The matter of rent collection shouldn’t be considered lightly if you want to have a successful real estate investment or business. A lot of people tend to take this matter for granted, including the property owners, which can cause serious issues later on.
If you manage to consider this quite seriously, and you can make it somewhat professional (and also easy for the tenants), it would affect your reputation as a property owner. And believe me, managing the (rent) collection professionally will help you a lot in doing smooth property maintenance. So, what should you know about this matter?
Understanding Rent Collection Concept
Rent collection refers to property manager or landlord’s act in collecting the rent payment (typically in monthly basis) from the tenants within a set date. The rent payment date should be included in the lease agreement.
It can be on the beginning of the month or within a certain set date (such as then 10th of the month or the 8th of the month). Some property owners may set it for the beginning of the month without stating the date; only the maximum accepted date.
For instance, the rent should be paid to the owners not more than the 9th of the month. It gives the tenant somewhat a ‘flexible’ option to pay the rent anytime, as long as it doesn’t exceed the 9th of that month.
The rent can be considered passive income; helping the owners to earn extra money on the side. A portion of it can go to the (property’s) mortgage, monthly maintenance expenses (utility, repairs, etc), and such things alike.
When you want your payment due is totally up to you although most owners may choose the first (date) of the month. You should provide the information clearly in the lease agreement and make sure that the tenants understand it.
How to Collect the Rent
Everything should begin from the lease agreement. The information about how much the tenants have to pay on a monthly basis, what charges the rent, and consequences of late rent should be included in the lease agreement.
You may want to check the landlord-tenant laws within your local regulations, making sure that the lease goes along with the rent collection and late fees expectation.
When the agreement has been set and then signed, the rent collection can start. In the old days, direct payment (or picking the payment up in person) was the most popular option. It’s still considered the easiest way until now because it’s straightforward and simple.
However, we live in the era of technology now, so why not making use of it? You can allow the tenants to pay the rent online, which takes very fast process. Once they pay, they notify you, you check your balance, and voila! It’s already there. You won’t even have to leave house or everything.
Of course, besides the online payment and the in-person direct payment, you can also choose the:
- Mail delivery. As the name suggests, your tenants will have to mail their payments to you (usually in the form of a check)
- Payment collection in a lockbox. It’s basically a service from the bank where they collect payments from customers. It usually involves a P.O. Box. So, you can ask the bank to provide the P.O. Box address where the tenants can mail their payment checks. The bank will then convert those checks to cash and then send the updates (regarding the payment) to you. This service is usually available for business, but you can manage it with your bank, if you want to.
Charging the Late (Rent) Fees
It’s pretty legal to charge late fees, but you need to write it down within the lease and your tenant knows about it. After all, it’s considered an effective method to encourage the tenants to pay their rents on a timely manner. Some states, however, may limit how much that late fee should be and they may encourage a grace period.
That’s why you should consult the local laws of the landlord-tenant. Moreover, if your state doesn’t require a grace period, it’s up to you whether you want to have one or not. If you decide to include one, don’t forget to inform it in the lease so that your tenants understand the condition.
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Rent Receipts: Do They Necessary?
Legally, most states require the landlords to provide a payment receipt for the tenants, including move in fees, security deposits, pet fees (if any), and such things alike. There are some programs that you can use to create your own type of payment receipts, or any receipts of payments that are rental related. The receipt should include:
- The name of the tenants
- The address of the rental property
- The total received amount
- The payment’s date
- The name of person getting the payment
- The name of person doing the payment
In short, even collecting a rent can be simple or complicated – it’s all up to you. Now that you understand the importance of rent collection, you may want to plan it out further.