How much will your home rent for?
If you work with a professional property management company, there’s little to worry about when it comes to rent collection. Most property managers have a process in place that ensures your rent is collected consistently on time every month. However, if you’re an independent landlord managing your own home, rent collection can become stressful. Tenants may be late, or they might not pay at all. Knowing how to handle that situation can be tricky.
Today, we’re sharing some thoughts on why a late fee is absolutely necessary for landlords.
Include Rent Information in Your Lease
The proper and timely collection of rent starts with a strong lease. Your lease should reflect how much rent is due every month, when it is due, and how it should be paid. You also need to include information about any grace periods and late fees. For most California leases, rent is due on the first of the month, and then late on the third or fifth day of the month. Decide on how many days you will provide the tenant to pay rent, and then make sure your lease includes the consequences of late rent payments.
Late Fee Amounts: How Much Should You Charge?
There is no legal limit to the amount you can charge in a late fee. However, you want it to be reasonable. If you charge a late fee that’s extremely high, the tenants may not bother catching up with rent at all. Consider a flat fee – such as $150, or a percentage of the rental amount. You could tell tenants that if rent isn’t paid by the fifth of the month, a 5 percent late fee will apply. If your rent is $3,500 per month, that late fee will be $175.
Some landlords and property managers charge a late fee and then an additional fee for every day that the rent continues to be late. This might give the tenants the incentive they need to catch up with rent quickly, but if you tack on fees that become too expensive too quickly, you’re reducing the likelihood that they’ll be able to pay at all. Do what makes sense for your property and your tenants.
Communicating with Tenants about Rent
Late fees are an effective way to ensure your rent is paid on time each month. It’s also a good idea to keep the lines of communication open with your tenants. The consistent collection of rent and application of late fees will let them know you’re serious about getting on-time payments. However, if something happens and they know that rent will be late, you want them to feel comfortable coming to you. Be willing to listen, and create an environment where your tenants are willing to accept their payment responsibilities, but appreciate that they have a landlord who understands when rent is late one month out of 12.
If you have any questions about collecting rent or anything pertaining to property management in Manhattan Beach, please don’t hesitate to contact us at South Bay Property Management Pros.