You’ve taken the genius move of turning a home into a rental property.
Maybe this is one of your first proper investments, but it’s a smart move. Rental properties are highly profitable – but only when you pick the right tenants.
First and foremost, a tenant screening process should be implemented by all landlords. This helps you find great people looking after your investment and making monthly rent payments. Rent payments don’t have a thorough enough screening process – and you can accidentally get unreliable tenants. They don’t look after your property and constantly miss rent payments.
It’s the latter that matters the most. As a landlord, you need rent payments to help pay for all sorts of things. It’s a mode of passive income, and many landlords will pay off their mortgage with these payments or use them to pay property managers, etc. Regardless, you need that rent! So, what can you do when your tenants aren’t paying up? Let’s find out…
Speak to your tenants
Listen, you have to start things off by giving them the benefit of the doubt. Maybe they forgot about this month’s rent? If they’ve missed a few months, perhaps they think they’re paying rent but sending the money to the wrong account.
You never know what’s happening in someone’s life, so you should always go in with leniency and empathy for them directly and inform them of the missed payments. This is often enough to get a charge out of them. It separates the tenants who made an honest mistake from those trying to pull a fast one.
Think about it this way, you can technically make ductions from their security deposit for unpaid rent. If someone has missed an accident payment, they’ll be eager to make amends to prevent this from happening.
Regarding timing, your request should be made a day or two after rent is due.
Follow up with a formal letter
If the initial contact doesn’t result in rent being paid, you should follow this up with a formal letter. Wait 14 days after rent is due before sending this one out. It should clearly outline what the tenant owes, that it should be paid immediately, and what will happen if they do not make this payment. You also need to include some info saying that future payments will need to be paid on the due date in full.
This isn’t a legally binding contract or anything like that, but it does help if things get serious later down the line. Think of it as evidence that you took steps to inform the tenant of their errors and gave them ample time to react. If they still don’t pay after this, they don’t have a leg to stand on if things end up going to court.
Speaking of which, you should mention this in your letter. State that you will take legal action if rent is unpaid by a specific date. It’s clearly written down for them, so they can’t make excuses about not knowing what would happen if they didn’t pay up.
Don’t post this letter through the mail – visit the property directly. If your tenants are in, hand the letter to them so you can be 100% sure they received it. If they aren’t, slip it under their house/flat door.
Make further contact another week later
Ideally, most tenants only need one formal letter to scare them into paying rent. They thought they could drag things out after your initial contact, but the formality of the letter and the threat of legal action forces them to pay up.
The trickiest tenants will still stand firm. They ignore your letter, seeing how far they can push this until you give up. After all, that’s their only end goal here – they want to drag this out and hope you’re bluffing about the court. They know that it still costs money to pay for court fees and all that stuff. So, they expect you to eventually give up and let them get away with not paying.
21 days after rent is due – Twenty-one other weeks following your formal letter – you should contact them again. Send out another letter, give them a phone call, or visit them at the property. This is their final reminder – it’s gone on long enough, and you’re now edging closer to another month’s rent being due.
Go down the legal route
In an ideal world, this is the last-ditch scenario to be in. When tenants consistently do not respond to you or your letters, you’ll have to go down the legal route.
Find a lawyer who can help start the process of eviction as well as debt recovery. They’ll get everything in order and take legal action against the tenant. This may lead to court, where everything will be in your favor. You can evict the tenant if they’re still hanging around and not paying rent. At the same time, the court will help you do everything to recover the missed rent – or as much of it as possible.
This may include retaining the full security deposit or demanding that the tenant pay up or face jail time.
What to do if your tenants don’t respond and can’t be found?
This scenario is not as rare as you might think. Sometimes, tenants will disappear and leave a property without prior notice. They may have left the country or simply ignore everything and hope it blows over.
Here, there are two things you can do:
- Find and track the tenant – You’ll need to know how to trace someone to do this, but it is possible to track someone down based on personal information. If it proves too hard, you can hire private investigators or firms that track people for a living. Once they’ve been tracked down, you can contact them or inform the authorities of their whereabouts, depending on how far through the process you are.
- Speak to their guarantor – Now, when tenants sign a lease, you should make sure there’s a signature from a guarantor. If they do not pay up, this individual will agree to pay someone’s debts. It will generally be someone close to the tenant, like a family member or friend. Speak to them if you can’t find your tenant, which may help you get your rent. It’s also a good idea to do this during the initial stages of contact. Sometimes, tenants can pay rent due to unforeseen personal circumstances, but their guarantor will help them.
What not to do when your tenants miss rent payments?
You’ve seen what to do, but what shouldn’t you do when tenants don’t meet rental demands?
First of all, you should never enter the property without asking. Yes, you technically own it, but this doesn’t give you the right to barge in unannounced. Doing this could shift things in favor of the tenant when things start approaching the legal route.
Secondly, you cannot evict someone on your own. You will need an eviction notice approved by the local legal authorities and can’t go down to the property and start moving things out.
Hopefully, this clears everything up for landlords with problematic tenants. In the future, adhere to a strict tenant screening process with a credit check to ensure this won’t happen again!
