How to Encourage Timely Rent Payments

One of the most challenging aspects of managing a rental property is ensuring rent is paid on time. Although this is an inevitable part of multifamily Property Management, there are some steps you can take to make these situations easier on yourself and your tenants. To start, let’s focus on what you can do to make paying rent as easy as possible.

Online Bill Payment
If you don’t have a website that accepts online payments, put this on your to-do list immediately. Not only have studies shown residents prefer to pay bills electronically, digital payments save property managers and landlords the time spen

According to a 2013 study published by the National Multifamily Housing Council, 79% of renters prefer to pay electronically.

As we move into a more digital age, competitors will continue to create easier ways for tenants to pay rent, and tenants will expect it. Even if you have an online payment portal, you may want to consider launching a mobile app, allowing for yet another method of easy digital payment.

Paying with Plastic
More and more properties are accepting credit card payments. Although credit card companies charge 2.5-3% in processing fees on average, several payment platforms allow properties to push this charge over to the tenant.

If you don’t accept credit cards now, new web services like RadPad allow tenants to pay rent with credit cards and will send you a check on your tenant’s behalf. Best part is, the property doesn’t need to use RadPad in any way and the service is free of fees or charges for properties.

One thing we know for sure at HD Supply Facilities Maintenance is that people love to be rewarded. Whether it’s a contest or loyalty gift, customers (in this case, tenants) love to feel appreciated. Now that your payment processing is set up for success, let’s dive into some incentives you can easily implement to encourage timely payments.

On-time Discounts
Offer a discounted rate on rent if it is paid on time. This can be offered in the form of a percentage or specific dollar amount. Discounts in the $15-50 range should be sufficient. If you don’t want to accept a lower payment, structure your lease agreement so that rent is X dollars higher than you would usually charge. This allows you to offer rent discounts without taking money from your bottom line.

Autopay Discounts
Offer a discount if tenants sign up for automatic payments. Make sure to clarify rent will increase if they decide to stop automatic payments.

If you don’t have a method to accept automatic payments, call your bank to discuss using Automatic Clearing House (ACH) debits or find a third-party payment processor that allows for scheduled payments. It’s also a good idea to create documentation on how to set up automatic transfers for each of the larger national banks. That way, you’ll be able to walk your new tenant through the process at lease signing.

Prizes and Contest Entries
Interested in providing prompt payment incentives but turned off by the idea of giving away discounted rent? Contests and prizes can work just as well and in some cases, could also excite tenants during the time of month when rent is due. Prizes can be anything from iPads to TVs to gift cards. Here are a few ideas on how to incorporate prize incentives:

  • Announce a raffle giveaway each month for tenants who pay their rent on time. Promote each raffle the month prior by posting flyers and placing the prize in a highly trafficked location in the leasing office. Offer each tenant one raffle entry each month they pay rent on time. After rent is due, pick one winner from the drawing and announce the winner throughout the property. 
  • Offer a pizza party to all buildings whose tenants collectively pay rent on time each month. Team-based incentives put pressure on those who would consider late payments. 
  • Offer prizes to tenants who consistently pay their rent on time. Create brackets: 0-6 months of on-time rent gets a specific prize; one year of on-time payments gets a different specific prize. 


When All Else Fails
Even if you embrace technology, set up several easy payment gateways, and provide incentives to motivate timely payments, you’ll likely still have a few stragglers who just can’t seem to pay on time. Unfortunately, if all else fails, you’ll need to enforce late penalties.

Charging Late Fees 
First thing’s first: make sure you communicate late fee penalties at the time of move-in and draw attention to that portion of the leasing agreement. Some property managers prefer a set dollar amount and some, a percentage—usually 3-5% of the rent total.

Dealing with Delinquent Payments
Generally speaking, tenants who are late once tend to be repeat offenders. Here are a few things you can do to remind tenants that rent is due before penalties kick in.

• Each month, send a text or email payment reminder a week before the due date.
• Notify your tenant you will report their past-due rent to credit agencies, advance notice of
which should be included in their lease or rental agreement. Include information on the detriments of poor credit history.
• Post a rent reminder on your tenant’s door when rent is close to due or at the end of their
grace period, warning that failure to provide payment may result in eviction.
• If the tenant does not respond promptly, follow up with a firm but friendly phone call.

Although nagging tenants to pay their rent has (and always will be) an unfortunate part of property management, there are tried and true methods to make the process easier. What are some methods you use to encourage timely rent payment? Tell us in the comments below!

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