Being a landlord or an investor in property can lead to healthy profit margins. Similar to most businesses, being a landlord will require one to have a healthy cash flow reserve. The timeframe in which the rent is collected can have an impact on your business, especially if the property is still being paid through a loan.
Numerous factors impact your cash flow as a landlord. These include the types of properties that you invest in, the rates, tenants and also the method how you collect rent. With the right strategy, you can improve your chances of getting paid on time and in full.
It is important to keep in mind that owning a rental property is expensive. Most transactions surrounding them are in fact debits from the bank account. Amongst these expenses, you will see mortgage payments, tax, insurance, maintenance, renovation and upgrades. The payment gathered from rent is the only consistent source of income.
There are different ways how rent can be collected and these include:
This is one of the best and most reliable ways to collect rent payments. Through a standing order, the same amount of money is transferred to the landlord on the agreed timeframe, typically monthly. Through this system, rent collection is automated, making it easy for both parties.
Some people still opt to collect the rent through a physical visit. Although this can help with avoiding misunderstandings related to the amount due and by when, it can be more of a hassle than it is worth.
Before leasing out property, it is important to perform screening to ensure that you are dealing with the right party. If you are leasing out on a long let, this information may be a bit easier to achieve rather than if renting out to holiday makers for a few days. Screening is one of the measures to ensure that cash flow as a landlord remains healthy. Important information about the potential tenant’s background includes how long the individual has been in the country and the type of employment held. It is important to ensure that through the potential tenant’s employment, the rent can be paid in full, in a reliable and predictable manner. Leasing to the right people will also minimize the risks of damage to your property, which can lead to further expenses.
Do you have experience as a landlord? Have you ever faced challenges with rent collection? Let us know your experience through the comments section below.