Funny Ways to Recod Rent Oayment
Collecting the rent on time is crucial for landlords – otherwise they might find themselves being out of pocket for interest payments on their buy to let mortgage. And, even if that isn't the case, a missed rental payment can still cause them plenty of anguish and stress. After all, no landlord wants the hassle of having to go to court in order to evict a tenant for non-payment of rent. It's not just time-consuming and costly, it also leads to bad feeling all round.
So, bearing all that in mind, this article outlines the best way to collect rent to make sure you get paid by tenants, on time, every time.
Is there a best way to collect rent from tenants?
There is no one best way to collect rent for every landlord. It varies, of course, depending on your own situation, but on the whole, direct debit tends to be the most reliable (and we'll go on to explain why later).
Then again, some landlords might prefer to receive cash or get paid by standing order. We know of no landlord who likes to receive a cheque, incidentally (certainly, not nowadays anyway). We'll go on to talk about these different rent payment options though, since they are still around today.
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Tenants paying rent in cash
Cash payments in the private rental sector are certainly not as popular as they were two or three decades ago. Then, many landlords considered cash the best way to collect rent. Not so today though. That traditional method is just too much trouble today. It means, for instance, having to go around to the property to collect the rent every month.
That's a chunk of time out of your life – especially if your rented property is a good 20 to 30 minutes' drive away. And what if you had more than one property? There would also be the petrol costs you'd have to fork out for to get there and back. For landlords who live abroad, having tenants paying rent in cash is, of course, impossible.
Another drawback to tenants paying rent in cash is the fact you have no record of the transaction – unless you produce a receipt each time you received cash as a rental payment, and then diligently record in a ledger. You'll need this for when it comes to handing in your self-assessment accounts.
Collecting rent payments by cheque
Yes, cheque payments are still around today – although we'd be surprised by any landlord who wants to receive their rent in this way. We certainly wouldn't describe cheques as the best way to collect rent.
The main problem with cheques is how long it takes to cash them – from three to five days usually before the money is available after you pay it into your account.
Not only that but if your tenant posts you the cheque then there is always the possible excuse that it got lost in the mail if they happen to be short that month and can't pay the full amount. When that happens, the rent can be substantially delayed – especially if your tenant sends 'another' cheque to cover it.
The fact you have to physically go to the bank to deposit the cheque can definitely prove to be a hassle. It might be the easiest way to pay rent for the tenant but it definitely isn't for you, the landlord.
Collect rent payments by standing order
Standing Orders are regarded as the best way to collect rent by many landlords. These bank transfer systems are easy to both set up and track. Regarding the latter, that's because a fixed amount is paid on the same date every month. The Standing Order is continuous until the tenant cancels it thanks to the fact it is an automated rent collection.
It's also possible to check the rent has arrived by simply using internet banking ie checking your bank account online. Standing Orders, like Direct Debits (which we'll go on to discuss next) are both excellent ways to collect rent online for free.
Rent payments by Direct Debit
Direct Debit payments are similar to Standing Orders ie they are also a form of automated rent collection where rents are paid out on a regular basis. The difference is the landlord has more control of the payment. He or she gets the tenant to sign a mandate (with the payment amount and payment date outlined). This can prove awkward and it is why many landlords use a third-party provider to arrange this ie a rent collection agency.
Receiving rent via direct debit means you also have a simple record of what has been received, and when – making your tax assessment form so much easier.
Getting tenants to pay rent on time
The best way to collect rent from tenants is to reward them for paying on time. Some rent collection services are rewarding tenants by improving their credit scoring if they're good payers. And this is certainly regarded by some as the easiest way to pay rent.
The collection services can achieve this by partnering up with credit scoring data company Experian. It makes paying rent a priority otherwise the tenant will be marked down if they miss a payment (just like homeowners with their mortgage).
Rent Score is one such company that incentivises tenants. It costs landlords around £10 a month to activate and will also set up the direct debit between the landlord and tenants. You'll receive statements as well as notifications when a rent payment is received. Better still, the company will also chase up late payments for you – so you don't even need to know about them.
There are a number of smart automated rent collection services available at the moment, and more being developed and updated on what feels like a monthly basis. These are mostly run by Prop Tech companies and are aimed at making the life of the landlord as easy as possible. If you're a landlord, then they are certainly worth taking a look at. We are sure you will find the best way to collect rent through one of them.
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Source: https://www.sandradavidson.com/best-way-to-collect-rent/
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