6 Tips for rent collecting from the Trenches

Small Beginnings

Let me lay a little ground work before I share all the juicy tips for collecting rent. A year and a half ago I moved to Memphis, TN. I didn't know a soul and was looking for love/connections in the business world. I found a guy who was connected to virtually half the city. I took him out for coffee and just asked him questions about life and what he did for a living. I then asked him to give him his top 10 business connections in Memphis so that I could call and meet with them as well. One of those connections led to a job working and being mentored/trained for 9 months at a hospital.

Last summer I took a few months off and came back to Memphis excited and ready to work. Since I had already laid the ground work for connections the year before I began to meet with these local business leaders and ask who they knew if real estate that could get me connected. One of the guys I took out for coffee immediately knew a guy who introduced me to another guy and I met with his boss who managed 600 properties and owned half of them. I was in way over my head.

I asked the guys for the job and they said we don't have a position for you. I asked what needs they had and they said collections. I proceeded to tell them I was a guy who could take that off their plate and they could train me in all things real estate. So, I got the job and began to mop the floors with the grunt work.

Memphis Spread

Many of BP members may or may not know this but Memphis is a great city full of history, grizzlies basketball, logistics and rental property. Roughly half or maybe even 60% of the city is rental population. Compared to other cities this is much lower.

Memphis also is looked down upon because it has a higher than normal crime rate coming in at top 5 in the nation every year.

Lucky for me I was eager and green behind the ears thinking everyone was like me and wants to pay the rent on time because it's the right thing to do.

Ahhh Lawd was I wrong!

Here a few things I learned along the way:

1. I was eager at first calling people to collect the rent. I trusted everyone and was sure they would pay on time. I began to realize that most of these folks are living day to day and are robbing Peter to pay Paul or in my case the RENTMAN which is the new nickname I received by tenants. Being lied to everyday is not fun but this is a business so act PROFESSIONAL! They couldn't pay on time because their light bill was $700 and late.

Tip:

Simply text or call and ask them when they are paying and how much? If they don't respond then continue to press them for an answer. Usually 3 strikes and your out works for me.

2. I guess there is a fine line between being lied to and someone not being able to follow through because of their circumstances. In most cases, when the tenants are living day to day then there is always something going on.

Tip:

Don't get emotional. Build vacancy into your business model. We anticipate 10-15% vacancy so let's not get emotional. A likely response is PAY ME MY MONEY; right? Just ask them what happened, how can I you pay? Borrow money from family? Pay a little now and the rest later.

3. It's hard sometimes to know what to believe sometimes; right?

Tip:

Give them a deadline. Usually I tell the tenants that they have one week to come up with a plan to pay. Half now; half later. If they are more than one month behind tell them they have to pay rent+25% of their back balance. Usually this doesn't work but its a starting point.

4. I looked at the application of a tenant who hasn't paid March. I started calling his emergency contact list. Someone picked up! I asked if they knew that person and I told them who I was; they hung up! So I called back and left a message that this person would be evicted this week if they did not call or pay the rent. Turns out it was a mother in-law. I got a phone call 4 minutes later from the tenant he would there friday and would not be late again! These tenants always turn their phones off because they can't keep up with the bill this month.

Tip:

Get all their contact info on the front end. Email. Emergency contact info. Parents info. In-laws info. Work numbers. If all else fails call their Mommy and tell them they haven't been paying rent. That will get them in shape real quick. You do this once and they won't be late again; I promise.

5. I go to the courthouse every week to do evictions. I would be helpless without my eviction attorney. Every wednesday I got to court for evictions. I also send all my FEDs(Filed and Detainer Warrants) on wednesday. I know that I need to make a decision on who to send and who to wait on.

Tip:

Call around to other property managers and find a good attorney who handles rent cases. Get a system of decision making going so that on wednesdays or a certain day you will send it to your attorney. Start with that date and work backwards. Two days prior I need to post an eviction notice in the case they might pay. The week prior I need to be driving by and posting rent notices. The week prior I need to be calling, leaving messages, and texting like crazy and so forth. Create a system and go for it!

6. I went to the house of a tenant to ask them if they were going to court in 2 days. I asked them if they wanted to go and they said, "UGhh No!." I said me either. I make deals with these folks all the time. Sometimes they work out and sometimes it doesn't. If they don't have a good job then I would ask them what would it take for them to give me the keys in one week plus half the balance owed? They don't want an eviction on their record and they certainly don't want a judgement.

Tip:

This is after you have filed the FED to evict. Two days before court go to the house and ask them if you can work things out. You don't want to kick them out and they don't want to go to court. Give them a time, date, amount, and when the keys will be in your hand. No more than a week and no less. Tell your attorney you want to continue the case one week. Tell the tenant that you will do them a favor since you like them and push it back one week. If they don't follow through then EVICT. One week lost is not the end of the world.

Re-cap:

I've learned more about people in the past 6 months than I ever thought I could know. We are not in the property management business we are in people management business. Dealing with people and knowing how to interact is crucial in handling tough situations. Every day I get handed the worst situations to deal with. Take the high road. Think positive. Think business. Take action.

Since starting I have learned about property management, investing, re-investing, hedge funds, section 8, re-habs, evictions, attorneys, closings, purchase and sale contracts, assignment contracts, double closings, wholesalers, rent collecting, managing relationships, managing people, got my real estate license, sold a $225k house the first day it was listed, and know how to solve really difficult situations!

Please contact me if you have any thoughts, questions, or advice!

[email protected]

Best of luck to rent collecting, investing and evicting!