How to Ensure Tenants Pay Rent on Time

As a landlord, reliable tenants that look after your property and consistently pay rent on time are the dream. But unfortunately, they are not always the reality, and many investors find themselves left short by their tenants. This can have significant knock-on effects, particularly if you are reliant on incoming rent to make your mortgage payments.

Signing agreement with rental property tenant

The good news is, there are some easy things you can do to increase the likelihood of prompt rent payments. Here are just a few of the tactics successful property investors use to avoid rental arrears.

Select your tenants carefully

You can set yourself up for a stress-free tenancy from the start by choosing the right applicant. At a minimum, you want someone with a good rental record and positive references from previous property managers. You should also look for someone with a long history of making rent payments in full and on-time.

An ideal tenant will also be in a strong financial position and able to comfortably cover their rent. This means having a stable income that is at least three times the regular rent amount. It also means having enough in savings to cover the rent for a few months if any issues arise.

Experienced buyers advocate, Luke Moroney, believes that most tenancy issues could be avoided by a robust applicant screening process.

“While you do not want the property sitting vacant, this does not mean you should drop your standards to get it leased. In fact, choosing a less than ideal tenant can cost you significantly in the long run – financially and emotionally. As such, it is generally better to take the time to find a tenant you can trust”, Luke says.

Remove barriers to payment

As any small business owner knows, if you want to improve cashflow, you need to make getting paid as easy as possible. This means being clear about exactly how much is owed and when payment is due. It also means agreeing how payments will be made and offering methods that suit the customer (or tenant).

If you have a formal rental agreement (and you should!), the terms of the tenancy will be spelled out there. It is also worth discussing these with the tenant to make sure they understand what they are signing up for. You can also recommend making the whole process even easier by setting up automatic payments.

The payment methods you accept can also have a significant impact on how promptly your tenants pay their rent.

Many landlords push a preferred payment option that is most convenient for them, like using a third-party payment platform. But this may not work for the tenant and many of these methods involve additional transaction and account keeping fees. Understandably, this can discourage tenants from making rent payments.

Instead, you should offer multiple payment methods and let your tenant choose the option that best suits them. Importantly, at least one of these must be fee-free, like making an electronic funds transfer or paying in cash. In addition to being a legal requirement in most states, this will minimise the potential for resistance from your tenants.


Real estate agent on the phoneFollow up any late payments

If your otherwise great tenant is suddenly late with their rent, contact them to find out why. Most often, it will be due to a simple change in circumstances that you may be able to help manage.

For example, they may have changed jobs and are now paid on a different date. In this situation, simply adjusting the date rent is due could help avoid ongoing issues. Though your ability to offer this will depend on your own financial situation.

Or maybe they have had a bad month and unexpected costs have left them a little short. If this is likely to be a once-off, you could agree a repayment plan for the amount in arrears. This could help keep the tenant in place and allow them to pay off the owing amount over several months.

Whatever the situation is, knowing about it will allow you to make your own plans and minimise any negative impacts. And, by maintaining open and honest communication with your tenants, you encourage them to be proactive with any potential issues. This minimises the risk of surprises and should help you feel more in control of your investment.

Use eviction as a last resort

If rent payments are chronically late, you may need to consider ending the tenancy. But be aware that evicting a tenant is not an easy process and will likely delay rent payments even further. As such, it should only be seen as a final option after you have tried to find other suitable solutions.

To reduce the potential pressure to pursue an eviction, make sure you have a sufficient financial buffer. As a general rule, having at least three months of mortgage payments available will help you cover any unexpected delays. It will also mean you can ride out any significant issues and focus on finding the solution that minimises your losses. In the end, if you don’t find a solution, you can start the eviction process. Since the problem is not fixable you need to send what’s known as an incurable eviction notice. In the case of an incurable eviction notice, the tenant has no choice but to vacate the property within a certain number of days.


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