When implementing due diligence with tenant screening by checking background, credit report, verifying income and employment, and checking landlord references, most landlords can place tenants who pay rent on time. On-time rent collection can also be helped by providing easy online rent payment methods, rent reminders, and keeping in communication with your tenants. But sometimes curveballs happen, even to the most reliable tenants, and past due rent can become an issue. But there are some ways landlords can respond that will bring about the best results. Here are 4 tips for collecting tenant debt from Murfreesboro’s RPM Rental Solutions to make this challenge a little easier.
Former tenant’s rent debt
If you had a tenant move out who owes you money for rent or damages, the first step is locating them. Did they give you a forwarding address? If not, go ahead and mail a letter to their previous rental address with you and mark the envelope “Address Service Requested” (pay USPS for this service). USPS can forward the letter and send you the correct address. You should also follow up by emailing the former tenant.
Report to credit bureaus
It is helpful to any future landlords if you report the debit to the three credit bureaus (many property management software companies, such as Appfolio, provide this service). Don’t you want to see previous landlord debt when you screen applicant’s credit report?
Go to court or collections, or settlement offer?
You can file a small claims case, hire a collection agency to pursue the debt, or offer the tenant a settlement offer.
- Small claims court – If you file a small claims case against a former tenant, you may also be able to collect for the legal fees. This can cost more money and take effort, but it may be worth this depending on how much the tenant owes.
- Collections – A collection agency is an easy way to continue to have someone working on tracking down the tenant and trying to collect the money that is owed. However, the agency gets a large portion of any funds that may be recovered. The success rate is not great either. But sometimes this is the easiest option to at least continue to pursue the debt and doesn’t require any more out-of-pocket funds.
- Settlement offer — You may also want to consider sending the tenant a ‘Settlement in Kind’ offer just BEFORE going to court or collections. Tell the tenant they “owe this much, but you will accept this much” to avoid court or collections. This can be a last-ditch effort that may end up being the best result for both parties.
Current tenants late with rent
When a tenant pays late — in violation of the lease agreement — the landlord or property manager does have some options. It is important to follow both your state laws and the lease before proceeding. With Covid-19, there have been many complications with eviction moratoriums and rent relief programs that may need to be considered as well.
- Installment plan? With the Covid-19 pandemic, many landlords offered different options for tenants to pay portions of a missed month’s rent in installments. You can create a lease addendum laying out a payment plan that you both sign.
- Rental assistance programs – Many local nonprofit and government agencies provide rental assistance. A landlord can partner with a struggling tenant to help supply contact information, tenant payment ledgers, lease agreements, etc. to help.
- Payment discounts – You could offer a discount on rent for on-time or partial payments.
Remember to document, document, document. Keep everything in writing, take photos, collect signatures. Also do not ever retaliate against a tenant by turning off utilities or not responding to maintenance needs. Be sure to follow your state and local laws.
We hope our 4 tips for collecting tenant debt are helpful to you in managing your rental property in Middle Tennessee. The property manager job can be made easier for you when you partner with an experienced and professional property management company, like RPM Rental Solutions. You are protected legally, prepared more efficiently, and start that cash flow as soon as possible. If you’d like to learn more about our property management services or for a free rental evaluation of your Middle Tennessee property, contact us at 615-900-4067!
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