Ask any property owner what keeps them up at night, and besides major repairs and market conditions, a common problem is payment issues from tenants. Bob Mack with residential property management company Advanced Solutions Property Management in Salt Lake City shares insights on how owners can avoid payment headaches with a few simple tips.
What are common payment issues that property owners are dealing with?
Do you have tenants that are constantly just a little bit late with their rent payments? Maybe they’re always making their payments just after the due date, or always just a little bit short of the full amount.
Other tenants are constantly asking for more time, and over time it adds up and what they ultimately owe you grows too.
Other issues may include insufficient funds notices for paper checks. And once a tenant is behind on their rent, sometimes they’ll threaten to withhold payment unless you do a repair, which isn’t legal in the state of Utah.
The main takeaway here is that once a tenant gets more than one month behind in their rent, it’s very difficult for them to catch up.
Why are payment issues a big problem for property owners?
Payment issues are a problem for owners because the relationship degrades. Soon tenants avoid contact with their landlords, and that could lead to tenants not making contact with the property owners for maintenance issues, because they don’t want to interact.
Also late payments almost always lead to later and later payments if it’s not dealt with effectively at the beginning.
Like I mentioned before, once the tenant gets behind on their payments, it’s very hard for them to catch up, and that could lead to them not adhering to other terms of the lease.
If they’re already breaking the lease in one area, they could easily see that breaking other areas of the lease isn’t a huge issue for them.
Payment problems could lead to cash flow issues for the owners, because expenses like insurance and repairs and legal actions still happen even when the tenant is behind on their payments.
What’s one thing a property owner can do TODAY to avoid a payment issue?
The most important action an owner can take today is to create minimum rental requirements for their properties, and have those requirements in writing.
Make sure to adhere to those requirements with each applicant. Don’t let some go through, and others not, and never accept cash from a prospective tenant who wants to pay multiple months ahead of time.
At Advanced Solutions Property Management, we’ve found that if someone has cash today, you can’t be entirely sure where they got the money, or if they have employment or credit issues. Never have the tenant push you into signing a lease just because they have a few months of rent right now, because after those months pass they won’t be making additional rent payments.
How can a property owner benefit from having a handle on payments?
The big picture shows that your business will run much more smoothly if tenants are adhering to terms of their lease and making their payments on time.
This will allow you to concentrate on the important things like purchasing more properties and increasing cash flow, instead of chasing after tenants for payments.