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Methods to assure prompt payment:

• Good information on the rental application

• Personal documented information that will make it easy to find someone who skips

• Strict qualification standards that are both legal and protect your interests

• Proper tenant screening

• Credit checks, reports and credit scoring

• Check references

• Project a no-nonsense business attitude.

• Strict collection options when the lease is signed.

• Personal and several liability agreements

• Grantors/co-signers

• Collateral, security and guarantees

• Authorize a credit card or checking account.

• Collect Rents Electronically

• There must be a definite system to know when rents are due.

• Help tenants build, or re-build their credit by reporting regular payments

Delinquency policies:

• Rent due on the 1st day of the month.

• When 3 days past due, a friendly reminder.

• When 5 days past due, a personal visit.

• When 7 days past due, notice to pay rent or vacate.

Rent collection and procedures:

• A friendly but firm attitude is always important.

• Penalties for late payment

• Rewards based on payment history

• Deposits and advance payments

• Credit card and automatic bank transfers

• Copy all rent checks

• Require a promissory note for past due rent

• Past due rent is a cash loan and landlords are not lenders

• Collect bum checks

• Automatic Rent Collection

Common collection failures:

• Fear of vacancy.

• Failure to take threatened action.

• Confusion of personal kindness with business necessity.

• Landlords who are not diligent.

• Inadequate information on a rental application

Always take any action that has been threatened, then ....

• Make a deal, perhaps even paying the tenant to move. 
  
  Ask yourself what it will cost you to evict, in lost rent, legal costs and time. The amount is substantial. Now consider that your dead-beat tenant probably doesn't have the money for a deposit and first month's rent in a new, even cheaper place. It may pay you to loan the money on a promissory note, that includes your delinquent rent. The tenant will be gone and you may well collect the note someday.

• Forgiving debt as a strategy - IRS reporting (income to the tenant)

If you just want a little revenge against the tenant who stuck you for the rent, and consider them uncollectible, send the tenant a 1099. You can report the unpaid rent to you as income to the tenant and they will be obligated to pay tax on it. The extra income may also impact their Earned Income Tax Credit and other government benefits.

• When all else fails: EVICT.  See RHOL e-course on Evictions.

Garnishment may be the only way to collect your money

• If you have a money judgment on a former tenant you can garnish wages, bank-accounts and more. There is a great deal of information on the subject in the Property Management Web If you don't want to do it your self, contact a debt collection agency.

Credit is now a necessity  Yet more than half of the people who apply for a credit card are turned down. Many because of poor credit history, many more because of no credit history. The enigma young people face is that they can’t get credit anywhere without a credit history, so their first credit purchases invariably become overpriced jewelry or electronics, where the merchant makes a high enough profit on the half of the people who pay, to cover the losses on the half who don’t. In many cases, when the young person discovers how badly they have been ripped off, they stop making payments. The merchant then reports their failure to pay against their credit and a nightmare financial cycle has been started in their lives.
Landlords often have an opportunity to help break that cycle. As a credit grantor, landlords have the same opportunity to affect a persons credit report as Sears, a bank or anyone else. Here is how it works: When a credit grantor signs up to report credit, they must report all the information, both positive and negative, every month. Some local rental housing associations can make arrangements to compile the information in a format suitable to the big three credit data companies and transmit it electronically .
It is a way for landlords to provide a very valuable service, particularly to young tenants, and a tremendous incentive for every tenant to pay on time. 
     
Copy all rent checks  When tenants pay their rent always photocopy their checks. You will note that we recommend always. They may change banks or have more than one account. Changing banks more than once should also be a red flag and indicate a tenant that needs watching. It is not necessary to keep all the copies forever, but one from each account at each bank is necessary.
Another reminder: the lower the rent, the more likely you will need to have bank account information to help collect back rent or damages in the future.

Require a promissory note  If a tenant gets behind, have them sign a promissory note to get them current. Never allow a tenant to be more than 10 days late without either having them sign a note for the rent, or sending them a notice to quit for non- payment. Collecting on a promissory note is much easier than collecting back rent. Additionally it becomes an acknowledgment that they owe the money and they are not claiming that the unit needed repairs or some other such excuse for not paying their rent.
There are countless cases of a judge ruling in a tenant's favor for back rent, but it is not as easy for even the most liberal do-gooder judge to let them off when you have a signed note for the money. Also, a note is negotiable and assignable. You can sometimes just sell it to a local collection agency and forget about it.

Landlords are not lenders  A new trend in rental housing is to not only use credit reports in tenant screening, but to report rent delinquencies to credit data agencies as well.  Tenants are no different than you and I; they will pay the one first who can hurt them the worst. Because courts have neutralized the threat of eviction to a great extent, tenants short of cash will pay their Sears card, or MasterCard first because late payments there are more likely to affect their credit.
The knowledge that landlords report delinquent rent to credit and collection services can be a major incentive to have tenants pay their rent on time. Those same services also make possible getting some of the money you have been writing off as un-collectable. According to three collection agencies that we spoke with, a money judgment though helpful, is not absolutely necessary to collect for past due rent. Your tenants need to know that as well. A judgment for unpaid rent will remain on a credit history for many years and is collectable for all of that time. As you will see throughout our pages, landlord tenant state law varies; Michigan allows collection for up to 10 years, in Florida a judgment is good for 20 years. Rent or damage owed you even without a judgment can appear on a former tenants credit report for 7 years and you can continue to pursue collection.

Penalties for late payment  Most state landlord tenant law addresses late payment penalties and interest, and in some cases they are actually prohibited. Massachusetts, for example, does not even allow a rent discount for early payment, arguing that the normal rent amount penalizes tenants who pay late. Other states, like Michigan, require that any late payment penalty be a reasonable reflection of the actual cost to the landlord of a late payment. $5.00 per day might be reasonable up to a few days, but quickly becomes onerous. Check your state law on our State Pages (see Select A State dropdown menu on most pages) or the Landlord Tenant Law Page.

Put Rent Collection on Automatic with a service that automatically withdraws rent from tenant bank accounts and directly deposits it into your checking account.  Costs less than accepting credit cards. Read all about it.

Collecting Judgments.
You win your case in court, and have your judgment, how do you get your money?  RHOL provides a comprehensive and detailed e-course on collecting judgments.