At times, the relationship between you and your tenants might seem like nothing more than a back and forth between them paying rent and you reminding them to pay it on time.
While many tenants are always on top of getting their payments in on time, others struggle with this prioritization, leading them to be late even though they are relatively reliable and still make payments every month.
As a landlord, you might be looking for ways to encourage them to pay their rent on time. While late fees can encourage on-time rent payments, they act as a negative repercussion for their late payment. Is there a way that you can give them positive reinforcement for paying rent early?
Some landlords use early rent discount vouchers to do just that. While these unique early payment discount options aren’t going to be right for every landlord or situation, they could help you. Let’s take a closer look.
A Table Of Contents For An Early Rent Discount Voucher
- Why Do On-Time Rent Payments Matter?
- How Can You Encourage Tenants To Pay On-Time?
- What Is An Early Rent Discount Voucher?
- Sample Form: Early Rent Discount Voucher
Why Do On-Time Rent Payments Matter?
Why does it matter if your tenant pays their rent on the due date or a few days late? Does it matter when it doesn’t make a difference to your bottom line?
Ultimately, it does!
When you are a new landlord or a landlord that is still in the beginning stages of building their financial foundation, not having rent on time could mean that you will have difficulty making other required payments, like mortgages or property management bills. In an ideal situation, you would have the cash flow to avoid this, but not all landlords are at that point (yet).
Even if your business is secured and able to cover missing payments, tenants are likely to pay later and later if this becomes a habit. They might even stop paying altogether, and you need to be able to keep a handle on your rental property so that this does not happen.
When rent is late, it’s a sign that the tenant is not prioritizing your relationship or they are not able to come up with the money. Either way, this situation is something that needs to be addressed to ensure the longevity of your rental contract together.
How Can You Encourage Tenants To Pay On-Time?
There are many different ways that landlords try to encourage their tenants to pay on-time; we’ll cover just a few of the most effective methods. When late rent is becoming an issue, you need to act to correct that behavior.
Make Paying Easier
One of the best ways to encourage tenants to pay on-time is to make paying rent easier. If you’re still hung up on the old school methods of only accepting mailed checks, consider setting up interested tenants with an online payment or direct deposit system instead.
These systems allow rent to be sent to you instantaneously, and that means that the tenant will be able to send rent on time even if they forget until the night before. With mailed checks, that isn’t always possible.
Charge Late Fees No Matter What
If a tenant pays rent late, even for the first time, make sure that you charge the late fee that was agreed upon in the rental agreement. Regardless of how much you like or trust your tenant, you need to charge this late fee.
Not charging the late fee sends an undesirable message to the tenant. Subconsciously, they might begin to feel that it is ok for them to send rent late. If there is no late fee, what are the repercussions for not paying on time?
Late fees are part of the rental agreement for a reason; stick to your end of the arrangement and ensure that you always charge a late fee for delayed rental payments.
Reward Early Payments
One final way that you can improve how frequently a tenant pays on time is to reward them when their payment is early with an early rent discount voucher. We’ll talk more about exactly what this is and how you can use them in the next section!
What Is An Early Rent Discount Voucher?
An early rent voucher is a notice that you can send to tenants when they send in rent early. This notice will inform tenants that their rent the following month can be paid at a small discount because they paid early.
The idea of using a discount voucher like this is simple. You want to reward the tenant for paying early, so you are giving them a discount. While they didn’t expect it, that’s part of the appeal for you!
Early discount vouchers are not a guarantee that you should always give to tenants. Instead, they should be used sparingly to encourage good rental behavior. Giving them to tenants once or twice a year will encourage them to always pay on-time, if not early, and that will help you both be more organized.
Sample Form: Early Rent Discount Voucher
Now that you’ve learned a bit more about when you might want to use this type of payment discount, it is time to learn how to create your own! This discount voucher is relatively simple to put together and doesn’t require much information, but there are a few things that you’ll need to think about before you can write your own.
Use our sample and the following explanation to figure out how to create your own voucher:
|Early Rent Discount Voucher|
You’ll want to start off your discount voucher with this basic information:
- Property address
- Tenant name(s)
Including all of this information first should be a requirement on every notice, form, document, and voucher that you send to your tenants. Having identifying information at the top of every single document page ensures that both you and the tenant know exactly what property is being affected and when it will be in effect.
Discount Amount And Reason
You’ll see that the next section in our form is very simple and to the point:
- As a thank you for paying your rent early, we would like to give you a discount of $___ on your upcoming rent payment.
The idea here is to let the tenant know why they are getting a discount, how much the discount is, and what it will apply to. This can all be conveyed in just one or two short sentences, so you don’t need to worry about making things too lengthy.
What you do need to consider, however, is how much of a discount to give the tenant!
Most landlords stick to less than 5% of the monthly rent cost, but the exact amount is going to depend on what your rent is priced at and how financially stable your company is. Others make their vouchers the same amount as what would have been charged as a late fee if the payment had been late.
In our experience, making the voucher slightly more than what you typically charge as a late payment fee is a good way to show that paying early really matters to you, and that might help change your tenant’s payment habits.
Finally, you’ll want to sign this document with your signature and your name. While this document is unlikely to be needed in any type of court case, it might become important down the line if you have issues with your tenant paying.
This document would explain why some rent payments were less than others, so you want to be sure that it is complete from start to finish. And that means that it needs to include your name and signature!
Note: Restrictions & Rules
It was mentioned that early vouchers work best if they are used on a case-by-case basis and not regularly. In fact, offering a discount for paying rent early every month is actually illegal in some areas such as Chicago.
In these areas, a regularly available discount for paying rent early is considered a reverse late fee and is not allowed.
While you may be allowed to always offer a discount for paying early, you will want to make sure this is allowed before doing so. We believe it’s best to use these vouchers sparingly, but the decision about when to use them is ultimately yours.
Reward Good Tenant Behavior
As a landlord, it’s always a good idea to reward good tenant behavior when possible. Most tenants will do the right thing even without this type of encouragement, but some tenants will become much better tenants after a few rewarding interactions.
If a tenant pays rent early, consider giving them an early rent discount voucher to encourage this habit. If a tenant contacts you about an issue that might develop into a bigger problem if left unchecked, reward them by acting on it quickly and efficiently.
You could even go as far as reporting on-time payments to the credit bureaus. While rental payments aren’t used to calculate their credit score, a history of on-time payments would still show up in a report. This will help them to rent other properties or even get loans in the future.
The key thing to remember is that sometimes, the best way to build good habits is to reward good behavior rather than to punish problematic behavior. There are, of course, times when you will need to be strict with late fees and even with evictions, but there are also times when you can provide corrective feedback in a positive way.
Using rent discount vouchers is just one way to do that; expand your mind and find ways to encourage the best behavior in your tenants!