No landlord likes it when the rent is late, and you don’t have to accept the loss of income. Use these tips to reduce the unwanted hassle of late rent payments.
Be very clear about your expectations
Prevent miscommunication about late rent payments by establishing your expectations with new tenants. Discuss the following information with your tenants:
- When the rent is due
- When the rent is considered late
- The consequences of late rent
Put everything in writing by including it in the lease. If problems arise, remind your tenants of the lease terms that they agreed to.
Impose late fees
Late fees are the financial penalty that a renter pays for missing the due date of a rent payment. For instance, if rent is due on the 1st of the month and the tenant does not pay until the 5th, they may pay an additional amount on top of the rent as a penalty. A late fee may be a flat amount or a percentage of the rent. The late fee dissuades occupants from paying late.
Some considerations when imposing late fees:
- State law – Check with state laws before establishing a late fee system. Some states have a limit on the percentage of the rent that you can charge as a late fee. Charging 3%-5% of the rent is reasonable in many states.
- Fee schedule – The date that you start imposing a fee may become the new due date, so choose wisely. For instance, if the rent is due on the 15th, but your tenant does not have to pay a late fee until the 30th, then the 30th could become the new due date in your tenant’s mind. Some landlords choose to do a daily late rent fee for this reason.
If the rent is late, you may try to contact the tenant, but avoid harassing renters with multiple phone calls. You may need to issue a “Pay or Quit Notice,” which notifies a tenant that if the rent is to be paid in a certain amount of days, or else you will be starting an eviction process. The number of days before a landlord can start an eviction varies by state, so check with your local laws regarding notices and the eviction process.
Late rent payments can significantly impact a landlord, so it’s best to have a solid plan when it comes to dealing with this potential loss of income. Keep thorough documentation of the process, know your local laws, and treat your tenants fairly.
And don’t forget, you can always streamline the rent payment process with online rent payments!