Rent collection is an important part of a property manager’s or landlord’s job. And with no rent defaults in our 25 years of property management, it’s a task that Bridgman Property Management has mastered.
Here’s how we do it…
1. Have just one rent day
Is your property manager coming back to the office every day to check that rents have been received in their trust account?
Or do they have one nominated rent day, when all tenants have to make their payment?
You’d think that it would be common sense to have just rent day, right?
Wrong. The majority of the property management industry has rent payments spread across seven days.
This means that property managers have to return to their office every day to check rent payments have been made! How much time is being taken away from your portfolio with this inefficient practice?
Bridgman Property Management has one dedicated rent day: Friday.
The following two days are nominated collection days for the situation where any rents are missed. This is a successful system, as we haven’t had any rent defaults in 25 years.
2. Manual rent collection for late payments
If a tenant is regularly defaulting on rent, then you need to introduce manual rent collections.
Manual rent collection means that you arrange to visit the tenant in person to receive the rent, which must be a cash payment. Saturday morning is a very good time for this!
For the manual rent collection system to work, you simply set aside a day and time each week to make any visits. However, tenants hate manual rent collections and will usually get their act together so they don’t have to see you every Saturday.
You need to explain to tenants that the Manual Rent Collection is being put in place to ensure that rent is paid on time, and once this is working well you may be able to look at bank Automatic Payments again.
Manual rent collection is a very powerful technique. It’s also a very good test to see if the tenant is willing to turn the tenancy around and demonstrate to you that they were the best applicant on merit. The process may reveal that the tenant is not of such good character, and another positive outcome could be that the tenant chooses to move on. You also have the option at this stage of issuing a ninety days notice to vacate (for a periodic tenancy).
3. Late rent payments are a wake-up call!
“What else can we possibly do?”
This is a statement often made by property owners and managers when they’re defending the fact that their tenant is still behind in rent.
The common theme here is that they have phoned the tenant, sent a letter and issued a 14-day notice, so they feel that they’ve exhausted all their options. (Even though they haven’t implemented manual rent collection.) Instead, they will wait for a tenancy tribunal hearing being required, where the tenant may be given 5 years to pay off a debt.
Resorting to a tenancy tribunal is not in the property owner’s best interests: the landlord taking immediate action could achieve a far better outcome.
A reactionary approach to late rental payments is a bit like a resident discovering a fry pan burning on the stove and just phoning 111 to get the fire brigade out, but they make no attempt themselves to extinguish a small flame. Yet they’d stand far better chance of putting the fire out with the fire extinguisher… because by the time the fire brigade arrives, the whole house could be ablaze.
The lesson here is that if you are aware of a tenant problem while it is small and manageable, you have the best chance of resolving that problem there and then.
A phone call to the tenant and written correspondence in isolation is unlikely to stop a problem from becoming much larger.
Just like the house fire analogy, human intervention is required early on so the small rent default doesn’t progress to something far more serious! You have to roll up your sleeves in these situations and move quickly.
Landlords and property managers who don’t visit a property immediately when there is a problem are effectively throwing in the towel and waiting for someone else to solve their problem.
If you are waiting on others to resolve your problem, then you are going to have to accept the results that they deliver.
Will your client be happy with this? Or would they prefer it if you were to prevent rent defaults from occurring in the first place?
- Have just one rent day for all your rent collections: Friday.
- Keep Saturday aside for manual rent collections. This immediately deals with any late payments.
- Treat late rent payments as a wake-up call.
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