How to Train Your Tenants to Pay Rent on Time

Some tenants proactively pay rent before the rent is even due, while others will never pay unless reminded or chased. Perhaps the worse type are those that say “oh I forgot, I’ll transfer you the money right away” and eventually get around to doing it next week. Whether you are a property manager or self-managing; chasing tenants when they are in arrears isn’t a pleasant task. It’s like begging for money, and you’re not a beggar and shouldn’t have to beg for money right? Tenants should pay you rent if they enjoy and want to continue living at the property right?

While most tenants understand this concept, however, there are still countless tenants that are new to the rental market (fresh out from home or international students new to renting), moreover with an abundance of new apartments being built constantly; some tenants feel you should be grateful they have decided to rent your place, and you should be thanking them for choosing to live here.

Let’s face it, having tenants in arrears adds extra needless workload (text messages, calls, door knocks) to your daily routine; not to mention they are stressful. If you don’t want to lose sleep over it best to try to change your tenant’s behaviour for the long term.

In order to change a tenant’s behaviour, you must first think like a tenant. When they pay for a pizza they get to eat a pizza right away. When it comes to renting some have this mindset:

I already paid for this two weeks ago, why do I have to pay again? I don’t see any immediate reward, why should I do this when the only person that benefits is the greedy landlord. I better put it off as long as I can maybe the landlord will forget and I won’t have to pay if they don’t ask…

Paying rent gets associated with something very painful and negative. Their hard earned money just evaporates before their eyes with no perceivable benefit.
One thing that Property360 has done well is incorporat this element of tenant psychology in the rental receipt design, unlike conventional rental receipts that just state the bare minimum, i.e. the period the rent is being paid for, Property360 receipts displays in addition to the period:
Was Paid to: and Now Paid to:

Property360 Rental Receipt Sample

Was Paid To date means if they hadn’t paid their rent then that’s the date they are allowed to stay in the property.

Now Paid To shows what their money has done for them, now that they have paid this rent, they can rent up to this date. This shows them their money is actually doing something.

How many times have you been asked by a tenant looking at a receipt, confused, scratching their head, “So when is the next time I have to pay?” This will no longer be the case, Property360 receipt technology and design makes it clear, with Now Paid To date in bold and underlined text along with the day of the week clearly visible, it can’t get any clearer than that. This also acts as a reminder so the tenant knows exactly when they should pay rent next time.

The second aspect of changing your tenant’s behaviour is building a positive association with paying rent. Paying rent can be a very negative experience for your tenants, you can do small changes to turn this around:

  • If possible, make it automatic, ask if they can set up scheduled repeated payments online. This removes the experience of paying rent for them (out if sight out of mind.)
  • Smile at tenants when they pay you rent in person, ask them how they are going. It doesn’t cost anything to smile, be friendly and polite even if they are few days late.
  • Don’t raise anything negative with the tenant such as complaints when the tenant is paying you rent proactively, doing so will make the paying rent experience worse as they will associate it with something harsh and negative. If the tenant is in breach for something raise it with them some other time.
  • Consider buying a bucket of non-perishable (wrapped) lollies (candy), and giving tenants a lolly when they pay rent on time or a lolly regardless if they pay on time or not along with their receipt. This is also known as Pavlovian conditioning (aka classical conditioning) where the subject (the tenant) undergoes associative learning linking certain events, or stimuli together in the process of conditioning. When they eat the candy the sugar will automatically have a chemical reaction in their brain and this helps build a positive association with paying rent over time. It doesn’t cost much, maybe $4 to $8 dollars for a bucket and it will last you for months, a very small investment to keeping tenants happy and out of arrears.
    • Make sure the lollies are out of reach and not something they can take willy-nilly like at a restaurant. But instead, it should be something you give to them as a reward and gesture of you being grateful they are being a good tenant and a token of continued mutual partnership.
    • Don’t eat through the bucket of candy yourself in a day… you will get diabetes.
  • If you don’t see any future for the tenant and you don’t plan on renewing their lease, and they are not getting with the program, consider making the consequences and reprehensions known.

By following these tips and using Property360’s rental receipt technology you should be able to dramatically decrease rental arrears at the same time engage tenants to proactively pay rent on time. Good Luck!

 

References:

S.L Tan, 2017 – “Oversupply of dwellings for Brisbane in next two years: SQM Research” – Financial Review
http://www.afr.com/real-estate/oversupply-of-dwellings-for-brisbane-in-next-two-years-sqm-research-20170314-guxroe


Crash Course Psychology – Ivan Pavlov – How to Train a Brain