As a busy landlord, you know that when your renters pay rent on time, it saves you time and money. Although late fees and notices are helpful to remind tenants to pay on time, let’s take a look at five suggestions to encourage them before the rent is due.
What are some ways to help your renters pay rent on time?
- Make credit reporting available for on-time payments to boost credit score.
- Make security deposit insurance available so tenants don’t have to save up for a deposit – leaving more funds available to make timely rent payments.
- Make paying rent convenient by offering rent payment alternatives such as online payments from a tenant portal and/or cash payment networks.
- Make paying rent on time something memorable with incentives.
- Make paying on time rewarding by offering discounts.
Let’s dive deeper into why these tips help your tenants pay on time and how you and your renters benefit.
How does credit reporting encourage on time rent payments?
If someone needs to establish credit or wants to increase their score, reporting on time rent payments can help and is a win-win for both landlords and renters.
– Tenants on-time rent payments can raise their credit score and help them achieve their credit goals.
– Landlords become heroes by offering this great service but also get the benefit of receiving timely rents and save countless hours that would otherwise be spent tracking down and documenting rent collection efforts.
How does rent reporting work?
When a tenant’s timely rent payments get reported to the credit bureaus, it can boost their credit score. Whether a renter is establishing credit for the first time or needing to increase their credit, using a credit reporting service such as RentReporters can make a big impact.
For example, a tenant can sign up with RentReporters through a property management software like Rentec Direct. Up to 2 years of the tenants rent payment history gets sent over and the continued reporting of ongoing monthly rents payments can help strengthen a renter’s credit score by an average of 40 points.
Can offering security deposit insurance free up tenant funds for rent payments?
Absolutely! Offering a tenant the option to acquire security deposit insurance relieves them of the burden to come up with those up front move in costs.
Not only does this give renters more freedom of choice in when and where to move, but it also frees up those reserves so they aren’t burdened when it comes time to pay rent. Again, the best landlord software will have built-in tools to let you offer security deposit insurance options to your renters.
Bottom line, when you offer security deposit insurance, renters have more available funds since they didn’t have to pay such a huge move-in security deposit.
Can rent payment alternatives inspires timely rent payments?
Yes, online rent payment options encourage paying rent on time because of the convenience it offers your tenants.
As the pandemic began, more businesses and industries felt the impact of the new paradigm. During that season, Rentec Direct collected rent payment data to track the impact for landlords and several trends in rent payment behavior emerged, namely, tenants with online rent payment options were considerably more likely to pay rent on time.
Gone are the days of going to the post office to mail a check as tenants are leaning into online options as evidenced in that report.
The full whitepaper report can be viewed, downloaded, and printed from here: 2020 Rental Trends | The Impact of COVID-19 on Rent Payments
What alternative payment methods can you offer your tenants?
The two best alternative rent payment options you can offer your tenants are:
Online rent payments such as ACH bank draft, credit card, and debit card transactions; and
Cash payment alternatives that replace receiving rent payments in cash, check, or money orders.
Consider leaning into your property management software options. Likely they have partnered with a merchant processor and cash payment network that makes receiving alternative rent payments easy.
You can learn more about online rent payment options here: 9 Best Online Rent Payment Systems
You can learn move about cash payment options here: A Modern Rent Payment Option for Money Orders, Cash, and Checks
Important Note: Not all options are the same. In fact, some pose some serious challenges and risks to both tenants and landlords.
You can learn more about those concerns here: Should Landlords Accept Rent Payments from Zelle, Venmo, and Cashapp?
How can incentives make on time payments top of mind for renters?
Incentives help your tenants remember to pay rent on time by making it a positive experience.
Your landlord software can automate many of the tasks related to rent collection like sending out automatic notifications when rent is due and when it’s late. Negative consequences like a late fee are traditionally the go-to to incentivize on time payments.
Having positive incentives might be a better alternative to relying solely on negative consequences.
What would incentives look like for on time rent payments?
An incentive could be a gift or a drawing for a gift when a tenant makes consistent on time payments after a certain amount of time. What types of incentives could you offer?
- Gift cards
- Carpet cleaning
- Window cleaning
- Themed gift basket (movie night, game night)
- Television or other electronics
- Tickets to movies or events
- And the list goes on!
Before offering an incentive, first check with your tax advisor for information on how this may affect your tax reporting. Additionally, check with federal, state, and local regulations regarding giveaways and drawings to make sure you conduct them appropriately.
What are rent concessions and how do they make on time rent payments rewarding?
A rent concession (also known as a rental discount, tenant credit, or write off) is a payment discount you can offer when a tenant makes their rent payment on time. These rental discounts are typically applied to the tenants ledger so that there is a paper trail of what was required and what was given as a discount.
Some landlords have come up with some very unique rental discount programs based on length of lease, lease renewal incentives, storage unit discounts, parking discounts, and more.
Learn more about rent concessions and how you can apply them to your rental business here: What are rent concessions and When Should You Offer Them?
Be sure your landlord software makes it easy to customize your lease and rental agreement forms and makes adding concessions to your tenant ledgers easy.
Again, before offering a concession, first check with your tax advisor for information on how this may affect your tax reporting. Additionally, check with your state and local regulations regarding concessions to make sure you conduct them appropriately.
Relationship building is the key to keeping your tenants happy and engaged in making timely rent payments a consistent habit. Consider trying out a few of these suggestions if you find yourself spending too much time tracking down payments and dealing with the difficulties of rent collection. Your tenants will appreciate these options and you’ll have more time available for more important tasks.
Heather, thank you for the insightful post! Although the many strategies suggested here to encourage tenants to pay on time are beneficial and worthy of imitation, I have a different perspective. One of the most excellent methods to incentivize renters to pay their rent on time, in my opinion, is to charge them a late fee. However, be sure that any late payment fines are explicitly stated in the rental agreement.
Thank you George – I completely agree that the consequence of a late fee can be a motivator to pay on-time. Thanks for reminding landlords to make sure those fees are explicitly documented in any rental or lease agreement.