They say that prevention is better than cure ... well, in no area of life is this truer than in rent collection.
Cashflow is the lifeblood of any business and good cashflow secures the ability of your property rental business to function properly. It allows you to pay your bills on time and maintain that squeaky-clean credit score that is so essential to a property investor. It allows you to take a regular income, which means youre not, basically, paying, or subsidising someone else to live in YOUR property - because thats what late rent payment means!
“In these economically turbulent times, CASH IS KING!”
It is fair to say that most property investors, when they start out in this business, assume that setting up a standing order is all that they need to do to make sure that their rent gets paid. If only! The reality is that the majority of tenants are a little fickle with their finances. Even well paid people have cashflow problems - what is it they say, "peoples lifestyles live up to their wage packet" - the more they earn, the more they spend. The majority of people in this country find themselves a little short at the end of the month - thats why sites like Quick Quid are doing so well!
Basically, what Im saying is that, if you want to get paid YOUR rent on time, you need to be a little more proactive than the average guy. Now, Im not saying theres a miracle cure that will stop ALL tenants from EVER paying their rent late, but statistically, all you need to do to get paid on time is to stack the odds in your favour. You don’t want to be at the BACK of a long queue of people owed money by your tenant; you want to be at the FRONT of the queue.
Lets imagine that 4 weeks before your next rent payday you knew your tenant had a cashflow problem - do you think it would help you to know that? Of course it would!
I have myself had the displeasure of being told by a tenant that she couldnt pay her rent that month because shed had a bailiff call a week before the rent was due saying hed be back in a fortnight with a court order to tow away her car if she didnt have some money for him, so she cancelled her rent standing order and a fortnight later drew her rent money out of her bank to give to the bailiff! That certainly taught me something about what type of rent collection technique has the best effect!
Now, lets imagine that the week before the rent was due, I knew the same day that my tenant had cancelled her standing order and Id called her to ask what the problem was and heard first hand about the bailiff’s visit. I could have advised her that her rent was her number one priority; otherwise she could be making herself homeless. I could have told her how to go about setting aside the debt, until she could afford to start repaying it and therefore stopping the bailiff from visiting, then at least I would have had a fighting chance of getting my rent money.
What about if, instead of the tenant cancelling her standing order, she just let it fail. When would you have known that you weren’t going to get paid your rent? Even assuming you run a really tight ship and that you make sure your tenants standing orders are set up to leave their account 3 working days before the rent payday, you still couldn’t have known for sure if the standing order had failed, or whether it was just delayed by the bank. So you’d probably wait another day or two before contacting the tenant - days that you can’t afford to lose when the rent payment is in doubt.
LandlordsRent Direct Debit Rent Collection Service
Well, with LandlordsRent Direct Debit Rent Collection service, you would have known - the same day - that the tenant had cancelled her next rent payment, giving you several weeks to have done something about it, i.e. get yourself to the FRONT of the queue of creditors.
O.K. So, let’s look at the same scenario of the tenant just allowing her rent payment to fail, but instead, let’s analyse the sequence of events that you would go through if you were using LandlordsRent Direct Debit Rent Collection service.
1. Firstly, on the rent payday your online direct debit account would show a failed collection and give a reason for its failure, i.e. insufficient funds in your tenant’s account. So you would contact your tenant immediately, armed with the knowledge that the payment failed and the reason why. You then wouldn’t accept any flannel from the tenant about, “it must be a bank error”, or “it’s definitely left my account - can you just wait a few more days to see if it arrives”. How many times have you heard those sorts of excuses?
2. Secondly, you would then agree to collect as much as the tenant can pay IMMEDIATELY and agree how and when to collect the balance. You could look to increase the frequency of your direct debit rent collections, from, say monthly, to weekly. Let’s face it; a week’s late rent is more then 4 times better than a month’s late rent!
So, by using LandlordsRent Direct Debit Rent Collection service you would already be several days ahead of where you were when you just used standing orders for rent payment.
Remember how this story started - within a week of the rent standing order failing, my tenant had already given her rent money to the bailiff. That’s time that I could really have used to proactively pursue my tenant for the rent BEFORE it was given to the bailiff.
So, however you intend to deal with late paying tenants, don’t be that person at the BACK of the queue waiting to get paid … be the person at the FRONT of the queue.
If you would like to apply for your LandlordsRent Direct Debit Rent Collection account please visit our website by clicking the link below.
Thanks to Alex Caravello for this article