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How to Improve Rent Payment Habits

By TenantCloud Team November 05, 2024

Collecting rent payments can be one of the most time-consuming tasks for landlords and property managers in real estate.

If you're a landlord, you want your payments on time to ensure reliable cash flow for your business and that the property doesn't fall into arrears. Plus, on-time payments help build a positive relationship between the landlord and the prospective tenant.

Today, we will look at rent payment habits and how landlords and property management companies can establish good rental payment habits so everything runs smoothly.

Set Clear Payment Terms from the Start

As a landlord or property management company, it's vital to set boundaries from the start to protect the rent collection process. These terms should be built into the rent agreement, which will help build a clear foundation of what is expected in the landlord-tenant relationship. It should include some of the following details:

When the payment is due: The date needs to be the exact day of the month the rent is due. This can help the tenant plan their finances. If needed, adjust the date to their preference.
Payment Methods: Make it very clear what methods are accepted for rent collection. The best way is to have them set up automated payments, but also offer other backup options, such as cash or check.
Late rent payment policies: Clarify any late fees or penalties for missed payments so tenants understand.

When these details are provided upfront, there is much less room for confusion regarding rent collection. It helps set the tone for a responsible payment schedule and prevent any problems that might arise in the future. It's important to make sure that the tenant receives a physical or digital copy of the rental agreement during the move-in process so they're aware.

Use Automated Payment Solutions

Setting up automated payment solutions after the rental application is signed can ensure that the tenant never misses a beat. Giving tenants the opportunity to set up auto pay on TenantCloud or other platform allows them to sit back and relax, knowing rent is paid on time every month.

If you're using TenantCloud, you can set up the following:

Payment Reminders

Automated payment reminders can be sent via text or email before the rent is due. This makes it less likely that a payment will be forgotten or missed. Reminders help create a routine and reinforce good payment habits.

Multiple Payment Options

Offering a variety of methods can help encourage tenants to pay on time. Options such as ACH transfers, debit cards, and credit cards gives tenants flexibility for their needs. Plus, accepting online rent payments makes it easier to pay, which usually means more on-time payments.

Recurring Payment Features

Autopay is a feature that can be a real game-changer for both parties. Ensure you have autopay set up so tenants can add their pay details and ditch the need for manual payments.

Financial Book Keeping

While you're managing payments, you may be able to take advantage of additional financial perks depending on the platform you use. Platforms like TenantCloud have built-in accounting tools, transaction history, tax reporting, and more. This is an easy way for landlords and tenants to review and keep track of their payment history.

Maintain Open Communications

Having open communication is important for both parties. It helps build trust and promotes good payment habits. Landlords and property managers should be available and give tenants the ability to reach out if they have any issues.

However, communication is more than just rent transactions. It also includes being available to answer any questions or address their concerns about the property. Being approachable and friendly will help tenants feel comfortable discussing any issues and may even prevent minor problems from turning into big issues, chipping away at your cash flow.

If a tenant faces financial challenges, a conversation can make a difference. Instead of waiting for late payments, landlords could reach out to help the tenant discuss a payment plan or partial payment. Understanding a tenant's difficult time can build a sense of security and loyalty with their tenants.

You'll want to establish the preferred method of communication before move-in. It could be by phone, text, or perhaps through a messaging portal such as TenantCloud. This way, tenants know the fastest and best way to reach their landlord or property manager.

Offer Incentives For Timely Payments

Incentives are an excellent way to motivate tenants to pay on time. Many people respond positively to a reward system, right? Here are a few ideas of what you could use for incentives.

Rent Discount

Offer a discount for on-time rent. This could be paid back to the tenant at the end of every 12 months so that it's not monthly.

Gift Cards

Another option is to give them a gift card to their favorite shop or restaurant. It's an easy gesture that shows appreciation. Small rewards like this can help build goodwill and make the tenant feel valued.

Christmas or Seasonal Gifts

In our experience, we've seen landlords pay it forward by offering to pay for part or all of their tenant's Christmas shopping. One landlord in particular gives tenants a turkey, groceries, and a few presents. They noted that thoughtful gifts were the secret to building relationships so that tenants felt appreciated and were more willing to pay on time.

Address Late Payments Consistently

Dealing with late payments is part of being a landlord, but how these situations are managed can change future payment behavior. It's always good to have a consistent and fair approach to late payments that allows flexibility on both sides.

The most important thing is to have your late payment terms clearly outlined in the lease agreement. This includes late fees and any late payments. Clarifying these terms ahead of time will help with any legal issues down the road.

Be consistent in how these policies are enforced. If tenants see that a late fee is not applied when it should be, it can lead to confusion or lead to them not paying on time again because nothing was done about it.

As mentioned earlier, though, there might be times when a tenant faces a genuine financial emergency. Life events or a sudden job loss could mean they can't pay on time. Having something in place for this, such as a grace period that offers temporary support or the option to create a short-term payment plan. As always, communication is critical.

What Are The Effects of Rent Payment Habits on Credit Scores?

The impact of rent payments on credit scores is important for tenants who want to have a good score. With rent reporting, an additional feature that allows you to get credit for your rent payments on TenantCloud, on time payments can help tenants build up a positive credit history.

In many cases, late or missed payments can negatively affect credit scores if they are reported to credit bureaus. This will show up on a credit check and can make it harder for tenants to access credit and rental opportunities later on. Landlords can support tenants by encouraging a rent reporting service, which is also an incentive to pay on time.

How Does Paying Rent With Your Credit Card Impact Your Credit Score?

Paying rent can have both positive and negative effects on credit scores depending on payment habits. The positive side is that tenants who want to build credit may have the option of using their credit card to pay their rent, ensuring that it is paid regularly. As long as the tenant makes payments on their credit card, it can help build their credit history and improve their credit score.

To make the credit card payments worth it, it's good practice to only accrue a balance that can be paid off.

What Are the Trends in Rent Payment Habits During Economic Changes?

Fluctuations in the economy can influence rent payment habits. During a growing economic period, it is often easier for tenants to cover their rent payments. During economic downturns or periods of high inflation, tenants may need to prioritize paying their rent due to tighter constraints on their finances. In general, it's a good idea to be aware of this when it comes to rent reporting, and it could be helpful to set up grace periods or payment plans to help tenants.

Final Thoughts

Improving rent payment habits and rent reporting is vital to landlords and tenants and makes everyone's lives easier. Setting up clear payment terms, automated solutions, good communications, and payment incentives are all critical strategies for creating good payment habits.

If you're looking for a hybrid solution to help landlords and property managers collect timely rent payments on time, check out TenantCloud. We have all of this built-in to simplify on-time payments for you.