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1 Sep 2011

Dealing with a Vacancy and Late Rent Payments

One of the townhouses
Dealing with a vacancy is less frustrating than dealing with late rent payments in my opinion. Vacancies are inevitable and contracts makes it easier for them to be predictable. On the other hand, late payments are the evils that we should try to avoid at all costs. I have one tenant who is developing a habit of paying the rent late. It started with 10 days and then 15 days with R450 shortage. I must say that, I have now set precedence by accepting the 10 days with no consequences. Tough!


How to Avoid the Late Rent Payments
Getting the best tenant is key when managing your own property. So avoiding any kinds of tenant - landlord discrepancies start with the screening. The advertising should obviously be done properly, in the right form of media. But the real work begins with  the screening of the potential tenants. Get the credit history right or hire someone who can do that for you. No cutting corners. Credit worthy tenants, take care of their finances, and should take care of their spaces too, Right! Not necessarily, but I would still trust someone who takes care of their money, to take care of my property, to pay rent on time and to want stability...thus staying for a longer period than most.

Well, if the tenant who had a promising financial record and had you fight for her/him to get the place rewards you with a late payment, just make sure it happens once ONLY. Stick to the contract and its contents. I know, its not easy, but its the right way to do it. If the contract has an "interest on late rental" clause; implement it fully from the very first breach.

Yes I know, I never did that when my tenant paid late the first time. I thought of the relationship that we have, how I wouldn't want sourness and the daunting task of getting a new tenant. So the tenant did it again. I am now expecting this and will have my Emergency Fund waiting for the third time it happens.

The beauty with this is that I've learned a valuable lesson that I am so human and not as much of a business person as I'd like to think I am.

Dealing with a Property Vacancy
I actually am having a tenant serving a notice for September to leave by the end of the month. The one month notice is meant for me to get a replacement as quick as I can. At least that's what I am trying to do.The tricky part is showing the prospective tenants a place with the notice tenant. I have to work around her schedule. I cant go and show as I please but only in the evenings. The prayer is that the great tenant I get should be free at the same time the notice tenant and I are available.Eeeeessshhh.

Anyway, as a landlord, one should be having the savings to cover the costs during the vacancy periods. A few posts ago I was talking about how I need an emergency fund. I have savings that are not titled EF and mixed with family funds. I so pray that I don't get to use anymore of the family savings than I already have because of this vacancy.
I always choose to collect slightly lower than market rate rentals than deal with a vacancy for the following reasons:
  • That way I miss out on R100 per month, instead of R5000 per month over a few months of the vacancy.
  • My property has someone in it and not at a risk of being vandalized.
  • I have peace of mind knowing that the rates and taxes are covered even if my net worth is growing slower. R200 or R100 in some cases would build up.
  • Psychologically I feel all together and efficient that I have no vacancies. Some ego boost.
The best way in dealing with a vacancy and late rent payments is avoiding them. I haven't had more than two weeks of vacancy since I started in the business. I must give credit to better economic times in general.

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