Rent Collection

Rent collection represents the rent-receiving activity initiated by property managers or landlords from their tenants in exchange for using their property against the lease agreement. Landlords generally set up robust policies for the collection of rent as per local rent laws, outlining due dates, advance payment, payment methods, late fines, and property maintenance. All these come in the lease agreement accepted by both landlord and tenant, which makes them enforceable under law.

After the signing of an agreement or occupying the leased property, the tenure of the rent commences with the payment policy enforced. At the due date, the tenant has to pay the rental amount to their landlord using any method, such as cash, online or check payment or digital payment. To streamline this process, landlords can opt for:

•  online rent collection services
• rent collection agency
• rent collection app

As a result of the efficient collection of rent, landlords can expect to maintain property profitability and cash flow. Late rent payments or defaults by tenants can add to the financial burden on landlords and potentially cause legal and financial scourges on tenants. Tenants may get their credit report hampered if the landlord reports it to the credit bureau companies. However, if landlords implement strategies like online portals for the collection of rent, then they can establish automatic payments, digital record-keeping, and payment reminders.

A significant shift in the collection of rent towards digital modes has promoted the adoption of financial technology in real estate. Such transformation has created new avenues for fintech firms and changed the way in which businesses of property management can operate. Thus, an effective method of collecting rent can balance the needs of the landlord with those of the convenience of tenants by increased use of technology for the whole process.

Collection of rent can pose certain difficulties to landlords, but after using the below methods, it becomes easier:

• They can utilize an online payment portal to conveniently collect rent electronically.
• They can deploy payment apps like PayPal for easy rent transfers and digital payment.
• They can even set up automated direct deposits from the bank account of their tenants.
• Alternatively, they can also set up a convenient and secure rent check drop-off location for tenants.
• Other ways include visiting the tenant in person to collect rent payments for the leased property every month.
• Finally, they can collect rent through the mail by making tenants send checks using the postal service.

Renting out property can give an additional source of income to landlords but may contain certain problems, so let's learn how to set rent properly using the following tips:

• They must undertake thorough market research to know about actual local rental prices and trends.
• Make an honest and professional assessment of the rental property's value, taking into account amenities, sizes, location, and condition.
• Determine operating expenses to ascertain profitability and cover costs.
• Evaluate the demand and supply of rental property in the local rental market.
• Find the unique amenities or features of rental property justifying higher rent prices.
• Take the help of experts from real estate advisors or experienced landlords in the area.
• Respond to fluctuating market prices by making periodic adjustments to rental prices.
• Finally, check for local rental laws and regulations about rent control and various other rental-related prohibitions.

Let us use a few examples to understand the topic.

Example #1

Let us assume a situation in which Johnny, a landlord of a commercial building in Old York City, handles 20 commercial properties, including retail store A. In recent times, Johnny has faced difficulties in raising rent arrears due to problems in collecting and tracking payments from his tenant. Hence, Johnny collaborates with a local software provider, TechCollect, to implement an automated payment monitoring system.

The tracking system enables Johnny to track the collection of rent and payments in real-time while sending reminders to his tenants, such as Retail Store A. Moreover, the user-friendly system empowers Johnny to update the system on his own. Therefore, other tenants, including retail store A, have become highly punctual with their rent payments. More importantly, the system improved overall property handling by Johnny by significantly increasing the collection of rent and decreasing rent arrears by 25% in only three months of implementation.

Example #2

An online article published on 30 August 2024 discusses Dudley Council's enhanced collection system, which serves more than 320000 residents and handles 21000 properties. After facing challenges in rent arrears tracking, the council collaborated with MaxContact to execute a user-friendly dialer system. The solution enhanced the quantum of outbound calls and increased performance tracking through sophisticated reporting features.

As the system obtained independence from outsiders' need for updates, it has been empowered to improve efficiency, staff morale, and real-time changes. The smooth transformation, helped by detailed training, allowed Dudley Council to manage rental income efficiently. Hence, the system has promptly addressed the needs of residents and enhanced service delivery to the community.