Late fees are an important part of any property management business. That’s why it’s important that you make it clear when rent due dates, grace periods and late fees are due in all rental agreements you draw up with your tenants.
Following are five strategies you can implement to ensure you receive the rent due on your investment properties in a timely manner:
1. Define payment terms
Every lease agreement should begin with clear rent payment terms. Information should include the day rent is due each month, what the grace period is (this can range from 3 to 5 days) and when rent is considered late.
2. Determine late charges
The late charges you establish should be fair, reasonable and be in keeping with monthly rent and/or state regulations. In general, the total amount you should charge should not be more than one quarter of the month’s rent. They can be assessed as:
- a flat fee due immediately after the grace period ends
- a percentage of monthly rent (usually 4-6%) based on rent amount
- a daily late fee that accrues each day after the grace period
3. Contact tenants
If a renter misses a rent deadline, give him or her a reminder via email or the telephone. Mistakes happen, but sometimes one late payment may lead to more in the future.
4. Set precedents – and stick to them
As a landlord, you need to be consistent with your late fee policies. Failing to communicate and impose fees could cause you problems later, especially if you have to evict a tenant. Courts need evidence that you are abiding by rules in order for you to protect your legal rights as a landlord.
5. Amend rental agreements
If your current leases do not have clear rent payment terms, consider revising them as soon as possible. Depending on the kind of agreements you have, you may not be able to do this until renewal time. Contact a legal professional if you need help.
Collecting, and enforcing, rental policies are among the difficult tasks busy landlords face. But Herman Boswell can help. Our professionals have the skills and savvy that get results. Let us show you an easier way to manage your investment properties: contact us today!