Have your residents defaulted on their rent again? It’s a huge blow. After all, the operational bills are still due, and your plans for that money now have to go on hold. So, you’re probably engaged in games of cat and mouse as we speak with no guarantee residents will cough up the cash.🤦♂️
Such scenarios are all too common. 15% of Americans have fallen behind on rent. The issue is global, too. In the UK, 59% of landlords say they’ve seen an uptick in late payments amidst the shaky financial landscape.
As economic uncertainty rages on, delinquent rent could spell disaster if left unchecked. It’s time to wage war on late payments. ⚔️ To prepare you for battle, we’ll expose some issues arising from rent defaults and how they can impact your business’ financial health. We’ll also share some strategies and solutions for hassle-free rent collection.
Table of contents
- The painful impact of late rent payments on owners
- How to dodge the late rent payment bullet
- Solution spotlight: How Flex helps you curb sluggish payments
- Win the battle against late rent payments 🏆
Noticed a decline in on-time payments? Get paid faster with Flex.
The painful impact of late rent payments on owners
Late payments aren’t just inconvenient. They can have consequences that can hold your business back. Let’s zoom in on a few
Cash flow dries up and reduces your company’s financial capabilities 📉
Who doesn’t love income streams? But when renters pay late, cash flow resembles more of a puddle than a river.💧 Here’s where issues arise. Property management for rentals comes with hefty costs, making constricted cash flow dangerous to your company’s financial health. For example, defaults can disrupt your ability to cover operating expenses. We’re talking mission-critical costs like mortgage payments, property maintenance, utilities, and wages. Soon, your company’s credit score will suffer, and securing affordable funding will become challenging. Strained relationships with lenders and vendors follow.
Property maintenance slacks
With less cash coming in, keeping properties in top condition also becomes more challenging. You may have to delay urgent repairs and cut corners, causing properties to deteriorate and reducing their attractiveness to residents. This problem is a huge deal, considering renters happy with their property’s maintenance are three times more likely to renew leases. 👷
Admin and costs spikes
From hunting down delinquents to issuing notices,managing late payments can stretch to-do lists to unmanageable lengths. The recovery process is also very costly. Wages for overtime and the execution hours required divert resources from strategic property management initiatives. As a result, growth-driving projects take a backseat as does your company’s progress.
Employee stress and disengagement rise 😮💨
Managing properties is tough. But do you know what’s tougher? Trying to keep a steady ship while late payments make rental income choppy and workloads explode. Considering many property managers already have jam-packed schedules (in states like Michigan, there’s one property manager for 754 employed residents), such a situation will wreak havoc on your workforce stability. Before long, you’ll wonder how you’ll hit company targets. Sleepless nights and endless mental math become your reality. Worse, your team can become demoralized, leading to higher staff turnover, and, you guessed it, even more work.
Investment opportunities fly by
We know how important growing your assets is critical for property management success. The problem is, late payments limit your ability to expand your property portfolio or explore new investment opportunities. This issue dampens your business’ growth. For example, at auctions you may spot a lucrative property in an upcoming area but don’t have the funds to buy the property. 💸
Legal issues roll in with hefty bills in tow
Persistent late rent payments can lead to vendors suing your company not paying them due to a lack of capital. But the legal problems don’t stop here. You might also have to take legal action to boot out offending residents that won’t pay up. In 2023, Los Angeles sent 40,000 eviction notices, 96% due to non-payment. These eviction proceedings can have hefty counsel and court-related expenses, which your business will be on the hook for.
How to dodge the late rent payment bullet
When managing late payments, prevention is always better than cure. Let’s run through some remedies to stop late rent payments in their tracks.
Communicate effectively 🎯
Despite it being common practice, imposing a late fee for tardy rent or seeking an eviction aren’t always practical. Whether it’s a layoff or an unexpected medical bill, life happens. These events impact your residents’ financial health. So much so that 56% of landlords have had renters move out due to being unable to keep up with rent.
To counter this problem, set clear and realistic expectations about due dates and consequences for late payments. For example, alongside the terms in the lease agreement, you could provide a quick sheet outlining:
- Rent due dates
- Payment options, e.g., split rent payments via a rent payments app and online rent payments
- Late fees
- The process following late payment
- Key contacts for financial assistance
Be approachable and helpful
Empathy is crucial in the battle against late payments. Avoiding conversations about financial difficulties is still ingrained in today’s society. 62% of Americans feel awkward discussing their finances. As a result, feelings of shame and hopelessness can plague defaulters. Ensure residents know they can come to you with any issues without judgment. Be ready to help late payers find a solution without resorting to penalties immediately.
Top tip💡: Provide educational resources on budgeting and financial health to help residents understand the damaging effects of late payments. 📖
Use data to spot warning signs early and intervene
There are often telltale signs tucked away in your company data that a resident will default. Leveraging these insights is an effective way to spot risky accounts and create preventative measures. To do this:
- Keep accurate rent payment records and analyze them often
- Encourage residents to keep you informed of any changes in their employment status
- Intervene early. Reach out to residents at the first sign of trouble and discuss solutions
For instance, say you notice a renter is experiencing financial hardship. After some digging, you uncover the late payments are due to a job loss. You can work out a temporary payment plan to clear the debt and share career development resources.
Incentivize early payments💲
Another proactive way to tackle late payments is to make paying on time attractive. Use incentives like discounts and rewards for residents who pay rent before the due date or cover some months upfront. Factor these incentives into your rent or business costs to avoid impacting profits. In action, the incentives could look like:
- Offering a 5% discount on monthly rent for residents who make payments a week before the due date
- Providing a 4% rebate for those who pay 3-6 months in advance
- Putting renters who pay on time into a raffle to win a prize
Commit to regular and timely property maintenance
Picture this. A summer heatwave hits and the air conditioning goes out. 🥵Simple daily tasks like cooking and sleeping have become unbearable. You submit an urgent maintenance ticket to fix the faulty air conditioner. After waiting days for help, you contact management; crickets. 🦗A few more days pass, and still no repairs in sight. At the same time, rent is due, and your landlord expects speedy payment.
Such a scenario would leave a bitter taste in your mouth, and quick rent payments probably wouldn’t be top of your to-do list. Conducting regular and prompt property maintenance fosters a positive landlord-resident relationship. Transparent communication throughout the process also breeds trust. This, in turn, motivates residents to complete rent payments on time. So, make property upkeep a priority to reduce delinquencies.
Provide digital and flexible payments 💰
Perhaps you’ve already set up online rent payments or offer a portal. The problem is that many solutions are generic, complicated, and cumbersome, even though they tick the digital box. These characteristics do no favors for your on-time payment figures. The fix is to remove such friction in the rent payment and collection processes with better tech and strategy. Here are some ways to make it happen:
- Provide flexible, digital rent payment solutions. With trends like BNPL and mobile payments picking up steam, providing flexible payments has never been more critical. Blending split rent payments with mobile payments is the ultimate combo. After all, most US consumers say they’d prefer to use mobile payments all the time
- Streamline payment options with a focus on self-service options. These options should reflect resident preferences. This includes a rent payments app for splitting rent into smaller payments like Flex (more on this later)
- Automate rent collection and follow-ups. 🦾Don’t rely on calendars, spreadsheets, and emails to track rent and chase late payments.Set up reminders in the residents’ preferred communication channels and style, e.g., audio message, a specific language, or text. Extra brownie points if the solution offers analytics
Solution spotlight: How Flex helps you curb sluggish payments
Flex is on a mission to speed up on-time payments for owners and property managers, and make rent affordable for residents, all while taking the hassle out of these processes. Using the Flex app, residents can access split rent payments and pay in smaller portions on-the-go. Users can also adjust the second payment date to make the cost more manageable, reducing late payments (subject to credit checks and terms and conditions).
With Flex, there’s no more guessing when your company will get paid. You’ll get rent on the 1st of each month, guaranteed. Plus, Flex has nominal fees for renters and no extra cost for your business. Some more perks of using the app include:
✔️ More on-time rent payments
✔️ Optimized cash flow
✔️ More ROI
✔️ Higher NOI
✔️ Less rent collection admin work
✔️ Happier residents and staff
Win the battle against late rent payments 🏆
Late payments are thorns in many property managers’ sides that increase workloads, deplete profits, and drag down morale. But the good news is you don’t have to settle for delinquent rent or expensive eviction processes.
Be a listening ear to uncover why residents go rogue on their rent. Then, put in place preventative measures to reduce their occurrence. Also, automate repetitive tasks like paying and tracking rent through digital and flexible payments through solutions like Flex. This approach will cut busy work and drive resident and staff engagement. Finally, stay on top of resident sentiments and adjust your approach continuously to maintain high on-time payment rates. Soon, cash will flow in, residents and staff will be happy, and late payments will be a thing of the past.
Ready to tackle late payments head-on? Learn how Flex can help you build a solid game plan.
