Why Do You Say That I Need Automated Rent Collection

How would you know anyway? I am perfectly happy to collect my rents every month the way I always have from my tenants. My % of rent collection delinquency? Its none of your business. No I am not afraid to tell you. I just don’t want to.

This scenerio is too often the case. People do things the way they always have and cannot imagine that anyone else could know what might be a better way. Investors have rentals to make money. They are not in the business of providing free places for people to live.

So a long long time ago,the way we used to have to collect rent was to go to the property at a specified time. At my properties, tenants would put their checks in envelopes on their doors. But there were always about 25% of them who would not be there. So I would have to call them and go back to the property and try to collect again. On the 5th day late I would post a late notice, and a three day pay or vacate. I would usually get a phone call that the rent was there all along, it was just under the mat.. or some other lame excuse. Then we would fight over the late fees. Oh, and I am sure that if you are an investment property owner you have heard all of the excuses in the world. Like “I can’t pay my rent because my employer hasn’t paid me yet.” And then I find out that he hasn’t shown up for work for two weeks. I could go on with this thread, but I think you get the picture.

Now I am going to sing my usual song about the importance of tenant screening. Did you know that Experian is offering a way for all property managers and owners to report their tenants’ rent payments every month? It is a way to get good credit for paying rent ontime. Tenant screening will soon be able to show histories of tenants rent payments, like they show histories of your mortgage payments. So be good to yourself and screen every tenant over the age of 18 who will occupy the unit. Once that is done and you have your new tenant, it is time to consider automated rent collection.

Just think about this. For as little as $3 per month your tenant’s rent is collected on time, and deposited into your account and the accounting is done for you. You could never accomplish those tasks for that amount of money. The other consideration is that it is so convenient for the tenant to log into his account and make a rent payment. In our system, if a tenant does not have a computer, they can call in their rent payment by phone. No more checks to handle, no more deposit slips to fill out, no more trips to the bank and having to wait in line to make a deposit. Automated rent collection can literally save you days of time per month. How much is that worth to you.

But here is the really good news. When a property owner or manager uses automated rent collection the % of on time rent collection goes up to 99.5%. Statements are mailed or emailed to the tenant every month, so if you have variable charges to add, like utilities, they are added to the bill and the tenant can make a payment which collects that data and provides a receipt of all payments made. And if the tenant does not make the payment by the due date, a late notice is automatically sent to him. All of these records are in your history. So if you have to do an eviction, you have your data all in one place to support your efforts to get your rent payments.

Of course you have to have state compliant leases and they need to be enforceable. But that is a topic for another day. I do hope that each of you who reads this piece will see the amazing benefits that automated rent collection has for your future as a property owner or manager. We are always available to answer questions if you ever want to call. Check out our web site at https://smartpropertysystems.com.

So Why Do I have to Do Inspections

Well as a matter of fact, you don’t.  But we do not recommend that approach. This is a multifaceted topic for discussion and it will require us to discuss a full approach to property management.  If you have looked around our blog or our web site you have heard repeatedly that the most important job a property manager/owner does is tenant screening.  That screening should include a credit report and a criminal history along with identity verification as the very least.Furthermore, we recommend that you screen every person over 18 who will occupy your property. This should not be a cost to you.  You should charge an application fee which will at least cover the cost of the screening report.  Now that being said, you will certainly get a better quality tenant when you use the screening.  In fact what we see many times is that when you state that tenant screening is required of every applicant, those who know that you will find something  that will reflect badly, do not even apply.

Now that you have screened your tenant and they are signing the lease, be sure to tell them that you do regular inspections.  On our site it is part of the lease and the schedule is made at the time you create your lease.  But now it is time for me to tell you a story.

When I first bought my investment properties I had to do everything myself because software like we have available at SPS was not to be found then.  I actually lived in a different state from where my properties were located.  I had nice units which had tile bathrooms, granite counter tops, high grade vinyl in the kitchen and medium grade carpets in all other areas.  One of the tenants I had in a three bedroom 2 bath unit asked permission to have his adult daughters move in with him.  He had always paid his rent and every time I had been there the place looked well kept.  So I agreed.  My first mistake was not to do screening on these adult daughters.  That winter was particularly hard and I contracted with a local person to collect the rents for me.  When I returned the next Spring, I noticed that the yard of that unit where the daughters had moved into was very unkept.  The grass had not been mowed and there were tire marks all over the from lawn area.  So I filled out a notice to comply and posted it on the door.  They had 3 days to remedy the problem.  I came back three days later and nothing had been done.  I knocked on the door and there was no answer.  I posted a three day notice because their rent was now late. I also posted a notice to do an inspection in 24 hours.  I returned the next day.  No one was home.  Just then our friendly local gendarmes drove by.  I stopped him and he said that he had started doing daily drive by’s for MY property because of all of the neighborhood complaints. (I didn’t have time to ask him why I had not been notified). I immediately asked him if he would accompany me into the unit.  I had to show him my notices and he agreed.  We used my master key to enter and what I found was appalling.  I had never seen such filth and destruction. He told me to stay at the door and he actually pulled his gun to inspect the unit.  Then he called the hazardous materials team.  They found dead kittens in the kitchen cupboard.

Every inch of the place was ripped to pieces.  The garage was filled with torn out insulation.  We found unspeakable things throughout the house and in the back yard.  The upshot was the the girls had abandoned the place and others had come in and trashed everything.  I called the father and he pleaded innocencebecause he had moved out as soon as they moved in.  My cost to repair the unit was over $10,000 and we lost three weeks rebuilding the unit to make it habitable.  I filed a lawsuit against the father and he declared bankruptcy.  Because I had not had the daughters sign a lease agreement I had no recourse against them.  What a mess and what an expensive lesson.

But you can learn from my mistakes.  If I had done an inspection, this problem would have been discovered within a month.  The damage would not have been nearly as costly.  I could have demanded improvement or evicted them for failure to comply then.

So how frequently should you inspect your properties. The answer is “Well that depends”.  If your property is located contiguously with other properties which you own, your other tenants will always report problem behavior or suspicious goings on.  And as your tenant mix improves because you use tenant screening, you will come to rely on all tenants to assist in keeping the neighborhood safe and nice looking.  If you own properties which are not contiguous, then you will want to schedule monthly inspections for awhile.  As you see that a tenant is caring for your property as required and continues to live in the unit and pay rent, you can gradually space those inspections farther apart.  If you find a problem at any inspection you should notice the tenant immediately to remedy the problem.  Failure to do so at inspection, will not look good to a judge if you ever end up in court over damages.

In the SPS software we schedule the inspections at the time the lease is created and notices of inspections being due are sent to both the tenant and the manager 4 days before it is scheduled.  I love that about our system.  Remember to take your camera.  Dated and time stamped pictures can be taken and uploaded into the SPS platform for a complete record. Or you can keep a physical file on each tenant and the pictures should be kept for reference in that file.

So that is our take on why every property owner should do inspections.  Do you have stories to share about your experiences? Post them in the comment section.  Others can learn from your experience.

My new motto after that horrifying experience was ” Be proactive, not reactive in all aspects of property management.”

I have a very disturbing video for you to see.  These people were devastated by what they found at their precious and valuable rental property.  Watch at your own risk….it is really bad.

http://www.youtube.com/watch?v=MUseCJ7PhLQ&NR=1