3 Pitfalls to Avoid When Renting Out Your Property
Thursday Jun 30th, 2022
Rent collection is a critical part for investors renting out their properties to generate additional income or fund their future investments. Anyone who collects rent knows, that late or partial payments can become cumbersome and troublesome for both the landlord and the tenants. So as a new investor with a rental property on the market, I’ve got a way to simplify the process with a few common mistakes to avoid.
1. Not doing your due diligence on your tenant’s rent payment history
A great indicator of future behavior is past behavior. Understanding a potential tenants payment history will provide insight as to if the tenant has recurring late or missed payments. You can get this information two ways; either by screening them or tracking rent payment status. Tenant screening services will let you know a tenant’s credit score, eviction reports, criminal background and reduce the risk of ending up with a problematic tenant. There are also platforms you can see a tenants payment status in real-time, so that you have the truth of the matter as you sign long-term leases and renewals.
2. Being too accommodating on late payments
Kindness goes a long way. And in case of unforeseen circumstances or an emergency, a landlord can be a little lenient once or twice. But continuous leniency often leads to financial stress, disruption of cash flow and general tension. By implementing a late fee (even if it’s just $20), encourages on-time payments and reduce the risk of being taken advantage of.
3. Not clarifying the rent payment process
Rent collection can be done many ways, each with their own pros and cons. No matter what mode of payment you choose, make sure to codify the process before the lease is signed. Clear expectations will eliminate challenges with tenants who only want to pay a certain way or if the way you prefer is unavailable.
Tips Moving Forward
1. Clarify and simplify your rent collection process
2. Use technology to your advantage
3. Do you due diligence
4. Manage your property properly
5. Implement flexible, automated payment methods
As a real estate investment expert, my advice goes beyond simply acquiring a property. My motto is to strategize to maximize, and that includes thinking long-term not only in your investment, but how to make it work for you. If you’d like to learn more, contact me today for a free consultation and let’s build a dream portfolio to work for you.