26 Apr Flexible Rent: Late Rent Payment Fixes
Late rent payments are a huge challenge for landlords that could cause a domino effect with many other problems to follow. It creates cash flow issues as well as tensions between landlord and tenant. No tenants want to be hit with a late fee, especially if the payment is only a couple days late.
Flexible Rent payments could be the solution to having more consistency with on-time payments. This method of rent collection allows the tenants to pay rent on their schedule, which is extremely beneficial for the tenant and yourself. This minimizes late fees and improves the relationship between landlord and tenant.
WHAT ARE FLEXIBLE RENT PAYMENTS?
Instead of having a hard date for all renters to pay rent, flex rent payments allow your tenants to pay rent on their schedule. This will allow you to collect rent in installments throughout the month. This allows for the tenants to pay rent within their budget, and gives them more opportunity to pay in full and on time.
Why Offer Flexible Rent Payments?
With the growing popularity of working in what is called the gig economy, self-employed individuals, or do not receive traditional paychecks (think the rise of Uber, DoorDash, etc.). These factors can lead to late rent payments, especially if the tenant does not receive a paycheck when they were expecting to. This is the place where Flexible Rent could be beneficial.
For a long time, rent has been collected on the 1st of every month. Many people get paid at the end of the month and many leases start on the 1st of the month so for many tenants, traditional rent collection works just fine. For Landlords, this also works well, as all rent checks come in at the same time and can are easy to track.
Technology has now made it much easier to stagger payments while tracking them, making flex rent payments more possible as technology advances.
The COVID-19 pandemic has also shone some light on the benefit of installing flexible rent payment options. According to the National Mulitfamily Housing Council (NMHC), offering a version of flex rent collection helps tenants manage their finances easier. It has shown to be the best solution for late rent payments, as they can pay rent in timing with their paychecks. This could mean that as a landlord, rent is collected in the middle of the month or perhaps more than once a month.
It is important to remember that is is not the same thing as deferred payments or an excuse for a tenant to rack up debt. Instead, it is an alternate way for landlords to collect full rent on a monthly basis.
Benefits to Flexible Rent Collection
While not necessary for everyone, flex rent does have benefits for landlords and tenants alike. In fact, the traditional rent collection process works for a majority of people.
- Preventing Late Fees: Late fees affect those who do not receive paychecks at the end of the month, maybe on the 5th or the 21st. They would have to pay late fees more often because of the timing of their paychecks.
- Make Tenants Happy: This can reduce stress for gig economy or self-employed individuals, they have the benefit of knowing they can keep up with rent.
- Boost Your Reputation: Adjusting the rent collection schedule with tenant’s income cash flows can show that you are a caring landlord. A self-employed tenant with the availability to pay twice a month will help you look like the wonderful landlord you are.
- Reduce Evictions: Evictions are expensive. Flex pay offers the opportunity to have less evictions. With less late fees comes less evictions, and during an eviction you are unlikely to be paid by the tenant. This mitigates your risk and keeps your cashflow constant.
- Gain an Edge: Offering a flexible payment option could give you an advantage over your competitors who do not offer this program. This may increase your chances of filling a vacancy faster than someone who does not offer a flex pay option.
How to Set Up Flex Pay
If you only manage a few properties, it may be simple to set up. It is extremely important to ensure that the lease clearly states the rent due dates, the grace period, and the policy on late fees. Also have a system to track rent payments.
You could also use a property management app for landlords and tenants that has this feature built in. With this, you can set rent due dates and the rental agreement.
