As lucrative as a rental business can be, there are still common issues a landlord has to face such as late rent payments. You need to know how to handle the situation right, as it will help you get your payments faster and prevent the issue from escalating any further. So let’s talk about these difficult moments: what do you do when your tenant is late on rent?
Handling Late Rent Payments
Issuing a Late Rent Notice
You can issue a pay or quit notice as soon as the tenant goes past the due date. The document should have the basics like the amount owed, how much the late fee is, and the consequences of not being able to settle the balance in the given grace period.
Communicating with Your Tenant
There's a reason why a tenant stops paying rent, and in case they have a valid reason for it, you can offer support or longer grace periods. You still need to remind them of the consequences as per the lease agreement, but a display of leniency is also advisable.
Providing a Grace Period
The Idaho Code does not state any specific grace periods the landlord has to give, but it would be nice to provide one anyway so the tenant would be able to pay even if the rent is late. It can also establish a good landlord-tenant relationship with your renters.
Charging Late Fees
There's no late fee policy based on the state laws of Idaho, so the amount will be up to you. Of course, you will have to make sure that the additional fees are within reasonable limits. Even when the law doesn't put a cap on the amount, having expensive late fees can affect your rental business' reputation.
Eviction
It's also important to note that the grace period for settling dues is different from the three-day notice you are required to give before starting the eviction process. It serves as a last resort if the tenant fails to pay rent after exhaustive measures.
It's best to hire an eviction lawyer when you decide to take further legal action since navigating the eviction process without knowing state and local laws can be a frustrating experience. On the other hand, you can also hire a property manager to handle the time-consuming process.
If you do decide to handle it on your own, be sure to have the proper documentation at hand since eviction processes require them for certain legal actions and local laws. Not doing so can leave you with unpaid rent and dealing with additional costs in damages.
How You Can Help Your Tenants with Late Payments
Offer a Payment Plan
You can accept partial rent payments to help the tenant settle what they owe. You can decide how much the partial rent payment would be and how often they would pay it until they settle outstanding rent payments.
Tenants will see this as a good-faith effort and can even encourage them to avoid paying rent late moving forward. Just be sure to include the terms in your rental agreement under rent payments, so your tenants know their options.
Suggest Rental Assistance
Idaho offers rental assistance for those who can't make timely payments. The Idaho Housing and Finance Association offers help to eligible tenants such as low-income families, the elderly, and disabled individuals.
Community Action Agencies also offer helping hands with late rent payments. The Community Services Block Grant (CSBG), for instance, helps both individuals and families based in the local community, which also covers rent payments.
Preventive Measures
Tenant Screening
The tenant screening process checks several factors regarding the applicant. Wave Property Management looks into the prospective tenant's credit score, criminal score, eviction history debit-to-income ratio, and calls previous landlords to check the tenant's behavior.
This ensures that the applicant will follow the rules in the lease agreement such as avoiding paying rent late and maintaining the property. It's a short process that can help you avoid dealing with more pressing matters in the future.
Rent Guarantee Insurance
Landlords can purchase rent guarantee insurance for risk management measures. It protects you from income lost due to late payments, and it usually covers up to 12 months after a tenant fails to pay rent.
The insurance provider will consider the financial stability and credit score of the tenants within your rental unit before underwriting the policy. Even if the landlord has this kind of insurance, the tenant will still have to pay for the rent and the fees incurred.
Security Deposit
With a security deposit from the tenant, you are covered if there is unpaid rent at the end of a lease. Unlike rent guarantee insurance, you won't have to submit a claim to the insurance company to get paid for late rent. You can simply deduct what is owed whether they are partial or full rent payments.
There are still responsibilities that come with this option, such as providing an itemized list of all the charges you made. It must be given within 21 days after the lease ends, or 30 days if it was specifically stated in the rental agreement.
Rent Reminder
A reminder to pay rent can be an effective method against late payments. This can be sent through a text message or a written notice. It can even be customized based on the tenant. If you believe a particular renter needs an earlier reminder, you can do so.
Offering Different Payment Options
Having more than one payment channel can let the tenants choose which option is more accessible to them. Some examples are dedicated rent payment software, bank apps, and more. You can even use tenant portals that property management companies usually offer.
Should You Hire a Property Management Company to Handle Tenants?
The rent collection process can be difficult especially if you have several rental properties to oversee, which is why hiring help from companies like Wave Property Management can be significantly beneficial. We can provide you with professional management and expertise in the rental market.
Aside from dealing with late rent payments and the tedious eviction process that it can lead to, we can help you get the most profit from your business. Use our free ROI Calculator to learn how your business is faring, along with our free rental analysis tool to determine whether it has reached its full potential.
