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Property Management: Collect Late Fees or Lose Control
During the application process, make it very clear to the potential tenant that your business is very strict about the two tasks I mentioned above. Clearly state that if payments are not made on-time and in-full, or if the property is not properly taken care of, then the tenant will be evicted without a moment’s hesitation. Generally, this brief but important conversation can eliminate a whole population of “professional tenants”—those who enter into rental agreements with no intention of paying the rent, and live there for as long as they can before the landlord finally forces them on to the next location. Don’t give anyone the impression that you can be taken advantage of during the application process.
Once you have your tenant under contract, consider charging late fees on rental payments. This will keep your tenants in check, and train them to respond to your rules and regulations. If they know there are no consequences for making a late payment, then they will not respect you, and you will be paid whenever your tenants get around to it. Most rent is due at the 1st of the month—make the rent late after the 5th. Charge a percentage of the rent (5-7% is reasonable), and enforce it. If you don’t enforce the late fee policy firmly and consistently, then it is worthless. Don’t let a tenant slide simply because it’s the first time he’s been late; if he faces the penalty, it will be the last time as well.
In addition to commanding the respect and obedience of your tenants, the late fee will also help put a little extra cash in your pocket. Anything that increases your property’s monthly cash flow is good for business, especially when it ensures continued on-time payments in the process! Although it may be difficult to establish yourself as the enforcer over your tenants, remember that you run a business, and you must maintain control over your interests.
What do you think?
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Comments (5)
Very true. It's the nitty griity that determines success in many instances!
Don Konipol, about 14 years ago
I agree that it is important to stick with the lease. The worst possible thing a landlord could do is sometimes enforce lease terms and do things differently with other tenants.
Account Closed, about 14 years ago
Great post. If you don't take your lease seriously, neither will they. It took me a few bad tenants until I started talking like my lease when we signed. Spell it out and enforce it!
Jon Klaus, about 14 years ago
Jay, great post, and important for all property owners to apply these tips. Especially the late fees. If you fail to collect late fees, you start a slippery slope that does not end good in most cases as a landlord.
Kevin Kaczmarek, about 14 years ago
I'm great at finding tenants that fix up and improve my property on tgheir own dime, but I'm not good at enforcing my late fee. I've never charged a late fee in 12 months. Hopefully, I will improve on this in the future. For now, at least they always pay & my properties are looking great!!
Jeremy Bailey, about 14 years ago