According to a 2014 SmartMove user survey, payment problems are one of landlords’ top concerns about new tenants. It can be more than a simple nuisance; it can put your rental income at risk.

Chasing down rent payments with phone calls, late notices, and repeated requests can undermine the relationship between a landlord and tenant, making addressing other issues (such as necessary repairs) that much more difficult. In the worst case scenario, tenant turnover and evictions are both expensive and time consuming. Ultimately, payment problems are a headache that no landlord wants to deal with.

Tenant screening can uncover payment problems, eviction issues and prior criminal activity

A thorough and consistent screening process is one of your best bets to finding a great tenant who always pays their rent on time, but a few preventative measures will encourage tenants to stay on track. Here are a few effective ways to reduce payment problems.

"A thorough and consistent screening process is one of your best bets to finding a great tenant who always pays their rent on time"

How to reduce payment problems in 7 steps

1. Protect yourself with good communication

Straightforward communication about rent, due dates, and possible consequences for late rent will reduce any misunderstandings down the road. Be sure to review the lease in person with the applicant so that the key terms are reinforced.

2. Charge late fees

Late fees and payment policies will motivate tenants to make rent a priority. You’ll want to check your local housing laws to determine how much you can charge.

3. Keep detailed payment records

Consider asking that rent payments be made online or by check instead of cash. Since there is no paper trail with cash payments, it’s easier to fall into a disagreement about whether or not the rent has been paid. Online payments and checks are easier to trace and keep a record of.

If you do accept cash payments, be sure to write payment receipts so both you and the tenant have a record.

Keep detailed rental property payment records

4. Send reminders

Send a rent reminder 10 days before rent is due (if you use an online rent payment system, check to see if they send it for you). You can send these invoices through USPS mail with return envelopes included or send them via email. The benefit to using email or text reminders is that tenants will see it even if they are out of town, which can be important during the summer months or holidays.

5. Make payments easy

Ask your tenant about making online rent payments through an online rent payment service. It’s convenient for both you and the tenant, plus there’s always an electronic record of payments sent and received. You can consider offering a slight discount on the monthly rent for tenants who sign up for automatic withdrawal.

How to reduce rent pay problems from your tenants

One caveat here is that you want to make sure that online payments aren’t the only option for tenants to pay rent. You’ll want to be mindful of the fact that in some cases certain tenants may not have access to a credit card or computer.

6. Report rent payments

Reporting rent payments to consumer reporting agencies can be a strong incentive for renters to make their payments on time. There are several online payment services that offer the option for tenants to opt-in to reporting their rent payments. Knowing that a late payment could potentially impact their credit history could make the difference between paying their rent on time and putting it off a few days. It also is a great way for renters who have little to no credit to build their credit history.

7. Be consistent

Enforcing your policies in a consistent and professional manner will discourage tenants from taking advantage of your kindness. The last thing you want is for a small pardon to become a pattern of undesired behavior, or for a tenant to feel slighted because you addressed a situation with their neighbor differently.

Conclusion

Among the best ways to prevent payment problems is to get the right tenant into your rental from the start. A full credit report will show you their credit history, so you can see if they can afford the rent. Checking past landlord references will help you determine if they have a track record of paying on time. An employment reference check will show you if they have a stable job and income. With a reputable online screening service, you can get credit, eviction history, and criminal background reports all from one source.

If you use TransUnion SmartMove online screening service, you will be provided with a ResidentScore. ResidentScore is tailored to the unique needs of landlords, predicting evictions, 3+ late payments and/or insufficient funds more accurately than a typical credit score. ResidentScore helps landlords by interpreting a renter's credit report to measure their level of risk – helping you determine if they’ll be a good fit and minimizing the risk of payment problems.