Do you receive 100% of the rents charged to your tenants, or do you feel as though you are constantly chasing rent payments? Late and non-payers can seriously disrupt the financial health of any business operation. But more importantly, the stress it adds to your day, and the attention it demands of you away from your other important activities, feels like a theft of something more precious than the money. It feels like a violation of your time and good health.
It’s actually a situation many landlords have found themselves in, whether new to landlording or running a portfolio for many years, and it’s also one that some landlords find themselves in repeatedly.
I’ve been there, and it was NOT a pleasant experience. About nine or ten years ago, not so long after all my HMO’s were set up and running smoothly, I decided to go back to work in central London. Since my houses were located more than an hour by train from where I worked, I ended up employing a letting agent to help me out and rent rooms for me. I soon discovered this would be a big mistake!
It was early days in the world of professional houseshares and not many agents would touch an HMO, let alone have experience with them, so I’m sure you can guess the outcome. Yep, £5000+ in rent arrears from tenants who disappeared, an attendance at court and more than a few grey hairs later, and I vowed I would run my property portfolio on my own from then on.
Since that time, despite encountering a variety of late payment situations (and hence, developing a process to deal with them), I have always received 100% of the rents charged.
I’d love to tell you it’s a simple 6 step process to receive 100% of your rent roll, but the truth is, there’s a few secret ingredients to add to the steps, which, altogether, are the reason successful landlords and property managers receive all of their rents due.
Secret 1 – Choose well
In my post on How to Qualify Tenants, I share the questions you need to ask to help you choose the best tenants. If you follow those steps, you will always be choosing tenants with intentions and motivations to pay their bills on time.
Secret 2 – Provide great properties and a great service
My golden rules are:
• always treat your tenants with respect
• attend to maintenance issues promptly
• keep lines of communication open for all tenants / be approachable
• ensure your admin is correct and organised
This doesn’t mean you will only receive 100% rents if you are offering a boutique hotel type property. You can offer basic level accommodation to blue collar workers or LHA tenants, but if the property is maintained well, your customer service team are efficient, and your admin is accurate and organised, then you too are offering a great product and service.
If you need help keeping your organisation and admin on point, check out our Virtual Management Services.
Secret 3 – Attitude
The right attitude comes from knowing you deliver top notch! When you know you provide a great product and service, it is much easier to insist on prompt payment terms from your customers.
Secret 4 – The landlord’s safety blanket
A Section 21 is a landlord’s safety blanket, so set yourself up to be able to make best use of it. Always issue six month tenancies then, rather than renew, let them roll over to statutory periodic. This leaves you free to issue a Section 21 at any point (after the first four months) if things turn sour. In order to rely on a Section 21, make sure all of your paperwork is served correctly, and within the correct time scales.
Secret 5 – Process
Okay, so creating a process is not such a big secret. The important point about creating a process is that you need to stick to it and act promptly at every stage.
Here’s some suggestions:
• On move-in day, send your new tenant an email with your bank details and remind them to set up a standing order. Many landlords prefer to submit the standing order form to the bank themselves, but I don’t believe it’s necessary. Let the tenant take some responsibility for the successful management of their tenancy.
• If a tenant contacts you in advance asking for a grace period as rent is likely to be late, reward them for their courage and openness, and be accommodating. I always ask for a token payment to be paid on rent payment date, with the balance to be paid on a pre-agreed date.
• Give two – three business days for rent to arrive into the account at most. If it has not arrived, contact your tenant by WhatsApp so you can see proof that the message has been opened and read. I find tenants are usually apologetic and arrange the transfer immediately at this point.
• A tenant might disclose at this point that they are unable to pay the full rent amount. Revert to the step above and ask for a token payment now, with the balance to be paid in X days time.
• Any unpaid rents or lack of communication from this point onwards need to be dealt with in a more serious tone. My next method of contact would be a phone call, then a formal letter, and then a section 21.
• Have late payment charges written into your contract. For tenants who communicate with you in advance and make concerted efforts to rectify the late payment issue, waive the charge. For habitual late payers, non-communicators and endless excuses, apply the charges. Realistically though, you would be serving a section 21 asap to tenants who fall into bad habits.
• Employ a VA to set up and follow these processes for you. We teach you how to employ and train a VA in our E-Book How to FREE your time from tenant issues and admin hell in 7 easy steps
Most people are good hearted, and if you have done your tenant screening properly, you won’t be renting to tenants whose sole intention is to take advantage of you or rip you off. That’s not to say that good hearted people won’t end up in unfortunate situations from time to time, and sometimes make a right hash of things.
You are the adult here, the business owner, the wise one. So you need to be the one to teach your tenant how best to handle the unfortunate situation they are in. Educate them. I have converted some poor and erratic payers to become regular good payers. It is possible. But there is a fine balance to be struck here between compassion for their situation and firm boundaries – not dissimilar to parenting teenagers!
So, be honest with yourself – which secret ingredient seems to be missing (or less developed) in your landlording business? Do you need to vet your tenants more rigorously, does your product or service need improving, are you proud of the properties you rent out and does it show, do you need to give yourself more control (the ability to serve Section 21’s quicker and easier), or does your rent collection process need some tweaking?
Focus your energy on improving that one element of your business first, before working on any of the other areas, and you will begin to see more rents arriving into your account in full and on time each month.
Want more?
Did you know SenecaRooms offers HMO business consultancy services? We’ll help you improve the performance of your HMO landlording business – increase your profits, increase tenant satisfaction, and increase your freedom and enjoyment from the business too!
Book a free initial chat with us here: https://senecarooms.com/contact-us/