Real Estate Investing | Tips for Collecting Rent

One of the consistent reasons we often hear from investors when they are uncertain about investing in real estate is a reluctance to become a landlord.  So often stories are traded like ghost stories around a campfire and the worst case scenarios seem to grow legends of their own.  The reality is, if an investor wants to own and manage their own properties, it is possible and can be a great experience.  Their is no need for fear, but there is a great need for educaiton.

As a landlord, my experiences dealing with tenants have ranged from pleasant to downright disastrous. Every aspect of being a landlord has come with its own unique challenges and learning experiences.  My family has been investing in properties for a lot of years and we have all been through very unique experiences as land lords. Whether it was in Colorado, Tennessee or Florida, we managed our own properties and learned the hard way how to collect rent.

Today, we own and manage a Memphis, Tennessee property management company named Premier Property Management, LLC which will surpass 1,000 properties under management in 2011.  Even though we manage this vast number of properties, we still average less than 1% of our properties needing any legal action each month to collect rent.  The ability to collect rents hold down our costs and the costs for the real estate investors we serve.  Here are a few tips that we have learned about collecting rents as part of the management process.

1. Know your local and State laws. So much of my advice may seem redundant at times, but it should be! The first piece of advice I give on any subject is always educate yourself. Without knowing the rules of the game, how can you ever expect to win?  The name of this game is collecting rent, on time each month and collecting the late fees when it is not. Whether you consult with other investors at local real estate clubs, talk to investors from your area online or visit in person with local management companies, there are ways to figure out the local and state laws without having to bury your nose in law books at the library.  Find those around you with experience and ask their advice. Ask for everything you can including copies of leases and notices.  The worst they can say is no and you will find a majority are happy to help someone trying to make a go of it on their own.

2. Be Polite, Professional and Consistent. When managing properties, the best way to start a relationship with a tenant is with mutual respect.  Always being polite and professional is a great way to start off and gives you a great deal of room to ask for respect and courtesy in return.  Being consistent allows you to always apply the rules you have laid out in your lease because they are enforced to the letter.  This will go a long way in making your collection efforts easier as the tenants knows you are being consistent and fair.

3. Bring out the big sticks when necessary. When it is necessary, sometimes a property owner has to step up to the plate and play hard ball with a tenant.  This is when having a good understanding of the local and state laws can benefit an owner greatly.  Legal letters from an owner threatening eviction are always great ways to alert a tenant they are behind and to protect the owner.  From here, depending on your laws, notices on doors, notices in the yards, collection phone calls and even knocking on the front door - loudly - all come into play and should be used in some variation.  Tenants have a binding responsibility to pay rent and if you have held up your end of the agreement, they should hold up theirs.

I always suggest going out of your way to deliver a quality property that meets not only all of the quality of life issues, but also the comforts of life as well. Treating a prospective tenant with respect and being very clear about what they can expect from you and what you expect from them will only make the hard part of collecting rents easier.  Above all else, always be fair. If a tenant has the ability to work with you and you can make payment arrangements work with your budget, then by all means work with the tenant.

During the process of sending notices and placing phone calls, more than likely a tenant will contact you with a request.  This is a real good time to assess the future of this arrangement and the willingness of the tenant to be responsible.  As an investor managing his own properties, the communication is what you want. If the tenant can't pay, you want to know early and you want to know why.  You then have the choice of getting them out of the property or working together. The idea behind all of the touches, is to get the rent collected on time every month and if it is not on time, then to get it all collected with late fees.  By being fair and balanced, yet strict and consistent, you should have very few problems with collecting rent.