One of the most imperative job as a landlord is collecting rent. That is where you get the money to pay your business and personal bills. There are utility bills for your properties, maintenance, and if you have people working for you, their salary. This is why if you create property listings at Padleads.com — which will definitely attract potential tenants — it is important to screen them properly.
If all your tenants pay on time, then you will have a positive and stable flow of income to cover expenses. But what about those tenants who like to dodge rent and avoid you like the plague?
This is where you might consider using the services of a collection agency. Collection agencies are used by lenders and landlords to collect due payments. Not everyone hires them, unless landlords have exhausted all their means to collect unpaid rent. Once you hire them, they will take over collecting payments for you through different tactics, which do not border on harassment. Such as:
- Sending notifications through mail
- Contacting someone through phone calls
- Getting in touch with the tenant’s friends and family
- Personally visiting the debtor
If those tenants still would not pay, the collection agency will update their credit report which will affect the negligent tenant’s credit score so it would be difficult for him to request for loans or apply for new tenancy.
THE DOWNSIDE OF HIRING COLLECTION AGENCIES
There are reasons why using collection agencies are not the first option when collecting unpaid rent. They may help you but you have to be aware of the disadvantages of hiring them.
1. They are not always successful.
There is no guarantee that the tenants will pay their rent as soon as the collection agency contacts them. They can also avoid them the way they are avoiding you. Some people are just not threatened easily.
2. The money collected will not be given fully to you.
Collection agencies will take a percentage of the payment given to them. This would serve as their fee for collecting the debt for you and the usual range is 25-60 percent — which is a lot.
3. They may break the law.
Some collection agencies are known to break the law or push the legal limits when collecting payments and that may affect you too.
WHAT ELSE CAN YOU DO TO COLLECT UNPAID RENT WITHOUT HIRING A COLLECTION AGENCY?
1. Screen your tenants thoroughly.
Screening your tenants is the first step when trying to lease a property. Prepare a set of basic but important questions you can ask. You can utilize this for all the applicants so that you won’t miss anything. You can ask for their employer’s details to verify their income or ask for references from people who know them personally. If they have leased previous properties, contact their former landlords which will give you a clear idea of how they are as tenants.
2. Inform them on your policies regarding payment.
The moment they show interest in your properties after seeing your listing from Padleads, you should discuss your payment policies and make sure that they understand and agree with it before signing any leasing agreement. You are the landlord and they should know that you have certain rules about this.
For example, do not just say you collect rent at the end of the month. Specify the date that you will be collecting, e.g., every 30th of the month. Inform them of the possible consequences if they do not pay on time. This will imply that you will not be lenient with rental payments.
Set up different modes of payment for your tenants. That way, they won’t have an excuse for delayed postal services or that they could not find the time to meet with you. Online payments can be possible options since they can easily send rental fees with only a couple of clicks on their phones or computers.
3. Consider eviction
Evicting a tenant can be such a burden to landlords. Nobody wants to be the bad guy and taking someone’s home from them but there are limits to these situations. Serve the notice of eviction to let them know the severity of their debts. If that still does not work, it may be the time to finally evict them, or discourage them from renewing their lease.
If you allow yourself to follow these steps religiously, you might not need to hire collection agencies and go through a lot of stress in collecting rental payments from your tenants.