“Rent Collection Preferences for Rent Commercial Space Businesses”
Looking for an easy way to collect rent?
Managing a rent commercial space comes with a lot of responsibilities. As the owner’s partner in ensuring the return on investment is maximized, a property manager is in charge of securing rent.
This isn’t always easy.
Collecting rent can be a struggle for property managers and landlords. Despite pre-agreed due dates, payments are not always made on time.
If you are having this issue, then it’s time to try a new approach.
In this article, we will talk about the different methods that can be used to ensure that rent is collected on schedule from your rent commercial space tenants.
Collecting Payment for Rent Commercial Space Businesses
Rent income is the lifeblood of every commercial space businesses. Late payments can easily destabilize cash flow. At the same time, the method of collecting rent can make or break relationships between tenants and property managers.
When such issues arise, property managers have something to refer to in order to get the tenants back on track. This is why it is recommended to have a strong rent collection clause in your rent commercial space lease.
What Is the Rent Collection Clause
The rent collection clause is discussed before the tenancy begins. This is an important term in a commercial lease agreement that includes specific details about rent.
Contents of the Rent Collection Clause
The clause is always present in lease agreements. Aside from the amount of monthly rent, this should also include:
- When the tenants should pay the monthly rent,
- The given grace period,
- The method of payment, and
- Any corresponding additional fees for late payments.
Understanding the Terms of Rent Collection Clause
Property managers need to discuss the terms of the rent collection clause with their tenants. Having an open discussion about the rent can prevent any misunderstandings between the parties.
Make sure to discuss any expenses that may be included in the rent payments, as well as:
- Unanticipated expenses covering the property manager’s operating costs that will be shouldered by the tenants.
- Savings that can be set aside for other expenses, such as “tenant improvement allowance.” This allows tenants to use the savings to prepare the commercial space for business operations.
- Issues that need to be renegotiated.
5 Methods of Collecting Rent
As the property manager, you can decide how the rent commercial space can be run. Making the decision on how rent is collected is one example of this choice.
There are 5 different methods of collecting rent. The right choice depends on what best suits your needs and ensures the business remains profitable.
1. Using Online Services
There are various websites that provide a rent collection service for property managers. Each site offers different features and services.
Here are the examples of websites where you can arrange an online rent payment to make it more convenient for yourself and your tenant.
ERentPayment, RentMatic, RentMerchant
ERentPayment, RentMatic, RentMerchant are some of the rent-collection online services you can consider. Using these online services is recommended if you are particular about security, as no bank account information will be shared with the tenants.
Pricing for these services differs depending on the plan and features of your choice. While some websites only offer a simple rent collection process, there are others offering more features such as:
- Online rent roll,
- Uploading of important documents, and
- Sending messages and notices to tenants.
Although it does not specialize in rent collection, PayPal is undoubtedly the most popular online payment system. It can also be used by anyone for free. It is also likely that your tenants are already using it.
However, if they are not, the procedure must be explained thoroughly to your tenants. This is to avoid problems such as:
- Delay of payments,
- Getting charged a business transaction fee, and
- It might be hard to ensure the exact date when the tenant sent the payment.
2. Sending Payments by Mail
This old-fashioned way of collecting rent is still sometimes used by property managers. While this saves property managers the time and effort to collect the rent, this method has its downsides. Examples of these are:
- Tenants can buy extra time to collect more funds to complete their rental payments. This can happen if they don’t have enough funds available upon sending of the first rental payment mail.
- It can be postmarked by the required date, which doesn’t make the payment late even if you received it at a later date.
- Tenants can claim their payment got lost in the mail by simply getting a certificate of mailing from the post office. However, this can no longer be verified if it happens.
3. Having a Drop-off Location
This method is suitable for those who have offices for their rental business. All tenants will need to do is leave the payment with the appropriate person in the office.
However, this is not advisable if you don’t have an office. It is best to avoid giving personal addresses to tenants to protect yourself from threats.
4. Meeting In Person
Meeting your tenant is another traditional way of collecting rent. Through this method, you can be assured that the rent will be safe with you the minute it is handed over by the tenant.
But, this can be a time-consuming method as this entails coordinating time and location, as well as travel time.
5. Outsourcing with a Property Management Company
Using services by property management companies is costly. Fortunately, this proves to be a good long-term investment.
Property management companies can help you manage your commercial space properly. Here are the different services that they can do for you:
- Collecting rent for you,
- Dealing with tenant complaints,
- Handling maintenance issues, and
- Filling vacancies.
If you don’t have the budget to hire a property management company, then this will be a better option for you. <<< REFERENCE BLOG POST WE ALREADY WROTE
4 Factors Affecting Landlord’s Choice of Rent Collection Option
There are four factors affecting your choice of rent collection. These factors will help you decide on the appropriate method for collecting rent from tenants who rent commercial space.
1. Number of Tenants/Rental Units
If you have more than 20 rental units, then collecting the rent in-person isn’t the best option for you. It will consume time that can otherwise be used for doing other property management responsibilities.
2. Distance of the Property from Home
If your house is located far away from your property, then it would not be advisable to personally collect rent from tenants. Not only will it use up too much, but it will also cost additional expenses for transportation.
If you’re in this situation, then options such as online payment or outsourcing to property management companies are recommended.
3. Your Preference for Using Technology
If you have a limited budget and would rather use your time for other responsibilities, then use online payment services. This is a convenient option, as payments can be transferred with a single click of a button. It also doesn’t hurt that most of the tenants who rent commercial space have access to the Internet and are comfortable with using it.
4. Your Hands-Off Approach to Managing Tenants
If you prefer a hands-off approach to managing tenants, choose to use online services or mail would be the best option. This enables you to keep a strictly professional relationship with tenants. Not having to coordinate meetups also make it less time-consuming.
Final Thoughts on Rent Collection Preferences on Rent Commercial Space Businesses
In this post, we discussed the different methods of collecting rent on commercial properties.
These methods are:
- Using online services,
- Having a drop-off location,
- Meetups, and
- Through the use of property management companies.
All of the methods mentioned have distinct advantages and disadvantages. It’s your personal choice as a property manager to decide what works best for your rent commercial space business.
There are also a few factors that can determine the right method for you. The number of tenants and/or the distance of the property from your home are such examples. Your management style and preference for technology can also influence which option would be most comfortable for you.
If you have more questions about collecting rent on rent commercial space business, leave them in the comments below.
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