Landlord and property management can be a tough task to handle, especially if you are renting out multiple houses. Many investors choose to handle the tenants on their own to keep the monthly costs down instead of hiring a management company. Most of the time being a landlord can be a good experience, but as times change and markets get tough we see more and more tenants leaving the properties and not paying. Now the landlord is owed, so how does he collect the money owned by the tenant?
Getting into landlord and property management is about collecting the money. You need it to pay the mortgage on the house if there is one, or you simply want the money to use for other necessities. Whenever you rent out a place it is always a risk. You will have great tenants who pay on time every month, and you will have tenants who are always late. Either way, a tenant may leave without paying – especially when times are tough. The best thing to do is clearly lay out the payment requirements when the lease agreement is signed. If a payment is late, then take action. Sometimes being the nice guy and giving the tenant time can cause more issues.
If you have already sent the letter and tried to talk to the tenant, you are probably going to have to go through the eviction process. This will not get you any money owed, but it will get the tenant out of the property. It is highly likely you will not get any money if they could not pay the rent in the first place. One thing you can do is file the debt with all three credit bureaus so that it goes on their credit report. You can also send the balance to a collections company, as they will stay active on trying to collect the debt. The last and most effective thing to do is to sue them. This is time consuming and small fees will have to be paid to file.
A lot of landlords simply hire a collection company since eventually the former tenants will get the money and pay to get it off of their credit report. When hiring a collection agency, make sure you choose one that is be reputable and persistent. Expect to pay the company about 30% of the balance that it collects. Make sure that the business is bonded and insured and has at least $1 million in liability insurance. Check to see if the collection agency has any reports filed against it with the FTC, and ask if the company reports the balance to the three credit bureaus.
If you own a house and want to rent it out, then be prepared to take on the landlord and property management tasks. There are great resources all over the Web that explain how to rent out a place, and you get legally binding leases for free. If properly done and you screen the renters, then chances are you will have a good paying tenant. If you start to take on multiple homes and the economy gets tough, then expect for at least one tenant to fall behind and not pay. You will then have to go through the tasks mentioned in this article to collect the money owed.
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