There are several ways to accomplish this. You can use an ACH (automated clearing house), which withdraws the money from the tenant’s bank account and deposits it into your bank account. The tenant will have to sign a document at the time that the lease is signed that gives you permission to withdraw the rent every month. There is a small fee to you for this transaction – usually between $.50 and $3.00 per transaction. It typically takes 4-7 days for the transaction to be processed. This system isn’t foolproof; if there aren’t enough funds in the tenant’s account to cover the rent, then the payment will bounce.
Another option is for the tenant to set up a recurring payment for the rent through their bank’s online bill pay program. The bank would then mail you a check every month. You would still have to wait for the check to arrive in the mail and deposit the check at your own bank.
Before these systems were available, the practice was for landlords to ask the tenants to write post-dated checks for the rent for every month of the lease. The landlord would hold those checks, and deposit one on the first of each months. These days, most people would not be willing to hand over 12 post-dated checks. An ACH or recurring online payment is a better option.
#2 – Screen Tenants Carefully
One way to make sure that you get paid on time is to make sure that you select tenants who can afford to pay the rent. Establish strict income requirements. All tenants should have a minimum income of three times the cost of the rent. They should also have a good rental history of having paid their rent on time. Be sure to call past landlords for a reference, and ask those landlords whether they would rent to this tenant again.
Landlords should always run a credit check on potential tenants. A credit report usually will not show rent payments; however, it will show outstanding debts and eviction judgments. At the very least, the credit report is a reflection of whether the tenant has been paying other creditors on time.
In order to avoid any issues of discrimination, be sure to apply the same criteria to all tenants. For example, if you deny a tenant because they have a history of bankruptcy, you must deny all applicants who have filed bankruptcy.
#3 – Don’t Accept Cash Payments
Never accept rent payments in cash. Cash can get lost and it does not provide you with any sort of proof or paper trail in the event of a problem. Be sure to state this policy clearly in the lease agreement.
If you want to make sure that your rent gets paid on time, get in touch with McMath Realty. We provide property management services in Phoenix, Scottsdale, Mesa & surrounding area, and that includes collecting rent from your tenants and handling eviction proceedings, if necessary.
Contact McMath Realty to learn more today.