How to Avoid Late Rent Payments
Kickstarting your financial future by investing in a rental property can be one of the most gratifying decisions you can make. If you’ve invested wisely and set up a sound investment from the outset, rental payments can cover a large portion, if not all, of your repayments meaning you receive all the advantages of capital growth with minimal ongoing outlay.
Key to any sound investment strategy however, is ensuring you’ve leased your property to reliable tenants who pay regularly and on time. One of a landlord's biggest headaches is when a tenant is constantly late in making their payments throwing the whole structure out, affecting your own financial security. At Stockdale & Leggo, we take great pride in keeping our rental arrears significantly lower than the industry average. We do this through a thorough and robust tenant screening strategy for all our landlords properties, clearly outlining the rental payment process from the outset and holding them accountable when they don’t meet these expectations.
We’ve spoken to our team of Property Managers and collated the following tips for our landlords to ensure tenants pay their rent on time.
- When choosing the tenant in the initial stages, make sure they can afford to pay the rent. The 33% rule is a good one to follow. If the rent is more than 33% of the total household income, the tenant is less likely to be able to manage it long term.
- Outline the expectations from the outset. Put in writing the terms of the rental including the rent amount, what date it is due, how often and how they should be paying it. Also include penalties for late payment and the consequences for failing to pay their rent by the due date or not at all. Go through the document with them and request they sign it to indicate they fully understand and accept the terms.
- Provide your tenants with a rent due date calendar upon their acceptable of the terms. Follow up with reminders of when their rent is due via text message or email before the due date.
- Recommend they set up a direct debit each month to minimise the risk of them forgetting. Avoid accepting rental payments via cash or cheque.
- Ensure that any rules you’ve set around late payments are enforced from the outset. If terms give you permission to issue a breach, do so as you can always rescind. It’s important tenants understand that there will be consequences if they fail to pay the rent on time and in our experience, once the first breach is issued, tenants attempt to avoid future ones at all costs.
Most importantly, don’t renew the lease for tenants who have fallen regularly behind with their rental payments. Don’t let emotions get in the way of making a sound business decision because ultimately your investment properties are a business and it’s up to you to run it profitably.
If you are having ongoing issues with your tenants, reach out to us at Stockdale & Leggo, as one of experienced Property Managers will be able to assist.