Dealing with delinquencies especially in rent collection is an age-old problem that property managers have to deal with especially in the recent past. Due to unprecedented economic times, residents are not able to pay their rent on time while some of them do not pay at all. In multi-family properties, effective delinquency management is one of the most overlooked factors despite this having a major impact on operational performance. Common effects of having applying inefficient techniques of dealing with delinquencies in the real estate sector include; increased risks to the community or portfolio, reduced financial performance through working capital requirements, unnecessary expenses and write-offs and disruption of operations that affects productivity and resident turnover. So what are some of the ways that property managers can best deal with delinquencies?

Create a Disciplined Approach and Impose Reasonable Penalties

Property agents understand how crucial it is to have a disciplined approach when it comes to rent collection. It is equally important that everyone understands the rules. When there is an inconsistent application of the rules, then residents are likely to abandon the culture of prompt payments. When there are alternative payment plans, exceptions or one-off favors, such a situation is likely to set a dangerous precedent leading to residents accumulating insurmountable balances. The key challenge therefore is to have effective processes, train everyone involved and have the right technology to ensure compliance where everyone is accountable for the good stewardship of the property. Residents who violate the contractual agreement of their leases should face the consequences. As a real estate agent, it is important that you have a policy regarding late payments and also put in place measures to address any legal cost associated with late rent collection. Make sure that the residents are well aware of such fees for example by displaying it prominently on the lease agreement as opposed to burying it in fine print.

Recover Legal Cost and Align Team Incentives

Covering another person’s legal fees is not something that any real estate agent would wish for. However, there is always the possibility of accruing legal charges when tenants do not pay their rent on time. The greatest challenge is probably ensuring that such fees revert back to the resident’s ledger. Sorting through legal bills and trying to attribute individual fees to the respective residents is a tedious exercise that will take a significant amount of your time. To address this challenge, you should keep electronic invoices such that they can be posted automatically on the residents’-level back to the ledger. This enables you to recover the accrued bills that the resident might have a hard time deciding whether to settle or not. That said, it is worth noting that some jurisdictions have statutory limitations with regards to entails reasonable legal fees even when the lease agreement allows for full recovery for example when dealing with mobile homes for sale. On the issue of team incentives, some real estate companies tend to reward agents and property managers once they achieve certain goals and objectives such as improved occupancy rate and reduced expenses at the property. Whereas such incentives are not entirely a bad idea, they are also a recipe of mixed priorities for property managers. You might end up bringing down the vacancies and legal cost but at the same time experience the skyrocketing of delinquencies due to non-filing or removing non-paying residents.

Eliminate Emotion

Property managers interact with different people on a daily basis and develop relationships depending on the nature of business. Such relationships can help you retain residents while at the same time fostering a positive reputation for your property. However, developing healthy relationships require a delicate balance in order to establish effective boundaries while at the same time being the custodian of property management. The best approach is to apportion responsibilities with every individual in the property management chain being aware of their roles. You can also have a legal team that acts as the bad guys when it comes to rent collection enforcement measures. When dealing with delinquencies, some of the activities require a different kind of skill set and demeanor-more than just playing the role of customer service. In fact, most large realty companies no longer have some functions revolving around rent collection on site. This helps to reduce the emotional pressure of the real estate agent or agency as well as additional administrative responsibilities. Instead of having to justify yourself as a realty agent regarding making exceptions or other special arrangements regarding rent collection, you can simply point out that some activities are handled elsewhere which implies that you have little or no say regarding what happens.

Automate with Technology

Many property managers still use outdated methods to prepare notices and file them, paying the court among other expenses. However, the availability of real estate management software now allows you to automate processes hence ensuring that some activities are on auto-pilot. Once you utilize the power of technology, you are able to pull balances electronically from the ledger in an accurate and timely manner for the execution of collection policy. This means that property managers and property managers no longer have to prepare collection letters or draft delinquency reports. With the right real estate management software, there should be no excuse as to why the real estate agent does not follow the collection policy. In addition, documents such as legal invoices should be run electronically and posted automatically on individual residents’ ledgers. There are so many other areas where technology comes in handy when it comes to delinquency management. You often find that some real estate firms are even having custom-made software solutions to suit their specific real estate management needs.

Ensure Court Success

The goal of efforts to ensure success in court is to ensure that a delinquent rent case does not go all the way to a judge for settlement. In most cases, between 10% and 20% of cases involving late rent progress all the way to a judge and even eviction notices are accompanied by the rent payments by the residents. Losing a court case can have a huge impact since it marks the difference between a manageable 1- months in rent deficit to the possibility of losing insurmountable amounts of up to 3 months in rent arrears. This is an indication of just how important it is for you as a real estate agent or property manager to have the right documentation, accurate ledger details and licenses in order to win a late rent case. It is important that you always have in place a good and effective document management system so that you are always ready for any eventualities.

Bottom Line

How effectively property managers are able to deal with delinquencies depend on the natural circumstances of specific cases that they have to deal with especially regarding late rent. Since there are several ways of dealing with delinquencies, you should identify which strategy would be most suitable to address the issue. Late rent for example is a common problem that even some of the most experienced realtors have to deal with. It is not entirely possible to eliminate common problems in the real estate sector such as late rent. With an effective delinquency management strategy however, you can minimize the effects of such issues to your business. It is through having a disciplined process with the attributes outlined above that you can be able to mitigate the long-term effects of delinquency in property management. Housing agents should therefore develop effective strategies that address common problems that can affect not just the agency but also the agent-resident relationship.