If you work for a property management company you know the importance of maintaining good relationships with your owners and tenants. And if you are self directing your own property management you probably know that tenants and landlords often clash. But it does not have to be that way. You must stay on top of your management tasks, and let your tenants know that each one of them is important to you.
Our company has provided software for property management to over 20,000 subscribers since 2005. We are recognized as one of the best property management software companies and, by the way, we have just rebuilt the software to be even easier to use thus making the communication with tenants even better. The legacy software won a webby and the New Release has already won a Best In Business for software award. With all of this experience, there are some things that we know will help you get good tenants, keep your tenants happy and retain them longer.
Expect the Best from your Tenants
You are entering into a business contract with each tenant. You expect them to pay rent and care for your property in return for their access and right to occupy to a quality property in which to live or work if it is a commercial property. Remember that it is a business relationship, not a friendship. From the beginning treat the tenant with respect. Once the lease is signed the tenant has agreed to pay rent on time. Be sure that he/she does just that. We recommend use of automated rent payments made through a tenant portal which contains all of the pertinent information that they need plus a way to make their rent payment in less than a minute. If they are late, do not offer to waive late fees. In the automated system, late fees are added automatically on the designated day. Waiving late fees only encourages more late payments. If you have a chronic late payer, make arrangements so that rent is due after they have received their wages or can reliably make the payment. If that means you extend the grace days a few more days then that is a better way to resolve the issue than to waive late fees. You might also have them pay two times per month instead of once.Don’t worry, if they are using automated rent payments, the accounting is done for you when that payment is made. And remember that any changes to the original agreement need to be memorialized in writing and signed by both parties.
You Make the Rules
It is the responsibility of the landlord or property manager in conjunction with the owner to make the rules for tenants residing in the property. Include those rules when they sign the lease. We recommend a separate document stating policies and rules as well as vacating procedures. The tenant signs that document and it becomes part of the lease. Tenants need to know the rules before they move in, not when they have violated one. Tenants need to know that they are responsible for being cordial to neighbors and abide by the rules of the property. It is always best to meet the tenant in a professional environment like an office. Our SPS software offers esign for leases and notices so that an office is not required to look professional. One other thing that is very important is good communication. The SPS software has tenant portals through which the tenant can easily notify you of any issues or report maintenance items.
Get Repairs Done Quickly
Things happen to rental properties during normal wear and tear, and repairs need to be done to keep the property in good shape. Occasionally there is also tenant caused damage, like a child flushing toys down the toilet or someone hitting the garage door with their car. Both types of damage should be repaired by the landlord or property manager, not the tenant. The most important thing that a landlord can do is get the repair done as soon as humanly possible. The tenant can be billed for tenant caused damage or the security deposit can be used if they do not pay. We recommend billing first so that the security deposit remains in place for the future. Always follow up after the repair with the tenant to be sure that the repair was done to the satisfaction of the tenant. We recommend that you inspect the repair or at the very least have the contractor take pictures before and after the repair and send them to you. Your tenant will know that you care about their comfort and you will retain them longer. Maybe even more important is that you will be sure that your property is kept in top condition.
You Must Do Inspections
Inspections are part of the price of doing business. Inspections done regularly will insure that there is no major damage being done to your valuable rental property. With new tenants, you may want to do an inspection or visit the property in one month to see how the tenant is faring. At the same time you can look around to see how they are caring for the property. If all is well you may schedule the next inspection visit for 3 months. If things look dicey, give notice to clean it up and come back in a week to inspect again. This may seem like over kill but we have seen some tragic situations experienced by our subscribers when they do not use the inspection software available to them. One subscriber found three families living in a two bedroom house. Only 4 people were on the lease. Another found a herd of cats, none of whom were authorized by a pet agreement. In fact the pet agreement clearly said that no pets were allowed. If these situations had not been discovered, you can only imagine the damage that would have been done to the property. Inspections are an ounce of prevention against pounds of cure.
Develop Good Relationships
Always be cordial to your tenants. They are supporting your business and even if you may not like them personally, you need to be pleasant. Remember that your tenants are not your friends. They have a business relationship with you. That does not mean that you can’t send Holiday cards or throw parties for the multifamily community once in awhile. But in the process of running your rental business, be firm and fair, attentive and respectful.
Smart Property Systems gives our subscribers the tools to be able to develop good relationships with tenants, members of associations, and owners of residential and commercial properties. That is accomplished with automation of most repetitive tasks and by allowing all stakeholders in the business to easily communicate through the portals. If you are not using software or are unhappy with your current software check out https://smartpropertysystems.com.
Submitted by: Timmi Ryerson
December 18 2015
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.
The 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.
Smart Property Systems
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.
- Failure to pay rent
- Chronically causing problems for other residents
- Damaging the rental property
- Conduct which makes it unwise to continue tenancy
- Theft or vandalism or other criminal activity
- Having unauthorized animals on the premises
Many counties in the United States do not report evictions to credit bureaus and it takes specific searches to discover these records. This kind of search can be done by a landlord or property manager in the local counties but is time consuming and not always reliable. The reality is that often a resident will apply for a new rental home while he/she is being evicted from the current residence and there will be no record at all.
We spoke with Equifax recently and found that they have just purchased a small company which is now collecting this eviction data across the country. In several years there will be a new data base with this information which will be available for credit reports but we still have to deal with what we have today, which is precious little with regard to eviction history.
That being said, we still have our rules and regulations to abide by and therefore will have to enforce them for the benefit of all. So there will be the occasional eviction.
The article below is a good summary from Expert Law which will help you if you find that you are needing to proceed with an eviction.