How To Better Manage Rental Property by Making Daily Rent Deposits

A residential property owner knows what it takes to manage rental property

Managing rental property can be the easiest thing in the world - if you do it right.

One of the common mistakes I see property managers and real estate owners make is to make things more complicated than they need to be.  

With an easy-to-follow check list system, listing daily, weekly, and monthly activities for each property under management, property management becomes a breeze and the odds of something slipping through the cracks is greatly reduced.

What's the single most important item needed to manage rental property?

From my personal experience the top two challenges are managing the tenants, and managing the cash flow and finances of the rental property. 

Today we'll focus on how to manage rental property from the financial side.

I personally know a pretty savvy investor who receives monthly rent payments from about 30 tenants, and obviously not all come in on the due date, so running to the bank every day to make a deposit could become a bit of a hassle.

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While it's tempting to make batch deposits every few days this landlord refuses to do so and sticks with a daily visit to the bank.

She told me she learned how to manage rental property by learning from her mistakes:

• Most tenants, residential or commercial, will look at the float time between when a rent payment is made and when the check clears their account.  The longer it takes for the payment to clear the more tempted the tenant will be to write a check for funds not actually in their account.  By taking several days to make a deposit you're training the tenant to expect this and it will become a little more difficult to manage the rental property and the cash flow.
• If you're dealing with a new tenant or have to manage rental property with existing tenants, making daily deposits sets the right expectations with the tenant right out of the box.
• If the rent payment is going to bounce, the sooner you know this the better.  We've seen banks take as long as a week, sometimes more, before returning a check as NSF.  Unless you monitor your bank account online daily, by the time you get the NSF notice from the bank you could be two weeks into the month.
• Many municipalities are tenant friendly when it comes to residential rentals.  The longer it takes to start the eviction process, the more free rent a tenant gets and the greater the odds that the property will be damaged when they finally do move out.  We've seen some markets where over the Christmas season the sheriff will publicly state they no evictions will be done.  If you manage rental property like this, then watch out!

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Another benefit of going to the same bank frequently is that the bank employees get to know you.  This was actually advice that I received from my accountant years ago.

Why should you care if the people at the bank know you?

When I manage rental property I've personally benefited by going to the same bank branch in these ways:

• When I'm recognized I often will get faster service from the teller.
• Large deposit amounts are not questioned or put on hold because the bank knows who I am.
• My company maintains several property management trust accounts in addition to our business accounts.  Whenever I have a question on one of them I'm not asked to prove who I am each time.
• It's nice to be recognized, especially knowing that a bank branch deals with potentially hundreds of people each day.  A little egotistical, but true!

Exceptions to the Rule

While writing this post I received a call from one of the tenants in a property that we manage, apologizing for paying her rent late.  I'd actually planned on giving her a call after the weekend to see where her rent was, because normally her business is good and she pays the rent on time.

She was very apologetic, and her excuse was that she'd forgotten to include our complete address on the envelope that the rent check was mailed in.

I didn't say this, but 'highly unlikely' was my first reaction.  Instead I mentioned that I'd planned on giving her a call since she usually pays her rent on time.

This is true, but this also lets the tenant know that when we manage rental property we keep a close eye on cash receipts and tenant performance.

If tenants know what to expect, and what they can't get away with, then you've set the right expectations and hopefully won't have the same problems with any given tenant going forward.

I hope you've found this article on how to manage rental property useful.  

Jeffrey Roark
Property Management Training
How To Rent My House