To keep the cash flowing, it’s essential that you’re able to collect rent payments from all your tenants – preferably by the first of the month, every month. However, in the real world, rent collection doesn’t always work perfectly.
If you’re a commercial real estate owner who is struggling with tenants not paying rent on time, you’re not alone. Fortunately, there are a few things you can do to improve the rent collection process and ensure more on-time payments. Here are a few best practices for rent collection in commercial real estate.
Automated Rent Reminders
Thanks to email, text messages, and automated voicemails, you can send out rent payment reminders without taking a single minute out of your day. Setting up automated rent reminders is simple and you’ll never have to think about it again for the duration of each tenant’s lease. Tenants will have a timely reminder of when rent is due and how much they owe. And you will have more time to focus on running your business.
“Rent collection software can help real estate owner/operators increase efficiency and streamline operations.“Rent Collection Trends in Commercial Real Estate Jpmorgan.com, Dec. 2, 2020
Make It Effortless to Pay
If a tenant has to drive to your office and physically drop off their rent check each month, that alone is a barrier to on-time rent payments. Online payments make things easier for everyone because tenants can pay from their phone or computer, anytime, anywhere. Tenants can even opt-in for automatic online rent payments so they don’t have to worry about submitting a payment each month. Plus, electronic rent payments come with the benefit of detailed payment records.
Consequences for Late Rent Payment
When you charge an additional fee for late rent, you’ll motivate tenants to pay on time. There are a few things to keep in mind, though. First of all, there are rules for how much you can charge for late rent depending on the location of your commercial property. Make sure to follow these. Additionally, you shouldn’t necessarily always charge the maximum late penalty. You don’t need to enforce the late fee every single time for it to be effective. It’s OK to waive it if the late payment was a one-time mistake or if the tenant is having a particularly hard time.
Incentivize On-Time Rent Payment
While most landlords implement late fees, it’s less common to think of positive reinforcement for on-time rent payment. One way to incentivize tenants to pay on time is to set up credit reporting for on-time payments. This way, tenants can improve their credit rating simply by paying rent each month. Be sure to communicate this to tenants and portray it as a positive bonus. You may also choose to offer rewards for early payment – for example, they can get $25 off rent if they pay before the due date. Sometimes, an early payment discount is even more effective than a late fee.
Finally, it’s very important to communicate with your tenants. If they haven’t paid their rent on time, reach out to them promptly to ask when they’ll be able to pay, why their rent payment is late, and whether they’ll be able to pay in full. Clearly establish your expectations to prevent confusion.
Tracking Rent Collection with STRATAFOLIO
With STRATAFOLIO, you can run reports to track who has paid and who has not. No matter how many units you have, you can still keep tabs on when each and every tenant paid their rent each month. This makes it easy to send reminders and keep track of each tenant’s rent payment history. STRATAFOLIO makes rent collection effortless. Schedule a demo of STRATAFOLIO today!
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