One of the biggest mistakes that real estate investors make is to let their properties become an emotional investment. It’s important to remember that acting as a landlord is a business. By maintaining a professional distance from your tenants, you reduce the risk of becoming too lenient or complacent when enforcing the lease terms.
By implementing these five tips, you can create a strict rent due date policy to ensure on-time payments.
1. Establish a Routine
Set your expectations with the tenant early by having a set day that the rent is due. Without a hard deadline, there’s no incentive to pay. Tenants will prioritize other bills that do have a deadline and seem more pressing. Having a set deadline enables tenants to budget and plan for the impending rent due date.
Having the rent due on the same date each month makes tracking payments easier. Then you can act quickly to impose a late fee or eviction proceedings when a tenant doesn’t pay.
2. Rent Due on the First
Many landlords choose to have the rent due on the first of the month. There are many reasons for this. Most leases begin on the first, so it makes sense to have the rent also due on the first of each month.
Another reason rent is due on the first of the month is because it coincides with when the mortgage is due. You should typically stay away from off cycle due dates because it becomes hard to manage.
When the rent is due on the first of the month, it makes it easier to perform your bookkeeping & helps you coordinate all of the other bills for the month.
3. Have a Grace Period
In many States, grace periods are required by law. While the rent will be due on the 1st, you are not able to charge a late fee until the State mandated grace period has ended. Usually, 5 days is the standard grace period. Once the grace period has expired, you can either charge a late fee per day or you can charge a flat late fee.
It is often easier to have a flat late fee rather than calculating the per day late fee. If your state doesn’t mandate a grace period, it may still be worthwhile to have one. My recommendation would be to be competitive with the standards of your investment area.
4. Hold Firm to the Due Date
If you’ve given your tenant a grace period built into the lease, you need to hold firm on the rent due date. Once you give your tenant extra leeway beyond this date, the tenant will think that you will do this every time. Soon, the due date is pushed out further and further until the tenant is over a month behind on rent.
Additionally, once the tenant realizes that they can break this lease term without consequence, they may be tempted to break other lease terms.
5. Start the Eviction Process Early
If the first four efforts don’t encourage your tenant to pay, then this final fifth one typically will. Your tenants must understand that their home is your business and if they are not paying their rent then they are impacting your business. Your remedy as a landlord is to file an eviction. Even if you are in negotiation with the tenant, you should already begin the process. Nothing lets your tenant know that you’re serious more than a notice on their door or a delivery from a process server.
Consistently Collect Your Rent
By implementing these five tips, you can create a strict rent due date policy. With this in place, your tenants will know what’s expected of them and will be more likely to pay their rent on time. If they fail to, then you have the terms in place to pursue a remedy.
Roland JeanCharles, LCAM, RMP Candidate, CISSP
PMI JCM Realty Group