In a perfect world, every tenant would happily pay their rent on time, in full, month after month. Of course, any experienced property manager will tell you, there is no such thing as a perfect world. The reality is, people are late on their payments for a variety of reasons, and when they are, it can cause all kinds of issues on your end, not the least of which is cash flow. Add multiple properties with several late payers and you’ve got quite the financial headache on your hands.
Enter late fees…
One of the easiest and most effective ways to reduce payment delays is to implement a late fee policy. In other words, you would charge an additional amount on top of the monthly rent for payments that are remitted past a certain threshold of days. Generally, this grace period is around 3 to 5 days and the penalty is usually anywhere from 2% to 5%, though some landlords or property managers choose a flat fee vs. a percentage.
This may seem pretty straightforward, but it’s not without its challenges. One of the most common issues lies in the ability to enforce such a policy. For instance, a tenant may send in his or her rent payment late, but only for the amount of the monthly rent, not including the additional late fee. It’s then up to the landlord or property manager to try and collect the additional amount, which can become an uncomfortable situation.
Making Late Fees Work for You
Thankfully, there’s a relatively simple solution to avoid the hassle of having to chase down late fees and potentially damage your relationship with your tenants. That is, employing the right property management software. By automating the rent collection process, you’ll eliminate the guess work and create a much more transparent experience, which will foster - rather than fracture – trust. You’ll also enjoy a much more streamlined approach that will mitigate potential cash flow issues.
Late fees can be a powerful and highly effective tool for growing and strengthening your business. You just have to be strategic in how you approach them. Be sure to clearly communicate your policy and reiterate it as needed. And most importantly, employ the power of technology to remove the obstacles and make the process more straightforward.
Want to see what other ways property management software can skyrocket your success? Schedule a free product demo today.