A common problem for landlords is collecting on-time rent payments. Personally, I don’t mind late payments because I enjoy making the extra $50-100 per month but generally speaking you want to ensure timely payments if you can. A couple weeks ago I had lunch with a friend and she shared some of the strategies that her landlord friend uses with her tenants. I thought they were excellent ideas and sought out additional strategies to share with all of you.
All of these strategies focus on rewards to induce positive behavior which is uncommon because most landlords just focus on the punishment for negative behaviors (e.g. lack of payment or late payment).
Strategy #1: Higher rent with monthly discount for on-time payment
For example, you can structure your lease agreement so that the rent payment is $25-50 higher than what you really want, but then provide a $25-50 discount when payments are made on or before the 1st of the month.
Strategy #2: Instead of raising rents each year, lower rents!
Let tenants know that while most landlords increase rents year after year, you will provide a reward and lower the rent by X amount of dollars for the next lease period if all the rent payments were early or on time.
Strategy #3: Provide discounts for tenants who will sign up for automatic debit
This isn’t an option for everyone, but getting a tenant on automatic debit payments will be very useful for getting your payments on time. Make it an attractive option by offering a $25-50/month discount on the rent if he or she signs up for automatic debit.
Strategy #4: Report payments to the credit bureau to help build tenant credit (and deter late payments).
There are numerous services available that help landlords and tenants report payments to the credit bureaus. Most tenants will want to build good credit, so they will be more likely to make timely payments.
Strategy #5: Give a bonus during the time its appreciated the most — the holidays!
You can structure this any way you want, but one idea is to offer to put $10 in an account for each month the rent is paid on or before the 1st of the month and then match it dollar for dollar and send a holiday bonus check the first week of December. For example, if the tenant makes 5 early payments, the first week of December you will cut them a bonus check (or give them a gift card for like a Wal-Mart or Target) for $100.