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Bobby’s Blog: How to Get Your Tenants to Pay Rent on Time

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What do you do if tenants can't or don't pay the rent on time? (Flickr/irina slutsky)
What do you do if tenants can’t or don’t pay the rent on time? (Flickr/irina slutsky)

I’ve only been in the property management business a short time, but it didn’t take long to figure out “the pattern”:

Between the 1st and 3rd of the month, tenants come into our office, drop off their rental payment in the mail slot, or simply mail it in — and it’s beautiful.  Then from the 4th of the month all the way to the sending of a “Five-Day Pay or Quit” notice, we have a line of people at the front door.  Each person’s conversation starts with the following statement: “Here’s my situation…”

Uh oh, here it comes: They can’t pay the rent, or only have part of it, or the husband or wife skipped out with or without the roommate or neighbor.  It doesn’t matter: That line is full of drama, and we are beginning the chase for the rent check. For the first couple of months I was in property management, my blood would boil and I would ask myself: How can you grow a business if all you do is sit behind a desk chasing a series of $800 checks?

Well, it didn’t take me long to remember the 90-hour real estate course I took, where I learned that the buyer (aka the tenant) is the customer. At first I remembered my first sales job out of college, when I was told the customer is always right. (Um, don’t think so!) Then I remembered the 8-page lease and all the remedies I have in it to evict.

EVICT! But then I’d have a bunch of empty units and a lousy vacancy rate. I thought to myself: There must be a better way to get tenants to pay.

What do I do to solve this problem? Suddenly the answer dawned on me: accountability. All I really needed to do was deploy a system that held tenants accountable. I had to keep in mind that when I partnered with my dad in the property management business, the prior staff — meaning the staff I fired — didn’t hold tenants accountable.

My approach was simple: I met with each of the tenants that fell into my 4th-of-the-month-and-beyond category and asked each of them two simple questions: What’s going on? How can I help you pay your rent on time?

I poured a martini the night before these conversations, expecting the answers I’d probably get from tenants in the morning.

But it turned out to be a waste of a martini. The answers I got were quite simple. They ranged from “I didn’t realize being late was a big deal” or “Other things came first” or “I just can’t manage money.”

I’m not going to lie to you. To solve these problems, you still have to have heart and be part banker to help them become a reliable and accountable tenant.

It’s all about the carrot and the stick. Give your tenants the tools and help they need to pay their rent on time every time, but also make it clear that you’ll hold them accountable if they don’t. I call it tough love.

So have you asked your delinquent tenants those same two questions I did? Try it next month. You might be surprised by what you hear — and the results you get.

What do you do to help your tenants pay their rent on time? What tactics have worked or not worked? Please share your advice in the discussion area below.

Bobby Russo
Bobby Russo

Bobby Russo is the Co-Owner of Ace Mulligan Homes in Pinal County, Arizona.

  • Tom Conner

    A Martini is never wasted.

    • Bobby Russo

      True

  • Ward Adams

    Document, document, document. Make certain that everything said or done is documented so when a tenant pulls out the old..you said or you did, you can politely show them the facts. I actually had a tenant try to tell me how the Tenant/Landlord Act applied to a situation. I simply showed him documentation of the transaction and the quoted charter and verse from the statute. End of argument. And as noted do onto others as you do onto everyone.

  • http://www.linkedin.com/in/nathanialisaacson Nathanial Isaacson

    Have you thought about providing a rental discount to those who pay prior to the 5th? It won’t be considered a late fee, and it will give the customers a financial consideration to pay rent on time.

    • Bobby Russo

      Like it a lot

  • Geo

    I bank with Chase and have set up QuickPay which would allow your tenants to pay online which is so convenient and efficient. I actually emails tenants with gentle reminders a day before rent becomes delinquent. Plus emailing is an effective way to have information documented.

  • Pamela Bunn Murgatroy

    I have gathered resources from our community to assist our families with some of the other living costs that consume the rent money. I also offer a limited and strict payment plan for those who fall behind and have allowed a few to work off a small amount in the park by picking up trash, cutting grass etc. Most of the time this helps them get back on track and when it doesn’t I do evict.

  • Landlordology

    I usually have a very serious talk with the tenants when we are signing the lease. I give them the big picture – how the landlord needs the money for the mortgage, and how a late fee will be assigned automatically without discrimination. This eliminates the “I didn’t realize it was a big deal” comment and has virtually brought my late payments down to zero.

  • U. Britt

    It’s old school, but I send them rental statements every month. It’s a visual reminder that the rent is due, just like any other bill they receive. I also offer online payments options.