Minimising the risk of rental arrears
When a tenant fails to pay rent on time, landlords can face significant financial challenges. To minimise their risk, landlords can put proactive measures in place to ensure a more stable and predictable rental income.
According to Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, proactive management, clear communication, and fostering good tenant relationships are key to minimising financial risks and maintaining a successful rental property business.
“This is why it is so crucial to involve a reliable rental agent who can help you manage your tenant relationships well,” he notes.To help landlords avoid some of the pain points of collecting rent on time every month, RE/MAX of Southern Africa shares some best practices to implement across your rental portfolio:
Regular & prompt communications: Send the monthly rental invoice a week or two before the payment is due. Property management software can be used to send automated rent reminders via email or SMS a few days before the due date. If a payment is missed, contact the tenant immediately to understand the reason and discuss a possible workaround.
Early payment discounts: Incentivise tenants to pay rent early through discounts or rewards. For tenants with consistent early payment records, the rewards could be anything from a gift card to the promise of no rental escalation for the following year.
Build in some cushion: For some peace of mind and stability, build up a reserve fund to cover potential rental arrears. Allocate a percentage of the rental income to this fund regularly to ensure it grows over time. If you need the rental income to cover the home loan repayments, then make sure you build in enough time between when the rent is due versus when your home loan repayment is due.
As a final step, Goslett suggests that landlords fully understand how to take legal action if necessary. “The eviction process can be lengthy, so it is important to follow the correct legal procedures strictly from the very beginning to avoid complications and potential liabilities that could drag out the process any further,” he concludes.
According to Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, proactive management, clear communication, and fostering good tenant relationships are key to minimising financial risks and maintaining a successful rental property business.
“This is why it is so crucial to involve a reliable rental agent who can help you manage your tenant relationships well,” he notes.To help landlords avoid some of the pain points of collecting rent on time every month, RE/MAX of Southern Africa shares some best practices to implement across your rental portfolio:
Regular & prompt communications: Send the monthly rental invoice a week or two before the payment is due. Property management software can be used to send automated rent reminders via email or SMS a few days before the due date. If a payment is missed, contact the tenant immediately to understand the reason and discuss a possible workaround.
Early payment discounts: Incentivise tenants to pay rent early through discounts or rewards. For tenants with consistent early payment records, the rewards could be anything from a gift card to the promise of no rental escalation for the following year.
Build in some cushion: For some peace of mind and stability, build up a reserve fund to cover potential rental arrears. Allocate a percentage of the rental income to this fund regularly to ensure it grows over time. If you need the rental income to cover the home loan repayments, then make sure you build in enough time between when the rent is due versus when your home loan repayment is due.
As a final step, Goslett suggests that landlords fully understand how to take legal action if necessary. “The eviction process can be lengthy, so it is important to follow the correct legal procedures strictly from the very beginning to avoid complications and potential liabilities that could drag out the process any further,” he concludes.
