Let’s all get on the same page first. Whether you consider real estate a hobby or do it full time -and no matter how you slice and dice – it ‘is’ a business. The key to any business is your revenue. Without revenue, your bills don’t get paid, and when your bills don’t get paid, it’s time for your hobby to cease to exist.
This may seem like common sense, but in the heat of the moment, it is “sense” that can easily be forgotten or pushed to the back burner. This “heat-of-the-moment” event is when you walk to your mailbox and see that your tenants have not sent in their monthly rental payment. At this point (especially if you are a new landlord), lots of thoughts can begin to rumble through your head…
- “What do I do now?”
- “What is their phone # again?”
- “Hopefully/probably it will show up tomorrow…”
That last thought is the most common one people default to. Why? Bluntly: because nobody likes confrontation. Add in the fact that this sort of confrontation deals with asking for money, and it can make it all the more awkward.
All I will say in regards to the psychology of this issue is to immediately remind yourself about the statement I made in the opening paragraph of this article: Bottom line, the bills need to get paid so it’s time for some confrontation.
My situations is a bit different in that my business model revolves around land contracts (owner financing), so I’m not collecting ‘rent’, but ‘mortgage’ payments. At the end of the day though, I am collecting a payment, so my approach is still viable for you as a landlord.
Next time you ask yourself, “What do I do now?” – consider our method…
The Blitzkrieg Rent Collection Plan
This method involves contacting the person who has missed the payment in as many ways as necessary. You strike and strike fast. Let them know that you are well aware that is payment is missing. Let’s walk through how my company handles it. As you will see, it is a very simple three step process, but highly effective.
- Payment does not arrive.
- My Operations Manager immediately calls them.
- If they answer: ask them and GET DATE on when it will show so we can hold them accountable. “In the next few days is not valid.”
- If they do not answer: leave them voice-mail and commence with Blitzkrieg.
- 3. My Operations Manager then drops them messages via email, text and whatever other contact information we have from them.
- Create spots on your application/information form asking for Facebook, Twitter, Google +, etc. The more ways you can contact them, the better!
- We use a spreadsheet with all this information. This is a very easy way to avoid the “What is their phone # again?” probelm.
Seem Pretty Annoying?
I’m sure it is. Would you be a bit annoyed if your phone is buzzing with a voicemail, followed by a text message and email all about the same matter, then when you log onto Facebook you see a message asking about it? I know I would be annoyed. That’s the point though! You want them to know, as mentioned already, that you are well aware that the payment that is due “today” is NOT there.
*Important Point* – just because the method may be annoying, you should NOT be annoying in your communication. Be polite and respectful. Treat them like a human being and how you would want to be treated.
Collecting Rent Blitzkrieg-Style is Effective in Numerous Ways
While the method may be annoying, I’ve found that it seems to…
- Create respect for you – It shows them that you are well organized and are not a push-over. There are ways to show you are not a push-over other than being “forceful” (borderline rude) when confronting someone.
- Builds discipline for both you and them – They understand that you mean business and therefore begin to build the mindset of, “I don’t want to get bombarded again, so I better make sure my payment is in on time.” That’s the mindset you want! For you, it ensures you stay organized (spreadsheets!) and are always on your A+ game when bringing revenue into the business (which ‘is’ the purpose of things – right?)
- Develops relationship – You aren’t trying to become their friend, but when you communicate to them and treat them like a human being, that goes a long way. It goes back to the point above about getting them in the mindset of “I need to pay on time.”
Customer Service Accountability
You’ve collected all their information… it’s a two way street though. Time to ensure they have all the various ways they can contact you. Customer service is priority number one for my company. That certainly doesn’t make us special, it should be for your business too. What better way to offer customer service then to offer an office number, a cell phone number, an email, a Facebook account, etc. etc.?
Don’t feel like sending over the plumber to take a look at the toilet issue? This now gives them the opportunity to hold you accountable as their landlord. You can’t expect them to respect you if you don’t respect them in the same ways.
What about you? Do you have a successful method that helps get the point across that you “mean business”? Leave your comments below as I’m curious (as are others I’m sure) to hear what strategies you deploy in your business.
Photo: Bill S