Rent collection policy and procedure
When you collect rent you want to make sure you have standardization and don’t deviate from that standardization.
What is your policy and do you enforce it?
Set the right expectations with the tenant at the beginning so they understand what you expect them to do. Be very upfront with your policies and procedures. When you talk to the tenants you want to make sure they realize rent is due on a certain day, rent is late on a certain day and what repercussions will happen when the rent is late. I suggest, in the beginning, you are very clear and very upfront. I suggest always putting it in writing so that there is never any “he said, she said” down the road.
Follow what your lease states
Follow the lease agreement and make sure that the tenants are on a current lease. Laws change, and if you are on an outdated lease agreement that could affect your enforcing the lease. It also gives the tenant a sense of commitment so they cannot just leave whenever they want to leave. You want someone responsible in the property, and part of that responsibility is committing to a time frame so you can plan your cash flow and your financials based on expecting it to be in that property.
Strict policies and procedures
Make sure that if you put it in your lease agreement that you are prepared to enforce it. I see a lot of owners that put things in the lease like a $250 late fee charge. Well, I am going to explain in a minute why that is so important. If you put it in the lease, you better be prepared to enforce it. Whatever the lease says you have to follow. If you charge the tenant or in the lease agreement say that you are going to charge them an outrageous amount because you want to scare them and you do not enforce the lease and you do not charge them those fees, you could actually be the one violating the lease agreement in the contract before the tenant. You could be setting yourself up for Fair Housing, Discrimination law violations and potential lawsuits.
A lease agreement is a bi-lateral contract
That means that you have to perform and the tenant has to perform. You cannot pick and choose when you are going to enforce the lease. So, for example, you can let the tenant slide a couple times on the late fees and then all of a sudden say now I am going to start charging the tenant. You cannot do that. The judge can look at it as you setting a precedent possibly by you letting them slide even the first time. So, again, if you don’t want to enforce it don’t put it in the lease.
One of the things that I have learned as an investor is with most tenants they have been renting their whole lives. You have been a landlord a fraction of that time. Who do you think knows how this operates better? You or them?
Most of the time most tenants do realize that rent is due and it’s late normally about the third or the fourth. So it just depends if they feel that they can push you off because they have other pressing priorities. My suggestion is you need to establish with them in the beginning that you are the number one priority and you’re not going to allow yourself to be pushed off. So, make sure that you know that. You need to teach them how you’re going to do business or they or going to teach you how they do business. They know what the consequences are, they just want to see if you are going to be the type of landlord that enforces them or that does not enforce them.
If you would like to know some more information you are free to go to our web site. We have a tone of information on there. Everyday use for a lot of investors is on there, video blogs, documentation, you name it, it’s on there. We are at www.empireindustriesllc.com and if you would like you can give us a call today. I would be more than happy to help you out.
Again, this is Steve Rozenberg with Empire Industries, thank you very much!