Well-maintained properties and quality renters won't make any money for you until you collect the rent! On-time rental payments are a critical component to building financial success as a real estate investor and realizing significant cash-on-cash returns from your portfolio.
When one renter struggles to pay the rent on time, it's a problem. For Detroit investors with large portfolios and multiple properties, when more than one renter can't pay the rent, you're at risk of a significant impact on your income. If you happen to manage properties for a trust or REIT, losing money now means the long-term financial goals of those you serve could be in jeopardy, too.
Short-term cash flow must be a priority when an economic crisis or a renter's financial challenges threaten to delay your rental income—but what can property owners do when a resident doesn't have the money to pay the rent? It's time to get creative! Follow these expert tips from a seasoned Detroit property manager to create payment plans for renters.
The Rent Is Always Due
First, let's agree that the rent is always due. No matter the circumstances—whether we're experiencing a widespread economic crisis or your residents lost a job for other reasons—the rent is due on time every month.
When residents struggle to pay the rent, your first step is to consult your lease agreement. Make sure the lease clearly details:
- The rental amount
- When it's due (and when it's late)
- The penalties for late payments or nonpayment.
A strong lease agreement is one of your best tools of support to enforce rental payments, regardless of the scale of your portfolio.
Still, even with an ironclad lease, unexpected circumstances can affect your resident's ability to pay their rent. However, not every renter who skips a payment does so out of necessity. An experienced Detroit property manager can help you determine renters who are genuinely struggling—versus bad renters who simply refuse to pay the rent.
Keeping You in Control
Despite struggling renters, investors can't allow their cash flow to suffer so much that it's impossible to recover. However, successful investors know that exercising flexibility with Detroit renters during hard times can go a long way in maintaining good renter relationships while minimizing the loss to your cash flow.
Be Flexible, but Take Charge
Don't let renters dictate how or when they'll eventually make a rental payment. As a professional Detroit property manager, we want to emphasize that it's crucial for property owners to maintain control over the rental payment process—especially when offering payment options.
A late payment is your first time to take action! When a resident misses a payment:
- Reach out: Follow your protocol for rental payment reminders. However, during a crisis, adjust your language to acknowledge tough financial times.
- Make yourself available for conversation: Let late-paying or non-paying renters know that you are open to a conversation and alternative solutions for collecting their rental payments.
- Recommend a plan to your struggling residents: When a resident lets you know they are experiencing financial difficulty, recommend a plan. Don't let them determine the terms of a payment schedule. Take charge and offer a flexible plan that they can either accept or choose to default on their payments.
Not every resident needs a payment plan during a widespread recession. Detroit property investors should exercise caution and avoid offering a blanket plan to every renter during a financial crisis. Many residents will continue paying the rent on time (in full) every month. If they don't need help with an adjusted payment plan, don't offer it!
Protect Your Income
When setting up payment plans, make sure you protect your income. Flexibility and empathy help maintain good relationships with renters—but don't bend so far that you can't pay your property mortgages or maintain your investment property business.
Consider these questions when helping Detroit renters with a payment plan:
- How much can they pay? Giving away free rent until a renter recovers financially is often not an option. Make sure they can pay something every month until the short-term plan ends.
- How much can you afford? Remember, maintaining cash flow is critical for your success—and you don't want to dip too far into your cash reserves to help a renter through a tough time. Know how much of a hit your monthly income can take while offsetting the rental payment for your residents.
When you have answers to these questions, document the plan for renters who need one. Make sure you both agree to the terms in writing, then enforce the plan.
Payment Plans Are a Short-Term Solution
- A payment plan doesn't replace the rental rules in the lease agreement.
- A temporary decrease in the rent to get through a tough time also doesn't eliminate the total amount of rent due from your resident to fulfill the lease agreement.
- Make sure your renter understands that paying less rent now (through the payment plan) means they'll pay more later to get their account up to date.
A Detroit Property Manager Enforces Payment Plans
Your Detroit property manager makes it easy to create and enforce payment plans for struggling renters. Own It Detroit can analyze your income, cash flow, and the needs of your renters to put appropriate plans in place when needed.
We'll never risk your income with our best-in-class service! Contact us to take with our seasoned property management professionals.