COACHES CORNER
Rental Success
A Strong Foundation is Essential for a Profitable Rental Porfolio
GET COMFORTABLEWITH YOUR NUMBERS Most of us have been programmed to keep finances private, and this sometimes carries over from our personal lives to our business practices. We are not always comfortable with discussions related to money. While many items are shared in our new shared environment, tax returns and income statements are not generally public. Understand in real estate you have been judged and you will continue to be judged by the income your properties are produc- ing. Just as in any other business, your tax returns and your Profit & Loss (P&L) state- ments are your report card. Especially to a lender, those numbers are the foundation of your success. The next time you want to take out a loan in order to expand your real estate portfolio, for example, your lender is going to want to verify your ability to col- lect. It is your responsibility to demonstrate that you can do so in order to sustain and support your investing business. The first and best time to discuss finances with a tenant is during the screening phase. At this time, you and your office should be reviewing a poten- tial tenant’s capacity to pay each month. Furthermore, ask yourself honestly: Does their credit history validate their commit- ment to pay? Share with new leads that you are focused on good service, and that your definition of that term includes the priority of prompt payments. NOW, GET COMFORTABLE WITH POTENTIAL TENANTS’ NUMBERS OFFER FLEXIBILITYAND ACCOUNTABILITY If you don’t already have a strong multi- touch reminder system that includes mail, email and text reminders that reinforce the payment date, begin implementing one immediately. These reminders should include a discussion of the many payment
Remember that if you decide to offer credit card or Venmo options, the consumer credit card protection terms that protect your tenant in the event of a disputed transaction can hurt your ability to collect rent. We have heard from clients who collected from a a tenant only to learn 90 days later the funds were reversed based on the tenant filing a dispute form. Know your options and your residents. Offer the maximum flexibility to assist your resident in timely payments, but do not set yourself up for failure if a particular option will not work with your tenant population.
BUILD SOLID SUPPORT UNDERNEATH YOUR RENT-COLLECTION PROCESS.
by Linda Liberatore
eal estate investors know how important it is to find a property with a strong foundation. The same the- ory you apply to making a brick-and- mortar investment should also apply to your cash flow. To achieve solid returns and provide safe, stable housing in your community, you need a plan to keep your cash flow consistent, including R
your rent-collection process. One of the facets of your business that will define your real estate in- vesting success will be your ability to generate income from your properties. Certainly, you can (and should) define your success by multiple standards, but most real estate investing busi- nesses will not be sustainable with-
out the ability to generate reliable, predictable income. This is particular- ly true when it comes to your rental real estate portfolio, and your ability to do this will determine whether you are able to grow that portfolio and, ultimately, position yourself as a proud housing provider with potential tenants, lenders, and colleagues.
methods you offer. For example, you may accept money orders, checks, ACH debits, and Chase QuickPay (and I recommend you do so). Consider allowing tenants to make direct payments to your company account as well, and make sure that your communications deal with the easiest, fastest way to do so. Of course, these op- tions should be tweaked and personalized to the specific needs and demographics of your tenant population. EXPLORE YOUR COLLECTION OPTIONS Sometimes, even with your reminders and easy options for payments, your tenants are going to miss payments. It is an unfortunate part of being a landlord. However, this part does not have to be entirely awful. The next step in your rent collection process should be to prepare for the process of issuing legal notices specific to your town/county/state. You do not need to be ashamed of doing this, and you can help tenants who are behind on payments by confronting the issue head-on, but in a helpful manner. Don’t stop communicating now! Proudly refer your tenant to churches and charitable organizations in your area if family and friends were not able to help with the personal event that has caused the rent shortage. By keeping the lines of communication open (even when issuing notices of delinquency) you will provide benefit to your resident. You may need to help them understand how to use
MULTI-TOUCH REMINDERS: Reminder notices sent to tenants via multiple communication avenues. For example, you might send a letter in the mail, an email, and text a tenant to remind them that rent is due and make payment as easy as possible.
these documents, but they will be able to leverage them to obtain assistance with a short-term problem or evaluate whether a change in their income requires a move to a new more affordable location.
BE PROUD OF YOUR COLLECTION PROCESS
Your rental income is the foundation of the real estate portfolio and business that enables you to provide safe, secure housing for residents and support your local neigh- borhoods as well. Additionally, establishing and maintaining sound rent collection pro- cesses will allow you to demonstrate solid, reliable cash flow in your portfolio, a must if you want to continue to expand your real estate investing business. •
Linda Liberatore (R) receives her 2017 Property Manager of the Year award from Affinity Worldwide president Eddie Wilson (L).
Linda Liberatore is the founder and CEO of Secure Pay One and a Think Realty Coach. She may be reached at lindal@securepay- one.com, and her coaching materials may be viewed online at https:/ thinkrealty.com/coaches.
14 | think realty magazine :: year end 2017
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