Do Your Tenants Need to Know How to Budget?

I listened to a web cast today on how to fill vacancies with residents who will pay rent.  I was surprised to hear that the incidence of failure to pay rent is going up.  The fact, according to this presenter, is that rents are rising and incomes are staying the same.  That means that more of a family’s budget has to be put toward the rent. There are several safeguards that can be used by the property manager when renting to someone with little or poor credit history. But the one least used, that comes to mind for me, is giving the tenant a bit of good old fashioned education about how to budget.

Young people, especially students, are sometimes on their own for the first time. Budgeting may be taught in business classes but I have not heard of it being taught in school as a general rule.  Another category of high risk families is single mothers with no child support.  However, poor rent payers are not just limited to these groups.  They come from all income levels and backgrounds.  But everyone needs a place to live.  Everyone needs shelter and to be able to feel safe and secure in their home. Furthermore, it is against the law to discriminate when considering an applicant unless that applicant obviously does not earn enough money to pay the rent.  So there are going to be times when you will rent to a high risk tenant.  Of course you always use tenant screening, and check pay stubs, and speak with employers, and past landlords before deciding to rent.  Those are tried and trusted ways to get good tenants.  But we have all had to get after our tenants at one time or the other for failure to pay on time.

budgetingThe next suggestion I have is that these high risk  tenants should get the budget your money talk.  “The rent” is the most important payment a resident makes each month.  Oh they may argue that they need a car more than a place to live, but with that mentality, they could end up living in their car.  Ideally rent makes up 25% of the monthly budget.  But recently it has creeped up to an average of 33% of the monthly budget.  That leaves car payments, insurance, utilities, food and clothing and finally entertainment to be budgeted (planned). Hopefully they are not into using credit cards when they run out of their own money or the situation could escalate from good to bad very fast.  If at risk tenants turn this sequence around, you will see many failures to pay rent. Unfortunately we see the reverse sequence all too frequently. (i.e. entertainment, clothing, food, utilities, car payments,insurance, rent)  At least if you have the talk, you will put them on alert.  Hopefully they will realize that budgets are a great way to keep everyone happy and give them the feeling of control over their lives.

I have been in property management for many years managing my own investment properties, before I bought a software company that provides software for property management. In both capacities I have heard all kinds of excuses and reasons for late rent payments.  You all have heard them.
“I mailed the check. Didn’t you get it? It must be lost in the mail”.
“I gave the rent to my husband. Didn’t he give it to you ?”
One of the best was “I had to take my kids on vacation and don’t have enough left
to pay rent.
“I dropped an envelope with cash in the door slot of the office.  It is not my fault if someone stole it.”
And another doozie “I already paid the rent last month.”

Then there is the issue of paying on time.  When you don’t get paid on time, your own budget and finances suffer.  It costs the property manager money every time a rent is late.  Of course we have found that through use of online automated rent payments, the excuses go away.  There is no more excuse for late rent because it takes the guess work out of where the rent is and all of the arguments listed above, except the vacation situation, are no longer valid.  But that is a topic for another blog.

I think it is a great idea for the property manager to talk with any young tenant, first time tenant or person with poor credit about “the importance of paying rent on time, every time it is due” before handing over the keys.  Sometimes they need to hear that rent should be the first bill they pay before they spend money on anything else.

The other question to ask your new tenant is on what day they get paid.  A solution to late rent payments may be as simple as setting the date rent is due to a couple of days after the person gets paid, or at least make the grace period long enough to accommodate that tenant. In some cases, it may be a good idea to add language to a lease document stating that the conversation about how to budget for the rent payment was done.  It may also be a good idea to offer a booklet about budgeting with a sample budget to demonstrate how easy it actually is.  I realize that this kind of approach will not solve all of the problems with poor rent payers but it may bring your percentage of on time rent payments up a few percentage points.

Timmi Ryerson
Smart Property Systems
help@smartpropertysystems.com

Are You Afraid of Change???

Have you ever thought about how change affects your life? How many of us embrace the idea of change? How many dread it?  I am  not talking about change that comes when you get dressed.  I am not even talking about a change of scenery.  Those kinds of change can be easy to take, unless the view is from behind bars and walls.  Changing a diet can be very hard.  Changing where you live can be stress inducing.  Changing a job may be difficult for some. Changing the way you do your job may be even harder to accept.

Matathesiophobia= The fear of change.change fear                                                                                   Have you ever started something brand new and realized that you don’t have a clue about what you are doing?  Have you ever gotten physically dizzy or distracted from the task because you are having a hard time?  It can be like that for new owners or managers of investment properties. Even seasoned managers can get into overwhelm at times when the work load piles up. Many are literally overwhelmed by the prospect of having to advertise for tenants, do tenant screening and write leases.  But before we fall over the cliff in overwhelm, there is a better way. Using a quality software which is designed to be easy to use,  where the work flows don’t let anyone make a mistake, is the real answer.  Now that kind of change does not seem so hard.  The subscriber/new landlord or manager can have a path to follow with success at the end of the road.  When using the Smart Property Systems software, the steps for each task are lined out and the tools are right there on the dashboard for the investor/manager to use.

You have never used software before?  Is that a hard change to overcome?  Not really. Change can be easy to deal with, when there is a change of mind and good attitude.  Relaxing into the new software environment can actually be exciting as the user discovers that everything is automated and all work is saved by the software.  Just think. This change results in having all documents and tools at your fingertips. Simple organization at last!

Smart Property Systems offers property management software and it is designed to make the business of property management much easier for anyone doing that job.  But hardly a day goes by that someone in the customer service department hears a complaint from a subscriber or maybe a free trial users saying that it is hard for them to change. After talking about it for a few minutes they realize that their real reason is fear of change. Once that fear is overcome, the whole prospect of having answers to all questions and problems that come up in property management which are at their fingertips, makes the new world of software becomes glittery and golden.

Smart Property systems has been doing business in the Property Management Software sector since 2004 and served over 20,000 subscribers.  This company knows property management and understands the problems that repetitive tasks cause for the staff. Repetition can cause boredom and bored people make mistakes.k8479153 The motivation and dream of the staff at Smart Property Systems is to provide automation for those repetitive tasks and make the business of renting well managed properties to deserving tenants easier and more profitable. Software does not make mistakes. That is change we can believe in.

But what about the change that comes in having to pay for software? There again, just how valuable is your time?  When you get your properties and tenants into your subscription account and automate the rent collection, can you imagine how much time you will save every month?  Why that could be a full time assistant salary saved. If you have no assistant, using SPS software will cut your time by two thirds. Remember, now all communications  with tenants and vendors go through the message centers in each account portal, instead of having phone calls all hours of the day and night.  Now notices are sent though the software via email and stored in all appropriate accounts. Some, like statements and late fee notices are automated, so there is really nothing you have to do. Rent week comes and goes and all statements are sent out, rents collected and accounting for those payments done by the software for you!  You can look at the rent roll and see who has and has not paid.  So now, what will you do with all that extra time on your hands?  Maybe play some golf or tennis or go fishing? How about spending more time with the family?

Yes Change can bring stress but fear of change is really the main issue.  Once that fear is overcome, then the change from manual management of properties to software driven management is a no brainer.  Check us out at Smart Property System <https://smartpropertysystems.com>

Author: Timmi Ryerson
CEO
Smart Property Systems

A Discussion About Rent Collection

rent due

Managing a property is task rich, many of which are repetitive. The more properties you manage, the more repetitive the tasks. Rent collection has historically posed the biggest point of pain for most owner/managers. Statistics show that over 80% of people who collect rents are still collecting rent in person, by drop box on the door, or by mail. Rent payments are received in many forms; checks, cashiers checks, money orders, and sometimes even cash. Often these payments are collected without unit or account numbers attached. So the rent collector has to look for the account, post the payment, sign or stamp the back of the document if it is a check, prepare a deposit slip and a receipt which is given to or sent to the tenant. And then there is the required trip to the bank to make the deposit.

Many landlords and property managers do not send their tenants monthly invoices. This actually can lead to a decrease in timely payments while making you look less professional. Tenants, like most other people, sometimes forget about bills without regular reminders, even if it is as important as rent.

The real problem with collecting rents by hand is that landlords and property managers are left at the mercy of their tenants. Renters who do not regularly pay rent on time have a vast array of excuses to offer as a mercy play to the landlord or manager. Some of the common ones are:

“I mailed it last week. Its not my fault if it got lost in the mail.”
Or, “Did you pick up your mail yet; it should be there.”
Another common one is “I gave it to my husband. Didn’t he deliver it?”
Or “I dropped it in the box already. Its not my fault if you lost it.”

One tenant responded when asked for a late rent payment, “I paid rent last month, why are you asking me again?”
Most times in my experience, if the rent was not left on the door on rent collection day, no one ever answered that door so there was no way to have a direct confrontation. I had to call and return again, this time with a 3 day pay or vacate notice in hand.
I am sure you have some real doozies of stories to relate yourself, if you are a property manager. Leave some of your better ones in the comment section below. We are sort of aficionado-collectors of good rent collection excuses.

These are just some of the reasons that automated rent collection is the future for property management. Here is one you may not have thought of.  Recently one of my tenants became very ill and was hospitalized.  She was single and had her own accounts to which no one else had access. She went from being comatose to a rehab facility, over a three month period of time. She was able to have nursing staff pay her rent for her by logging onto her account and making the payment. Happily she has returned to good health and was able to go back to her rental.  When you agree to automate your rent collection, you will leave behind all of the excuses, the travel, the uncertainty, the hand work and you put the automated system in between you and your tenants.

To use automated rent collection on Smart Property Systems, you will first need a merchant account. There is an application to fill out and some supporting documents to provide. It takes about 3 days for approval after all documents have been provided.

Once you are approved and your software is turned on for rent collection (that takes about 5 seconds) your tenants can choose to pay via ACH, from their checking account, Credit Card or by phone. It takes them only a minute for a tenant to make a payment and there is always a receipt or confirmation number provided in the automated sequence. (One more job you no longer have to do).

When you use automated rent collection you will not get any more excuses about where the rent is. It is either paid or not. There is no argument. Late fees are automatically attached to the tenant’s bill on the day rent is late and a late notice is sent for you. If the rent is three days late, a three day pay or vacate notice can be sent using custom notices section of the built in library. It has been the experience for subscribers who use automated payments that they are collecting their rents regularly with 97% on time payments. In some cases it takes a few months for the tenants to learn that if they do not pay on time or miss a payment that they have nowhere to turn with their arguments. The software does not lie. Once that is learned, your rents will flow in on time with no issues and you will be free to look for more business or go play golf. I used to tell my tenants that the most important payment they make every month is the rent payment. That truth is reinforced in spades with automated rent collection.

Remember that your tenants can pay automated rent collection payments via ACH from their checking account, Credit Card or by phone. Checks can also be sent to a lock box for processing, but they must be on time to avoid late fees; and the cost is a bit higher because of the handling fees. Many section 8 tenants do not have credit cards or checking accounts and this lock box system allows their rent to be automated as well. It takes a tenant only a minute to make a payment and as was mentioned earlier there is always a receipt or confirmation number provided. SPS also allows your tenant to set up automatic recurring payments for the term of the lease.

So now consider this. When you automate rent payments, your tenant will not need to have any interaction with you regarding rent payments. They can make rent payments whether or not they have a computer. All tasks required of the rent management process are automated. That means the accounting is done for you as well. As the rent is collected and sent for processing you are notified of the payment and the accounting is done for you in the software. It is added to the ledger, the rent roll, the statement (for next month’s credit information) the lease and the tenant portal accounting record. So after your golf game, you can go out to a fine meal and relax, knowing that your rents are coming in on time and all is well with the accounting for those rents..

Oh and did I mention that the processing takes 3 business days so be sure to set the day for rent being due 3 business days before you want it in your account. Yes it is deposited directly into your bank account of record. One last reason that you want to automate your rent collection….Allowing your tenants to pay online or with the phone makes your business look  professional. Your tenants will respect that.