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Tips for Collecting Rent & Getting Paid on Time

Tips for Collecting Rent & Getting Paid on Time

Managing your rental properties or on behalf of others can be a profitable venture if you manage your cash flow well and collect rent on time. In fact, the biggest factor in your cash management will be your ability to collect rent on time.

Sometimes, renters are not the most fiscally responsible people. Whether this is true or not, at one time or another you are bound to have a tenant who pays rent late – or defaults completely.

Here are ten tips for collecting rent on time and handling tenants who have trouble paying rent.

1. Automatic Payments

Requiring tenants to pay rent via auto-pay, post-dated cheques or auto-deduct system is the best way to collect rent on time.  There are even multiple systems that will deposit the money automatically to your bank account.  The major benefit is that this eliminates the factor of human error – i.e. tenants “forgetting” to pay rent.

There are multiple ways you can set up automatic rent payments:

2. Standing Order:

Use a Standing Order to withdraw money from the tenant’s bank account.  To authorize this transaction, the tenants sign a document (Called a Standing Order Request Form) that instructs the bank to send a set amount of money on recurring basis. The best thing about a standing order is that once it is set up, it will run automatically every month until it is stopped.

The downside is that if a tenant doesn’t have enough money in their account to fund the withdraw, the order will bounce, and you won’t get paid.  All Kenyan banks have a Standing Order service. A standing order costs between KSh 100-500 and take 1-2 days to process – so it’s one of the safest solution for collecting rent – but it is the easiest.

3. E-Bill Payments

Some major banks have an “online bill pay” feature where tenants can log in to the banks online portal and transfer cash to your account. Mpesa also allows you to receive payments directly in your bank account.

4. Post-Dated Cheques

Before the invention of online payments, some landlords would collect 12 post-dated checks – one for every month of a year-long lease.  Then, the landlord would simply deposit the check on the first of every month.  It’s pretty simple, but most tenants I know are uneasy about writing 12 post-dated checks – especially to a landlord they just met.  Remember, it’s illegal to cash a check before the date mark.

In some jurisdictions, it is illegal to issue a cheque that bounces and the landlord would be empowered to pursue the outstanding rent legally.

5. Pre- Tenancy Screening

Only rent to qualified tenants with a great rental history. No surprise here, right?  When screening tenants, you will see the entire gambit of credit ratings.  Some prospective tenants will have an excellent history paying bills, but others will have downright terrible payment habits.

  • Create your standards: Start out by being very clear about the criteria prospective tenants must meet to pass the application process.  You should hold the same standards and criteria to all tenants.
  • Income Requirements: At the very least, this should include regular income equivalent to three times the rent amount or more, and an established history of paying rent on time with past landlords.
  • Good Credit: Landlords and property managers should always obtain an up to date CRB (Credit Reference Bureau) Report, which usually doesn’t include rent payments, but does include eviction judgments and past debts. You will also discover how they’ve been paying other creditors.
  • Check References:  I believe that the best predictor of future behavior is past behavior. Therefore, thorough verification of the application information is critical to paving the way for prompt, full rent payments.  Always call the previous landlord and ask “would you rent to them again?“.  Keep in mind that a previous landlord does not have to tell you anything, but it doesn’t hurt to ask! Click here

6. Exercise a “No Cash” Policy

Cash is too easily lost, leaves no paper trail in the event that your tenant disappears, and may sometimes imply that your tenant is involved in illegal business activities.

You can eliminate these risks by establishing a policy in which you do not accept cash as a payment for rent.

Serve a legally sufficient notice of your “no cash” policy and advise your tenants of acceptable ways they can make their monthly payments, such as cash deposit, cheque, money order or direct debit. Remember to communicate this policy in your lease or rental agreement.

7. Enforce Your Rent Collection Policy

To ensure regular, timely rent payment, keeping your collection policies firm and consistent is the industry best practice – but there are few exceptions.

In your lease, you should address all payment related issues including the:

  • exact amount due every month
  • where payments are made
  • acceptable payment methods
  • when rent is due, grace periods
  • the consequences of bounced checks or default.

At one point or another, you may feel sorry for a tenant falling on hard times, or simply be in too much of a hurry to charge a late fee. If you are sure that a good tenant is only experiencing a “just this once” type of issue, feel free to cut them some slack.

However, to keep them from taking advantage of your generosity in the future, be firm about your policy from then on and don’t make a habit of being lenient. Let them know that rent should always come first in regards to paying bills and that their delinquency results in costs that will be passed on to them. Visit here



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