Are you getting the result you want? It is my belief in life that we really do “Teach people how to treat us”, and to add to Mike’s Post, we teach our residents how to pay their rent.
At Urbane, Rent is due on the first and late on the second. We assess and enforce a $50 Late Fee on the second and a $100 late fee on the fifth. If rent is not paid by the sixth, Seven Day Notices, including legal fees are prepared and processed. We work hard to have non paying residents evicted from the apartment within a fifty day window, pending how quickly our court cases come, which limits and deceases our exposure.
There are certainly exceptions, but not very many. Our lender doesn’t accept any exceptions regarding our mortgage payments. Some may think this is too harsh, but being a Start Up Company, approaching our five year anniversary, we simply did not, do not have the cash flow luxury of making loans to residents, because when they do not pay on time, that’s what happens, the management company has agreed, by default to loan them money.
I can tell you too, that we do not get any push back on this topic. It is made clear at the lease signing, and just isn’t a problem. But to have effective and prompt collections, one must also be on their game regarding Credit and Background Checks, and be disciplined enough, even in a high vacancy situation to turn away questionable credit history. There certainly are lots of schools of thought on who should be approved and who not, regarding credit and payment history, and we would love to hear your feedback and experience as to what works and what has not for your property.
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Sorry for double posting this comment. I was catching up on my Google Reader items and I should have read all of the updates before contributing because Eric is kind of talking about the same thing.
Here are my thoughts via an excerpt from a comment I already made to another post:
I’m sure you’ll agree that most people want to do what is expected of them and will follow rules that have been explained to them. Our residents are no different and they pay when you tell them to pay. For example, when you tell a resident “Your rent is due on the first and it is considered late after the first. There is a 3-day grace period to pay without penalty and after the third an additional late fee is due.” they understand that to mean that their due date is the third because that’s when the penalties start.
I really feel like this is really as easy as telling residents that rent is due on the first and late on the second instead of the forth. We did the same thing in Atlanta a few years ago when most large management companies transitioned from a 5-day grace period to a 3-day period. Two days wasn’t a big deal then and it’s not going to be much different now. 🙂
As a sidebar, providing a “grace period” feels like the right thing to offer, especially when considering the state of personal finance many are currently facing. Did our residents truly believe that they had a “grace period” or did they just understand it as a due date? If you think about this as change your “due date” (which is in essence what we’re talking about) it’s easier to buy into. Think about your credit card company. If they eliminated your grace period you’d probably be upset and you might even think negatively of them because some may interpret the change as a way to collect more fees. On the other hand, if all they did was change your due date (after notifying you in writing before the change) it wouldn’t be a big deal. Just a thought… I think we’re having conversations about it because we’re looking at the idea from the wrong perspective.
On the same thought, Eric’s example about our debt service lender is great. Residents pay our mortgage with their rental payments and regardless of whether or not they honor their obligation, we’ve still got to pay the bank. Why add 2 more days worth of risk to your monthly expenses? Get the payments on the first, put them in the bank, and then you’re done. Situations do arise and you should extend consideration as needed, but if you do have to go through the eviction process 2 days can mean a lot (especially in my area where they are already delayed by weeks and by turning my request in 2 days before every other competitor mine gets processed more quickly before the others come in and backlog the system, meaning I can finish the eviction and turn the unit more quickly, adding to my bottom line).
David, Thank you for sharing your experiences and ideas,
I agree with you completely, that the most effective way to increase collections and decrease delinquency is effective and clear communications as to what is expected.
Awesome post, Eric! It is all about training our customers in how we need to be treated. I work with a property that recently went through a management company change and had to face this very issue. People were paying their rent as late as the 10th in the month. Granted, the change in policy didn’t make a handful of residents very happy, but the new “Rent is due when it’s due” will make the property run a lot more smoothly AND, over time, won’t be an issue at all.
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Awesome post, Eric! It is all about training our customers in how we need to be treated. I work with a property that recently went through a management company change and had to face this very issue. People were paying their rent as late as the 10th in the month. Granted, the change in policy didn’t make a handful of residents very happy, but the new “Rent is due when it’s due” will make the property run a lot more smoothly AND, over time, won’t be an issue at all.
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Heather, Thanks for stopping by and sharing,
Your point and David’s are on target, we just all need to do as good a job outlining expectations, even when the topic isn’t popular.