How to Effectively Collect Rent from Your Tenants: A Guide
Becoming a landlord can be rewarding if you’re wanting long-term financial stability. It gives you autonomy and lets you provide tenants with safe and comfortable homes. This venture also enables you to increase wealth and secure your financial future.
However, a landlord has responsibilities, including ensuring tenants pay their rent on time. You wouldn't want to worry about if they'll meet the due date. While you can't wholly avoid rent evaders, you can minimise the risk by selecting the best rent collection method and including it in your tenancy agreement.
If you want to maintain a stable and sustainable property, this article will explain what you should do before starting and how to collect rent effectively. We'll also discuss what you can do if you encounter rent evaders.
What Should You Do Before Starting?
When finalising your tenancy agreement, specify when and how your tenants will pay their rent. You should also supply them with essential documents before they reside in your place, like energy performance and gas safety certificates and provide them with a How to Rent guide. Moreover, place the deposit in a government-backed scheme. Neglecting these steps can make removing the tenant from the property, if necessary, challenging.
When Should Your Tenants Pay the Rent?
Landlords usually ask tenants to pay the rent at the start of each month so that they would pay for January on the first day. You must include this information in the tenancy agreement to avoid confusion. Otherwise, the usual payment method defaults to paying for the previous month at the end of the current month.
5 Best Ways to Collect Rent from Tenants
After discussing what to do before starting and the ideal time for rent payments, this section will enumerate how landlords collect rent from their tenants.
1. By Standing Order
Paying rent through a standing order is the most straightforward and popular way to settle the tenant’s rent. At the beginning of the rental agreement, the tenant can set up this payment method with their bank to ensure they pay it on time monthly. Although it’s not 100% fail-safe, it’s more reliable than other payment options. As a landlord, you won't incur any fees and won't require much involvement.
2. In Cash or by Cheque
Cash and cheque payments aren’t ideal for rent collection today because they require in-person meetings and have a limited paper trail. When your tenant uses this payment method, ask them why they did so.
3. By Direct Debit
Many people usually confuse direct debits and standing orders. Direct debits require a mandate and can vary in amount each month while standing orders are for a fixed amount each month. Direct debits are harder to set up and may result in additional costs.
4. Through Rent Collection Services
You can avoid the hassle of rent collection and chasing late payments by hiring a professional rent collection service for a fee. Remember to shop around and understand the service before signing up. Some companies may also offer you a rent guarantee.
5. Online or via an App
New technology makes online rent collection faster and easier, allowing tenants to pay through banking apps or services like PayPal. However, you may need to pay fees for these services.
What Can You Do If Your Tenant Doesn’t Pay Early?
Protecting yourself from tenants who don't pay rent is tricky, regardless of your payment method. You can be a responsible landlord by tracking rental payments, communicating with tenants, recording communication, and knowing how to evict them when needed.
Final note
Having tenants who constantly dodge paying rent can be frustrating, especially for new landlords. You can minimise the risk by communicating with tenants, selecting the best payment method, and knowing when and how to evict them.
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