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Rental Terms To Consider Implementing
Your investment property is a cash generator. You have to take responsibility to maintain your rental rates reflective of market levels. This can either be rental increases or decreases. If you fail to increase rents, your property value may not be reflective of what it is worth. And if you fail to decrease rents, you face the prospect of an exodus of tenants who know better than to pay your outrageous rentals.
It is tough being a landlord. Whenever you want to raise rents, you will always be viewed as a hungry shark. But if you look at it from another angle, you are losing money if you keep low rents when the market is willing to pay more. Tenants know when they have a good deal and will usually avoid the hassle of relocating. They will have to fork out the same amount of money anyway if they move out as that is the market rate.
You will ideally want to collect rentals due on the first day of the month. However, it is common for investors to set a date between the first day and the fifth day of the month. Bear in mind that you are not doing so just so you can see your piggy bank bursting. You are running a business and need timely income to pay and plan your business expenses. Always pro-rate rentals when tenants move in on odd dates like the middle of the month. It is the honorable thing to do.
When the payer is a third party, you have to get the contact details of them. This is a common occurrence for foreign students where rentals are paid by their parents in another country. If cheques are issued for payment, take note of the time delay for the mail to be pushed through postal services. The best is to arrange for direct deposits or telegraphic transfers.
If possible, set up automated payments from the tenant’s bank account. You will of course have to nicely ask the tenant to do so. To entice tenants to allow automated payments, you can give them a 2% refund at the end of the year. When cheques are the mode of payment, they should be made payable to your or your company before the due date. Do not accept post-dated cheques.If you are collecting payments with credit card, take note that you will be incur a transaction fee for this mode of payment. When tenants pay you in cash, remember to issue a proper payment receipt and file up the payment.
Consider charging a significant penalty for late payments. You can also turn it around by offering a small discount for early payments. You can also stagger the penalties upward for recurring late rental payments. For example, 10% for first late payment, 15% for the second and so on. If you have a sadistic personality, you can also insert a term in the tenancy agreement that states 3 late payments is a legitimate cause for eviction.
It is also important to note that the security deposit is not your money. You cannot use it unless clearly stipulated in the lease agreement. This money belongs to the tenant. If you are to sell your property to another investor you have to arrange for proper transfer of the deposit to the new owner. Sometimes, tenants may ask you to deduct rental from the deposit. Do not allow this to happen unless you have explicitly agreed to it in your tenancy agreement.