If you’ve ever had a tenant pay rent late, you’re familiar with the frustration that comes with it. Fortunately, reducing the frequency of these late payments is easy. Learn about methods of reducing late payments, including late fees, online rent payment, and incentives, with Rentec’s Kaycee Miller and Brentnie Daggett.
Late rent is one of the common headaches landlords face. But, fortunately for many housing providers, late rent is an easy problem to reduce. There are multiple easy methods of reducing late rent payments, ranging from late fees to incentivising early or on-time payments to large-scale systemic changes you can make to streamline payment and encourage tenants to pay on-time.
In this discussion, Rentec Direct’s Kaycee Miller and Brentnie Daggett will discuss the various ways you can discourage late rent payments and how to implement these strategies.
Key Takeaways
- You can reduce late rent with fees
- Online payments are an easy way to encourage on-time payment
- You can use incentives to encourage online payment
The Key to Fewer Late Rent Payments – Video Transcript
Kaycee:
Hey there, it’s Kaycee with Rentec Direct. Today, I’m so excited to be sitting here with Brentnie from the Rentec Direct marketing team. Brentnie’s been with us for almost 10 years, and we’ve gotten the chance to work together, talking about all things rental-related. We’re the ones behind all the articles about how to be a great landlord, what it’s like to be a good tenant, and ways that you can improve your landlord-tenant relationship, manage your rental properties, and do everything from leasing to tenancy to vacancy. How are you doing today, Brentnie?
Brentnie:
I’m great; I’m excited to join you.
Kaycee:
So we really wanted to create this platform to talk about some landlord-related questions that we see out there when we’re doing some research online. As you know, we are always out there looking to answer questions. So we thought it’d be fun to kind of pull some questions that we’re seeing in different landlord-related forums on Reddit and Facebook groups to see what people are talking about and how we would respond to some of these questions as if we were talking to a friend. How does that sound, Brentnie?
Brentnie:
That sounds great. I’m super excited to get started.
Question: How Do I Decrease Late Rent Payments?
Kaycee:
Okay, so I always think it’s fun to talk about some of the things that we’re most familiar with, whether that’s renting a new property, finding your next tenant, or managing the property while you have it either occupied or vacant. So this is a question that I found in the Landlord Forum on Reddit. We have HippityHopHip asking how to effectively manage late rent payments without damaging tenant relationships. Pretty excited about this topic because you know I love the landlord-tenant relationship, and we’re always looking at ways to maintain a positive relationship. And so this seemed right in line with the stuff that we like to talk about. Okay. So this is what our person is asking:
“As a landlord in New York, I’ve encountered several instances where tenants have been late with their rent payments. I want to ensure that I handle these situations professionally while maintaining a good relationship with my tenants. I typically send a reminder email a few days before rent is due and follow up with a notice if it’s late.
However, I’m concerned that being too strict might create tension. I’ve considered implementing a grace period or offering a small late fee to encourage timely payments without being overly harsh. This question wants to ask, what strategies have you adopted to handle late payments effectively? How do you balance enforcing the lease terms while keeping a positive rapport with your tenants?”
Initial thoughts hearing this?
Brentnie:
I love this. think that it’s a good question because, you know, it’s, it’s good to understand that, as a landlord, you need to be upholding your lease agreement, but understanding that doing that effectively will impact your relationship with your tenants. I just like that this question is already coming from a good place of wanting to have a positive relationship.
Kaycee:
And I think that’s a good point. They are already so concerned about how to maintain that positive relationship and are concerned that charging a late fee might damage it. And then I’m on that other side of like, “Oh my gosh, you don’t have a late fee in place?” That seems so obvious to me because this person’s asking, “Should I even charge a small late fee?”
Late Fees to Discourage Late Rent Payment
Kaycee:
I guess my advice would be, yes, charge a late fee, figure out what your state’s allowed grace periods are, because in Oregon, where I manage rental properties, you have to provide a grace period before you can even provide that notice to cure or quit, and you can start charging a late fee. So figure out what that law is first, whether you’re in New York, Oregon, whatever state or county or city that you’re in, and then create a policy, put it in your lease, and it can be ten dollars a day, five dollars a day. Again, check your state laws.
But what do you think? This person is so worried about charging a late fee for a rent payment. Do you think that would damage a landlord-tenant relationship?
Brentnie:
I really don’t. I think that implementing your policies and implementing them consistently is going to help foster that relationship because when your tenants know that you can be relied on to follow the policies that you’ve already put in place. I think that levels the playing field and lets them know what to expect from you. And I don’t think that charging a late fee is going to damage that relationship at all, because that’s an industry standard. As long as you’re following the laws in your state, it’s important.
You know, as far as I think that they mentioned being concerned about being overly harsh, I think that that is the key to that is consistency and making sure that you’re being professional about it, but that you are enforcing what your lease is saying that you’re going to be charging.
Kaycee:
Yeah, and I think that’s it. It’s an industry standard. You mentioned that. So I don’t think a tenant would. I think they’ve probably gotten off lucky if you haven’t been charging a late fee to begin with. I was just trying to think about where I’ve heard that maybe there’s been exorbitant late fees, but a lot of states have caps on the max amount of a late fee that you can charge. I think we typically charge maybe five dollars a day to twenty dollars a day. I can’t remember off the top of my head, but something to incentivize on-time payments. And ultimately, you can charge a late fee but still move forward with providing them notice.
Like, you know, you don’t need to threaten that they’re going to get evicted, but just let them know, “Hey, you’re in a legal contract, you’re in a lease, if you’re not going to pay your rent on time, then there are consequences”. Just like if you pay any other bill late, you can have the consequences of late fees.
The other side of this question is that he’s kind of asking, “So what do we do to get them to pay on time?” They’re saying they’d charge a late fee to get them to pay on time. But what are other ideas that we’ve seen or thought of that can help tenants pay rent on time to kind of incentivize them to uphold their end of the contract and get those payments in?
Reducing Late Rent Payments With Online Rent Payments
Brentnie:
I mean, we always recommend just having your tenants sign up for online payments. I think it eliminates so much of the hardship for tenants and landlords alike. You’re not having to remind them; they aren’t having to remember if they’re signed up for automatic payments. It’s just completely hands-off. And we’ve actually published data that shows that you’re having to charge fewer late fees if your tenants are signed up for online payments.
Kaycee:
Yeah, that was one of my favorite things to actually see through data, like if your tenants are signed up for online or automated payments, they will be less likely to get charged late fees. That means you’re getting your rent on time. You’re able to pay your bills on time. If you’re a property manager, you’re able to produce your owners’ disbursements on time and cover all of your other expenses. So we love online payments for that reason. And I’ll actually link the study where we were able to demonstrate that with some rental data down in the comments, so get a look out for that.
And some of the other ways I thought about how we can help people adopt online payments, because yeah, as a landlord, that’s great. You won’t get late payments or need to charge late fees. You’ll get paid on time. But what about for a tenant, how do you get them to actually make that change, of “I’m so used to writing a rent check” or “I just go to the bank each month and get my rent money” to get them to actually use online payments?
Do you have any ideas for how to get that step? So we’re a 2-4. We want people to pay rent on time, but we also want them to start using online payments.
Brentnie:
Yeah, I think that making sure that they’re familiar with the way that you’re having them pay online, if you’re using a property management software, especially Rentec Direct, they have access to a tenant portal and making sure that they’re familiar with being logged into that, that’s going to give them access to so much information that they need, their lease agreement, communication with you, all of those things.
And I think that another thing to do is, there’s the potential for offering them incentives if they start that process. I know, Kaycee, that you’ve had ideas about that, if you want to talk a little bit about that.
Learn more: Rental Data Shows Online Rent Payments Reduce Tenant Late Fees
How to Encourage Online Rent Payments
Kaycee:
I was kind of thinking about how we could increase adoption of online rent payments, and you could consider discounting the rent, even like for the first two months that they make an online rent payment, discount it ten dollars or twenty dollars. Sometimes, even that small amount is enough for someone to get excited about saving that little bit of income and getting excited about it.
You could also do, like, “everyone who pays rent online this month, we’ll enter you into a pool to win a gift card,” or some sort of prize. It doesn’t need to be big and come out as a big landlord expense, but people do a lot just for like 20 bucks to a pizza restaurant or a $20 gas card. And then I really think that a one-time rent discount, if you can pay $10 to get someone to pay their rent online, or sign up for online payments, and now you’re getting your rent on time every month moving forward, because they sign up for automated payments, then that sounds like a pretty good investment in terms of that incentivization.
Learn more: Benefits of Having a Rent Portal for Online Rent Payments
Brentnie:
Absolutely.
Kaycee:
Well, any other thoughts that you might have to help out our landlords in New York who are thinking about either charging the late fee or getting their tenants to pay rent on time, other strategies, or ideas?
Brentnie:
I think that covers it for me. I think that the big things for me are implementing your policy and really providing your tenants with the tools to make it easy for you to not even have to charge them at all, but you know, making sure that, when that time comes that you are professionally implementing what you’ve said that you’re going to in your lease agreement.
Kaycee:
Absolutely. Well, I wish you the best of luck with this landlord issue that you’re having. And just remember, if you don’t already have a late fee policy, if you’re going to start charging that late fee, make sure that you have an addendum that you give out to your current tenants. Follow your state laws, whatever they might be about grace periods, late fees, and changing the lease mid-term, and then get your lease reviewed by an attorney, even if you do it one time, to make sure your language is appropriate moving forward for any new tenants that you might bring on.
So again, my name is Kaycee. We have Brentnie here from the Rentec Direct team. Let us know in the comments what you guys have done to help renters pay rent on time or how you’ve managed late payments. And make sure to check out the Rentec Direct blog and follow us on social for more tips on how to be a great landlord. Tips and advice for renters as well.
Have a question you want answered?
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