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The Blitzkrieg Rent Collection Plan for Landlords

by Clay Huber on December 14, 2012 · 14 comments

  
rent collection

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.

  1. Payment does not arrive.
  2. 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. 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…

  1. 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.
  2. 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?)
  3. 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

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{ 14 comments… read them below or add one }

Greg Turnquist December 14, 2012 at 9:03 am

Don’t know if I agree with contacting through Facebook or Google+. It would require become “friends,” and would open a two-way street for communication. It seems it would possibly break down the concept of keeping the manager and owner separate. Also, does each staff member also plan to link through Facebook, or just one? And what happens when that person leaves the company?

It just seems like neither Facebook, Google+, nor Twitter are designed to support that. Email, for sure. But not these social networking sites.

Reply

Clay Huber December 14, 2012 at 9:20 am

If you are in real estate, you should have an LLC. All social media sites allow you to create an account with your company being the name, so that is what I (my company) does (for the very reasons you pointed out, i.e. someone leaves).

I am all about opening up as many lines of communication as possible. While I agree that you shouldn’t use your ‘personal’ social media account, I’m a big believer in creating a ‘business’ social media account for this sort of thing (not to mention for all the over branding purposes).

Thanks for your comment!

Reply

Dennis December 14, 2012 at 4:23 pm

Maybe this works for you, but I don’t chase or beg for rent. No payment by the 5th? In Philly we need to give at least 5 days notice before filing (or at least the courts like to see this) I post the 5 day Pay or Quit (Termination of Lease) letter on their door. If no payment with late fee by the 10th I pay the lawyer to evict. If they want to pay after they receive a court date, they get to pay rent, late fee, and costs incurred by filing eviction proceedings.

I no longer attend court the lawyer does this for me, if they want to make a deal in court he will do so as the tenants lose their right to appeal if they make a deal in lieu of standing in front of the judge. We require payment in one week as part of the deal, 99.9% of the tenants break the deal, which gets the ball rolling for the Sheriff’s office to do the actual eviction.

What I described above is the only way to really be a landlord if you are not feared the tenants will be your best friend and that will lead to your lending them money in the form of late or non existent rent payments.

Of late I have been thinking of wearing a black suit, cape, and top hat when interacting with tenants. Interesting how in the cartoons the landlord is always portrayed as a dark character. I bet the cartoon landlords got the rent on time!

Good luck with begging for the rent, your tenants are training you.

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Clay Huber December 15, 2012 at 7:09 am

Fair enough.

All I can say is “Good luck getting a trashed rental back and spending quadruple the money to fix it back up because you attempted to build zero relationship with the tenant so all you were to them is a “mean old landlord.”

Thanks for the comment.

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Doug December 19, 2012 at 12:05 pm

Clay,
Thanks for the article. There is merit to Dennis’ approach. My approach is almost identical. I manage multifamily properties in inner-city Chicago. Many tenants won’t take rent payment seriously without the threat of litigation. Although I serve 5-day notices on the 6th to all delinquent tenants, I won’t submit the notice to the attorney unless they are 30+ days past due. In order to qualify for a payment plan, the tenant must pay 1/2 of the balance due including late & legal fees. The agreement is executed in court, and the ruling on the case will be ‘Vacate with Leave to Reinstate.’ So if the tenant defaults on the plan, I can go straight to the Sheriff. Concerning trashing the unit, that’s what the security deposit is for. If damages exceed the security deposit, I can add that to any other funds due & submit the tenant to a collection agency.
I’m never rude & always professional. In some markets, you have to be very strict…it doesn’t make you a “mean, old landlord.” I’ve achieved positive cash flow on my properties. Having said all of that, there is some merit to your approach. ‘Blizting’ tenants on the 5th via email & text may cut down on legal fees.

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Clay Huber December 19, 2012 at 12:13 pm

This is why I love business. Everything is just opinions. In my opinion, there are better ways to go about it then you and Dennis’ strategy, but hey, that is just MY opinion.

If it works for you and him and you are both creating positive cash flow, then I’d call you crazy to stop with the strategy.

Thanks for the comment!

Jason Lavis December 14, 2012 at 6:59 pm

I agree with the article. Fair but firm. Then you are less likely to get an angry confrontation, or expensive legal drama. There are different ways to do things in life but giving respect to others is better for you in the long run.

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Clay Huber December 15, 2012 at 7:12 am

Exactly Jason.

Perfectly said. We should all be in this for the long term, so long term thinking is the vantage point I’m always taking.

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Al Williamson December 17, 2012 at 7:39 am

Clay, I think your system has strong pros and cons:

PROS:
1. Organized contact info with redundancy. – Love it
2. Systematic approach. Glad a human to human phone call is Step 1

CONS:
1. If the missed payment was a honest oversight, then one phone call/message is all that’s needed.
2. If tenant isn’t able to pay, then additional contacting is not necessarily useful / helpful to problem solving.

INTERESTING:
To build a systematic approach that provides tenant with resources (non-profit organizations, churches, etc.) WHILE 3-5 Day Noticing them. This would be a carrot and stick approach.

Reply

Clay December 17, 2012 at 8:23 am

Thanks for the comments Al. Appreciate it.

In response to the Con’s…

1) If it is indeed an honest ‘oversight’, then my system gives them a ‘taste’ of what will happen if they ever think they can get away with a non-honest oversight.

2) I agree; however, if the tenant isn’t able to pay and you don’t know about it, you need to find out somehow (per point #1, maybe it is just an honest oversight?).

I do see what you are saying though, just wanted to offer my thoughts on them.

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Melisssa Woycechowsky December 18, 2012 at 12:28 am

My tenants have up until the fifth of the month to pay without a late fee. On the fourth, I text everyone who has not paid a “Did you forget?” notice reminding them. I call them on the fifth. On the sixth, I send out a bill with the rent plus the late fee. On the tenth, they get three day to pay rent or quit notices required to start eviction. I have made payment arrangements with a couple of tenants who have got caught up, and one who I got to leave without an expensive eviction.

All of the tenants I put into the buildings have gone through a thorough screening and background check. So far I have not had to evict anyone who has gone through this process, though one of my tenants is coming very close and if it wasn’t December I’d start the eviction. I know that judges around here tend to be very lenient to tenants with children during the holidays and it’s not worth it until the new year.

If I started evictions on everyone who was late I’d have cost my clients a pile of money with court fees and turnover!

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Clay Huber December 18, 2012 at 7:12 am

Great point Melissa. If you use the model of automatically bringing the lawyers into it right away, I’d imagine you would bring a lot of unnecessary costs on yourself given it is probably just an honest oversight (assuming of course you have, as you noted, a thorough screening process).

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Geoff December 20, 2012 at 9:53 am

When you leave messages for them in the social medias, do you make the messages private, or leave them public?

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Clay December 20, 2012 at 9:59 am

Never public. I personally think that is a bit too far.

Reply

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