The method used to collect rent can be the difference between making profit from your property or running battles with tenants every month. Luckily, there are many ways to make the rent payment process seamless and effortless for your property.
There is no single method that works for everyone. Each landlord and property have their own unique challenges when it comes to the collection of rent, and the method chosen should suit their specific situation.
The choice of rent collection depends on a number of factors such as size, distance and your relationship with your tenants. David Walusimbi, a property manager, notes that different sizes of properties require different types of rent collection for effectiveness.
For instance if you live close to your property and you have just two or three tenants, collecting rent by visiting them personally is recommended. It even gives the landlord an opportunity to make monthly checkups on the property which allows them to easily assess how well the tenants are maintaining the property. But if you own more than one property in several locations, face to face rent pick-up can be exhaustive and time consuming. In this case Walusimbi suggests using other methods such as:
A direct deposit is where monthly withdrawals are automatically made from tenants’ bank accounts. This method is convenient for both you and your tenants but only works effectively where the tenant earns a regular income that is able to cover their rent.
Likewise, a tenant can pay using a bank cheque or a money order. While both methods have the advantage of availing physical documentation of payments, Walusimbi notes they have disadvantages.
“Some tenants are tricky and will issue checques well knowing they have no money on their accounts which can be rather frustrating. Also getting money orders involves an unnecessarily huge amount of paperwork that tenants dread,” he notes. Walusimbi cautions against accepting personal cheque until a level of trust has been established with a tenant.
Rogers Mwesigwa, a property owner, swears by standing orders. Mwesigwa relates that after trying and failing efficiently to collect rent on his various properties using both cash and cheque, he has found standing orders convenient.
“I had a unique challenge in that most of my tenants are either non Ugandans or the ones paying rent live abroad. So I would have to wait months to meet them in person to get cash or cheques. But now money is just paid to my account. Not only are they fast and easy to setup but being electronic means they provide digital footprint as proof of these transactions,” Mwesigwa relates.
Standing orders, however, have one major inconvenience; in case the rent changes the current standing order will need to be completely cancelled. The tenant will then need to set up a new standing order for the new amount of rent.
Hire a property management company
Managing rentals can rather be time consuming and tedious, especially if you have other demands on your time. Depending on the size of your property it is sometimes easier to hire a property management company.
Property managers offer more services in addition to rent collection such as dealing with tenant issues, taking care of maintenance, and also listing your property so that you do not lose out on income due to low occupancy. While they will charge a fee for these services, considering the benefits, it is worth it.
Because of the convenience offered by mobile transactions, it is only a matter of time that rent payments should follow suit. Some tech savvy landlords allow tenants to process their payments online from anywhere from the convenience of their home computers and mobile devices. This service goes a long way to show your tenants that they are understood and cared for.
Recognising the need for quick, secure, digital transactions that fit seamlessness into your tenants’ device-driven lifestyles shows them that you care and understand them, which goes a long way in retaining them and attracting new ones.
How to get tenants to pay on time
No matter what your preferred method of payment might be, here are some general tips for collecting rent:
Communication is vitally important in all aspects of being a landlord - particularly when it comes to rent payments.
Make sure you are entirely clear about when the rent is due. You should also outline any fees or other consequences for paying the rent late. This will help to avoid tenants paying late simply because they were not sure when their rent was due. You will also help your tenants to budget for their rent: they should know exactly how much to pay and when they need to pay it.
There are some landlords who swear by incentives. This means discounting rent if the tenant pays early or sets up automatic payments. However, it makes more sense economically to charge a late fee if the tenant fails to pay rent consistently.
Always enforce rent policies. Forgiving a late fee or accepting payments more than five days late can make collecting the rent even more difficult the next month. If you make an exception for a tenant once, he is more likely to be late on his rent again.