Late rents are a perpetual headache for landlords.
At best, they’re an inconvenience and mean having to chase down tenants like you’re their parent. At worst, they cause your own mortgage payment to be late, and force you to go through the long, tedious, expensive eviction process.
Stop messing around late rents and follow these strategies to ensure on-time rent payments from now on.
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Brian Davis:
Hey, guys! Brian Davis here from Spark Rental, super glad to be with you this Tuesday afternoon. It is just me today. Deni is out of the office for the day, you’re stuck with just me. Last week we talked about how cap rates are down nationwide and whether that means you should look elsewhere other than investing in real estate. And if you do want to invest in real estate, other ways to do beyond just going out and buying a property in the MLS and potentially overpaying and not earning enough rental income to make it a good investment. Today, we’re talking about ways to guarantee on-time rent payments. We’re going to keep it super simple and short and sweet today. We’re just going to go through five ways to guarantee on-time rent payments and use the term guarantee a little loosely. There’s a little hyperbole here among content marketers.
Brian Davis:
Right. But at least one of these is an actual guarantee. We’re gonna jump right in as you guys join us. Let me know where you’re tuning in from. Shoot your questions away. I will be answering them, of course, in real-time, as always. The first way to guarantee on-time rent payments is to buy rent default insurance. Now, this is a new concept for a lot of landlords, and it’s a new concept here in the US. It’s pretty common overseas. The way it works is you buy an insurance policy once a year. You have an annual premium, which is usually a few hundred bucks, in the four hundred dollarish range a year for your typical rental property. And what happens is if your tenants fail to make their rental payments, the insurance kicks in and makes the rent payments to you until you have managed to evict them and replace them with a paying tenant. You can buy this policy and then sleep well at night knowing that you’re going to get your rent come hell or high water. And nothing is going to get in the way of you making your mortgage payments and covering your other expenses as a landlord. We highly recommend that you check out rent default insurance. It takes an enormous amount of the risk out of being a landlord and having rental properties. We’ll send you the link in the comments here to study, which is a company that we like for rent default insurance. You can check them out.
Brian Davis:
Number two is accepting rent payments by credit card because sometimes your tenants do want to pay their rent on time, but they don’t have enough cash sitting in their checking account. You can service them and let them make the rent payment on time by making the rent payment by credit card instead of having to write you a check or show up at your doorstep with cash. And we do offer this service on our online landlord software. It’s free for you as a landlord. If the tenant pays by ACH, which is a bank transfer, then it’s free for them as well. If they pay by credit card, there is a small surcharge on it for them, but it’s still smaller than paying the late fee to you. They still come out ahead and most credit cards offer rewards. Even though they’re paying a small surcharge on top of their rent to pay by credit card, you know, me of that they get back in the form of credit card rewards. It makes for a super-easy way for them to pay their rent, even if they don’t have quite enough money in their checking account at that point in the month to make their rent payment to you.
Brian Davis:
The third way that you can guarantee on-time rent payments is by reporting the rent payments to the credit bureaus. You can do this usually through third-party payment platforms like Spark Rental. This is something that we are about to start offering for all of our landlords and tenants across the board. There will not be any extra fee for it. It’s just going to be free and included for all landlords and tenants on the rent payments process through our platform. But we’re not the only service out there that does this right. I mean, there are a couple of others out there that all report the rent payments to the credit bureaus. And this works as both a carrot and a stick. Tenants get rewarded for making their rent payments on time in the form of better credit. And they get penalized beyond just the late fee for making late rent payments because it hurts their credit. It’s a great simultaneous carrot and stick to ensure you get on-time rent payments from your tenants. All right.
Brian Davis:
Number four is enforcement. You have to defend the boundaries of your lease agreement because it’s human nature to push boundaries and your tenants are going to try paying the rent know the day before it’s late and then they’ll pay it the day that it becomes late. And they’ll just see how you react because they’ve got a ton of bills to pay. Right. The rent is not their only bill. They’re all going to they’re going to see what they can get away with if they’re feeling pinched that month. It is your job as a landlord to defend those boundaries. If the rent comes late, you serve the eviction notice immediately on them and an eviction notice does not mean you will be evicted. It means if you don’t pay your rent, you will be evicted. Way too many landlords, they pussyfoot around this and they’re like, go, I don’t know. I just want to give them a few more days. Guess what? The eviction process takes many months in most jurisdictions and tenants can bring the rent current up until the actual Lockout date. Serving an eviction warning notice is not heartless. It is not kicking families out on the streets. It is just the first step in a very long legal process that you have to go through. And again, it is simply a warning letter telling the tenant that if they do not pay their rent, then you will initiate the eviction process, which again, a very long legal process. Draw those boundaries and defend them as on as the rent becomes late, serve an eviction warning notice. Now, these are state-specific. There are different letters for every single state in the US. This is something we do all offer for free on our landlord’s software.
Brian Davis:
There are al not only other different letters for each state but there are different letters for different lease violations. They do get tricky. But we do have a database of these for free on our software. Theresa says I need the service desperately. Does the tenant have to initiate the service or can the landlord? And Theresa, I’m guessing you’re asking about online rent collection and it’s intended to be initiated by the landlord. However, tenants can invite their landlord to participate as well. If you go to SparkRental.com, you can create a free account and start collecting online rent payments by bank transfer or by credit, or both. Rather, you accept both types of payments and the tenant chooses what style of payment or type of payment they want to make when they submit their rent payment. All right.
Brian Davis:
Finally, the last way that you can guarantee on-time rent payments. This is an oldie but goodie and it is simple prevention through aggressive tenant screening. The old proverb is true. An ounce of prevention is worth a pound of cure. You can find you will be able to identify which tenants are going to pay their rent on time based on what they’ve done in the past. Investment brokers always say past performance does not indicate future results. But the fact is, when it comes to tenant screening, it does because in my experience, there are two types of people in this world, and those are people who pay every single bill on time. They are driven to do it. They philosophically feel the need to pay their bills on time. They’re organized, they’re conscientious. It is part of their DNA. And then me people never saw a bill they wanted to pay on time in their life. They hem and haw and say, well, yeah, I guess they got to pay this bill. You want the former, right? You want the kind of pern who pays every single bill on time, every month, no exception come rain or shine tenant screening. And yes, that does include things like credit reports and criminal background checks, and eviction history reports. And these are all things that that we offer, of course, through our software. But it goes beyond that. It involves calling up former and current landlords and asking about does the tenant pay their rent on time? How do they treat the rental property? Have you had any trouble with them? Have they ever sued you? It involves calling up the tenant’s supervisor and their employer and verifying their income. And do they show up to work on time every day? Are they conscientious on the job? All of these things are part of tenant screening. It’s not just the reports. Although, you know, as someone who sells these reports, I don’t want to devalue them.
Brian Davis:
But tenant screening is more than just running the reports. It is all of the other due diligence involved.
Brian Davis:
Ideally, you want to go and see how they treat their current home. Find the excuse to go visit them at their current home and see how they treat it because being a good tenant does not just come down to paying the rent on time and it all depends on how they treat the property.
Brian Davis:
To wrap this up, five ways to guarantee on-time rent payments. First, by rent default insurance. We like Steady, in fact, through the only one operating in the US that we’re aware of. There’s a link to them in the comments. Number two is to accept credit cards for rent payments. And this is great for tenants who are a little pinched in a month and don’t quite have enough in their bank account to make the payment on time. But they still want to pay the rent on time. Number three, report the rents to the credit bureaus. It’s both a carrot and stick for incentivizing your tenants to pay the rent on time. Number four, serve eviction warning notices immediately when the rent becomes late. Do not let that slide because tenants will push your boundaries. And number five, screen your tenants aggressively before ever signing a lease agreement with them. All right.
Brian Davis:
That’s it, you guys. again, Deni will be back next week. You’re stuck with just me today. Let us know what you want us to go over next week. We’d love to hear from you and we will catch you on the flip side.
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