The Importance of Proper Rent Collection Techniques

One of the things essential to the whole idea of being a landlord is, of course, cash flow. Positive cash flow will enable you to earn a profit. On the other side, negative cash flow will significantly disappoint you: your real estate property investments will crumble. While a solid number of things might affect your cash flow, one can say that it all comes down to your rent collection techniques. It's your approach that counts the most. This shouldn't worry you too much, though. Having a proper rent collection method will ensure you always get paid on time and in full. Stay tuned for a more thorough examination of this idea!
 

A guide through different rent collection techniques

Here we'll show you the types of rent collection one can choose from. Keep in mind that these are something you'd call standard.
 

#1 Online rent collection

Needless to say, our everyday lives wouldn't be the same without technological advancements. Nowadays, you use ACH transfers or rent-collecting software to do something you'd otherwise probably have to do in person. Luckily, most of these apps are very easy to use. They also possess various useful features and add-ons, such as tenant screening, credit and criminal records checking, and many more. However, there's a bit of a downside to them: they might take a couple of days to process your rent before you obtain the money.
 

#2 Old-school rent collection (in-person)

If you're not in the mood to rely on apps, you can simply collect rent using the old-school method: in person. Additionally, some people utilize a dedicated drop-box put in the common areas of the property you're renting to others. The most significant advantage to this rent collection method is that you can enjoy the money on rent day. Of course, there's always a slight disadvantage: this method demands more work and additional record-keeping. For instance, if you're not a resident on the same property, you'll have to commute monthly just to collect your money. Also, you'll need to ensure that you record the rent payments and provide reports just so the IRS won't sanction you. Lastly, let's say that if organizational planning isn't among your best traits, this method isn't strongly recommended.
 

#3 Rent collection via mail

As we've already said, collecting rent in person can be difficult if you're not living near your tenants. Instead, you can ask them to mail you their rent checks. The biggest plus to this rent collection method is that it's free: you're not required to pay for any software or service. Of course, there's something of a minus: it can be pretty unreliable since your tenants must remember and mail you the money on time

#4 Direct-deposit rent collection

Lastly, let's talk about probably one of the best (if not the best) ways to collect rent: direct deposit. This method takes automatic withdrawals from your tenants' accounts and adds to your account each month on rent day. This is a win-win situation for you and the people you rent the property to. It's safe and secure, and not much thinking is involved.
 

How to boost your rent collection technique

Now that you've looked at all of these rent collection techniques, yours is to pick out what works best in your case. Let's consider how you can collect rent more efficiently.
 

#1 Hire a property manager

Hiring a property manager to do some downright irritating tasks instead of you is a dream come true for many people. Property managers will collect rents, handle various issues, screen potential tenants, schedule maintenance and upkeep, and manage leases. Also, they'll even manage evictions if that is necessary. As always, we'll try to be as objective as possible: this comes with a specific cost, and you'll have to figure out whether the advantages of hiring a property manager justify the funds you'll invest. However, there isn't a more efficient way to obtain rent money and improve your relationship with tenants.

#2 Try not to collect cash

The best way to avoid many issues with collecting rent is to avoid collecting rent money in cash. That's because there isn't a method to truly document a cash payment. Further on, this could result in various issues if, for some reason, the payment becomes the subject of a dispute.
 

#3 Automate communication with your tenants

Let's talk about software you can utilize to automate your communication with tenants. For instance, some apps help you develop a welcome email template you can send to each new tenant once they relocate to your property. Experts from Helix Transfer & Storage advise using apps as a communication devices as it can save both time and effort. You can even communicate with your tenants before they move in. This is beneficial as they can quickly inform you of any delays with the packing, relocation, and such.
 

Additionally, most apps will allow you to set up automated rent reminder emails or invoices. Needless to say, these little traits will enhance the chances of your tenants remembering to pay their rent on time. This will boost your cash flow considerably.
 

#4 Inform yourself

Now, this won't boost your technique in an obvious sense, but it's still a good idea to inform yourself about local and state rental laws to see whether or not you're doing something wrong or illegal considering rent collection. Just so you don't end up in trouble.
 

Closing thoughts on the importance of rent collection techniques

That was all that we prepared on the subject of rent collection techniques and their importance. As you could've read, there are some ways to collect rent more securely and efficiently. Therefore, don't hesitate to implement some of the things we've mentioned above. You'll notice the results very quickly. Until next time!