Our rent collection process involves a variety of tasks, but it's important to notate that these tasks can be State or County specific to you.
Now, let's go over each of the tasks we require as part of our rent collection process:
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Insure your late fee system complies with State and local law. Set your rental due date (typically the 1st of each month and a late date, which may be the 6th of each month). Our office likes to use 5% of the monthly rent as a late fee.
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Use software, preferably free, that can track and record your rents collected. For landlords, we are a fan of Cozy.com and Nestegg.com. You can also check out TenantCloud.com as another option.
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Provide the tenant multiple ways to pay rent each month. This includes mailing rent to a PO Box you hold the keys to, processing rent online via the website, and payment via debit or credit card (although this may involve a processing fee). Have each adult tenant sign off on the fact that they know the options available to them and that they understand the process in which to pay rent as well as the date due and any late fees incurred.
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Offer tenants a "free upgrade" to their rental home (i.e., new ceiling fan, refrigerator, microwave, etc.) if they signup for your direct debit program. This will add value to your property while making sure you have taken an extra step to assist your rent collection.
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As rent is collected, make sure it is distributed to a checking account, which you have access to both by desktop computer and mobile. Record rents collected into the appropriate software you have designated.
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While we use the 1st day of each month to notate when rent is due and the 6th day considered late, adhere to this system with no exceptions. Emphasize your tenants to communicate with you if they think their rent will be late at anytime. Make sure you have a variety of means in which to contact you, or a representative of your office, by email, phone, text to insure that you are easy to contact and accessible.
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If you do not receive rent on the 6th, an automated email (using a software provider like Cozy.com or Nestegg.com) can be issued to the resident reminding them their rent is late. Also, this software should automatically charge a late fee that is reflected in the tenant ledger.
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In order to comply with the credit collection procedure, make sure you limit your collection calls and emails. While this can vary based upon State, we recommend you review what your State's Attorney General will permit when it comes to collection procedure. The Consumer Financial and Protection Bureau (cfpb.com) can also be a great resource.
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Issue your appropriate State notice for non-payment of rent. This can also be called a 3 or 5 Day Notice depending upon the State you live within. Regardless, make sure this is an attorney approved document that you will sign and issue to resident. Making sure that all known occupant names are on the Notice is critical. Also, SERVING THE NOTICE in a means that comply with the lease and State permitted servings is equally as important. While we love to emphasize using a firm that specifically serves Notices on a professional level, depending upon the size of your operation and your cash reserves, most States allow you to serve residents these Notice on your own. Just document and communicate with your attorney to insure that means of service will translate well in Court.
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Once verification of service is complete, await the allotted amount of days (3 or 5 business days typically) to let the know Notice expire or see if the tenant pays rent in full plus late fees. WE DO NOT RECOMMEND ACCEPTING PARTIAL PAYMENTS. This can jeopardize your ability to obtain a judgment in Court and may force you to start the process all over again.
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Assuming rent is not collected in full by the time Notice expires, hand this file off to an attorney that performs evictions, at the County Courthouse for this rental property, on a regular basis. While many attorneys will charge hourly for representation, I tend to find it best to use legal counsel that offers a flat fee eviction service and includes two court appearances as part of this fee. Provide legal counsel the Notice provided for late rent, copy of a lease, and any documentation showing your attempts to reach out to the resident for the purpose of rent collection.
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Your legal counsel may very well not require you to appear in Court. Assuming so, just make sure Counsel is on top of filing the Forcible Entry and Detainer and pushing to get into Court as soon as possible.
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Perform drive-by the rental property every week to make sure that property is not being damaged and has not been abandoned. Now, this is not always easy to do as peeking in windows or accessing the property without any formal notice is not permitted. You may ask legal counsel for recommendations to insure that abandonment has not occurred. Regardless of outcome, do the best you can, legally, to protect your asset.
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County Sheriff will need to Serve your resident, face to face, in order to formalize the court appearance. A resident may attempt to dodge this service. If at all possible, and with legal counsel's permission, try to contact the Service provider and request you set up a location and time to meet the resident in the hopes that the resident shows up and the Service provider can serve the tenant for a Court appearance.
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Assuming all goes well, a Notice to Vacate and Judgment should be entered against adult residents in Court. Then, the eviction needs to be scheduled with County Sheriff (depending upon State). Have legal counsel, or yourself, set this up with the Sheriff’s office. Once set up, I recommend you let the residents know in the hopes that they clean up and move out by the specified time and date.
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Be in attendance for eviction. Sheriff may require you to schedule a moving company, a locksmith, tarps to cover resident items outdoors, so make sure you adhere to these requirements. Document damages, items left behind, etc. This is also a great opportunity to use your inspection software for these purposes (as we will talk about in lesson 7.
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Get the locks changed on all exterior doors. Plain and simple.
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Get your repair and cleaning vendors in property to turnover and re-lease.
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Contact your legal counsel for eviction for recommendations on the best way to collect on your judgment. This could be the use of wage garnishment or the use of a collections agency.
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Write down your lessons learned from each eviction! Each one is unique and can present its own challenges. Learning from these challenges is a key component.
This concludes lesson 5 on Efficient Rent Collection processes. Our next lesson, lesson 6, will cover creating an efficient repair management process for residents.
