The archenemy of the landlord has always been the tenant who is in arrears. Tenants who fail to pay on time are immensely costly to landlords, but it’s not just the missing rent that needs to be sorted out, there are a whole host of other costs that need to be funded too. Here are a few incentives to make sure your tenants pay up on time!
Time Costs and Chasing
A tenant who is late paying is not all that likely to ring you up and apologise if they miss rent, although it does happen. What’s more common is that landlords have to spend considerable time chasing tenants who don’t pay which is time that could be spend better doing other things. If you seem to spend your whole time chasing tenants about rent, it’s worth keeping track of time spent writing emails or on the phone: you may be surprised how much it costs!
Interest and Missed Payments
Rent that doesn't come in on time usually means a missed payment on a mortgage for smaller landlords and that can come at an enormous cost. Not only will you be charged a lot of interest but you will have a permanent blemish on your credit record. It’s possible to alter what the record says, but it’s a lot of hassle that’s best avoided.
The Opportunity Cost of Missed Rent
Finally, rent that is late is rent that you could have put to better use elsewhere. Even if you were only intending to put the rent towards savings or, perhaps, to pay off the overdraft, you’re missing out on interest that you could be owed. A lot of tenants suffer greatly from this and one of the best remedies is to charge tenants penalties equivalent to your opportunity cost for missed rent.
The only sure fire way to avoid arrears is to take out rent guarantee insurance, this way you know you’ll be paid on time, every time. Don’t let arrears build up too much and if a tenant is habitually not paying then it can pay real dividends to talk to both your tenant and your insurer to sort things out once and for all.
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