Dealing With Late Payments Appropriately
By Paul Esajian on May 19, 2014
Being a landlord is difficult. It sounds simple enough, but if it was easy, everyone would do it. In a perfect world, you would have a property manager handle the everyday tasks around your property and not have to worry about rent collection. This can work on properties where there is excess cash flow, but on the ones where every dollar matters you need to handle mostly everything yourself. If you are not collecting rent or your tenants are doing more harm than good to the property, you need to step in and protect yourself and your investment. This may not be in your personality, but if you don’t handle this as soon as it starts, you will end up dealing with it for the next nine months.
As a landlord, rent collection is everything. It is easy to overlook and assume that you will get your money every month, but it is far from a guarantee. If you are late on a mortgage payment, even just a few days, you will immediately start getting phone calls. The reason for this is that over half of the people who are late on a payment will be multiple months late. The sooner you can nip a late payment in the bud and show your tenant that this will not be allowed the more serious any future threats will be. One day will lead to five which will lead to ten and the next thing you know it is the 20th and you are approaching a full 30 days late and staring at the point of eviction.
Before a new tenant moves in, you should take the time and review the lease with them. When reviewing the lease, stress the importance of paying the rent on time and tell them which way you would like to be paid. If you want the check mailed out, you have to tell them to factor in any post office lag time so you get your check as close to the first as possible. This sounds obvious enough, but there are tenants who may be renting for the first time or have dealt with landlords who may have done things different. You should leave no doubt as to how you want your payment, when you want it and what the penalty will be if they are late.
As soon as your payment is not received for a few days, you should call, email or text your tenants. Find out the reason why and see if the payment was sent. You may receive some lip service about the payment just going out, but stress to your tenant that you will enforce the late fee if not received by your due date. If you have hit the fifth day of the month without any contact, you should plan for an eviction and place a notice on the door. This will show that you mean business and will not deal with this every month. At that point, you should be able to discern if they are going to pay or not.
The quicker you act, the more information you will have to judge whether or not this is an honest mistake or a sign of things to come. These are not easy things to deal with for any landlord, but they are a necessary part of the business.