When it comes to the efficiency of a residential lease, what more is there to consider about rent other than tenant pays, it clears the deposit, and everyone goes on their merry way? If a property owner believes that this is all there is to it, however, then they’re losing out on far more than unexpected missed payments or late fees. Sometimes, the greatest expense comes from what’s not being captured at all.
Table of Contents
The Expense of Documentation
This is how most rent scenarios play out. Tenant pays. Landlord deposits. Landlord makes a note on a spreadsheet/notebook at home tracking (what they’re supposed to) over the course of several months or years. Some landlords have held onto such systems since their inception years ago, never needing to change, and they seem to be working just fine.
Until the time comes when they don’t and it always comes when it’s least convenient.
A tenant wants to apply for a mortgage and needs verified proof that they’ve made consistent rental payments. A landlord must sift through two years of bank statements and memories to recreate the timeline (not to mention the time lost in doing so). Or a disagreement comes about who paid when for what, and suddenly, that casual tracking method falls short under the weight of examination. Legal scenarios necessitate documentation with the ability to hold up in court, but “I think they paid on time” is not a statement of fact.
Landlords who do not properly track payments find themselves in uncomfortable situations more than they’d care to acknowledge. Confirmations of references for tenants about to leave get awkward in phrased questions of “what do you mean they wanted a referral? I’m not sure…they were good enough.”. Tax paperwork takes an additional hour because proper documentation is not easily accessible. Insurance situations where payment history is required become catastrophic as landlords scramble to document information on their own.
What Tracking Truly Captures
Beyond just a general sense of who paid when and how much, comprehensive payment tracking creates a paper trail that can be cross-utilized for both tenants and landlords alike.
Establishing a pattern is crucial for lease renewals and proves as legitimate evidence when things go awry and legal recourse is needed. It makes both parties accountable.
For really good tenants, it’s important to have their timely pay history documented, and this is why rent reporting services has become such an advantage for property managers across the board, both parties benefit from collaborative transparent efforts that otherwise scrutinizes and/or celebrates stability without substantiating data when it’s commonplace. When payment history can be better tracked and reported, it builds credit for tenants.
But where it becomes expensive for landlords is every time that transaction or scenario occurs without substantiated documentation. Every time a landlord spends their unpaid administrative time searching for information they know they should have but do not, it’s expensive. Every time something goes to mediation because there’s no clear-cut record reported, it costs money.
Every time a reference check is less than probable because there’s no actual reported data behind it, it demonstrates that their professional credibility’s are lacking.
The Tie-In to Credit Bureaus
Most tenants don’t realize that payment history has been invisible to the credit bureaus up until now. Mortgages, auto loans, credit card payments, those are all things that get reported and build profiles. Rent, one’s greatest monthly obligation, does not.
Things are changing now, however. The moment landlords report information about payment history, or lack thereof, to credit bureaus, it’s not just helping tenants but it’s creating verified documented evidence within a standardized format for backup recourse that’s timestamped by an independent body. If a situation arises three years down the line because property management wants clarity after an inevitable eviction, it’ll be there.
Conversely, if property owners choose not to report, they’re missing out on substantiated protection documentation thereafter. They’re also preventing good tenants from using their payment patterns in their favor which impacts tenant retention efforts. Good tenants have access to enticing mortgage opportunities if they know that their consistent payments can provide equity elsewhere, so if they find this out about their payments too late, and it’s too late in the game to keep them as happy tenants.
The Hidden Cost of Tenant Turnover
Every time a property owner calls for a reference, it’s noted. But what happens when property owners have no documentation to help save them in the situation? If someone calls and says, “yeah…they were fine,” what does that mean? Compared to documented proof with timestamps showing 24 consecutive payments paid on time with specific dates amounts?
One bad tenant can cost thousands dollars lost, for repairs, legal fees, inadequate payments. But property owners assume they’re making the right decision because other property owners have provided vague narratives with no discerning documentation.
This creates a snowball effect that property owners with good tracking will never understand: poorly tracked payment history creates vague references which make referencing harder which increases the likelihood that these tenants will cause issues which ultimately costs everyone money unnecessarily.
Property owners who track everything properly save themselves time and expenses down the road because better references help with screenings for better matches across the board.
The Expense of Tax Documentation
April 15th creates another hidden expense with improper documentation. Taxes need to be filed. Rents must be reported, which means proper bank transactions need to be confirmed. But with all of the time that property owners spend going back through who paid what throughout their properties, it ends up being hours of billable time from accountants or taxpayers processing this information on their own.
Furthermore, expense reporting deserves similar attention; when reports of income can be tracked each month, and attributed to specific properties, the monthly obligations created month-to-month are validated as such through proper expense reporting/income tracking. Poor tracking means more time reconciling reports, higher likelihood of mistakes that can trigger audits or inflated taxes without accountability.
Protection from Legal Proceedings
Eviction hearings; security deposit disputes; small claims amount, documentations are needed. “He said she said” holds no water in court but timestamps, late payments and documented recourses about payments made (or ignored) hold credibility.
Landlords should not find themselves in weaker legal positions, especially when they’re right, but that’s exactly what happens when there’s no documented tracking available. The tenant claims they paid; landlord claims they didn’t, they neither have backing up their respective claims without any documentation in play.
Costs mean legal fees and reverting to less-than-satisfactory conclusions because there’s ambiguity.
The Observable Differences with the Right Methods
Those who implement rent tracking effectively find benefits that aren’t immediately visible thereafter. Communication improves because there’s no confusion; professionalism increases which helps everyone involved, from tenant retention efforts and referrals, all while administrative time decreases because when information is needed, it exists.
Relying less on others creates a newfound relationship dynamic. When formalized accountability exists, with clear transparency, neither party can minimize what’s owed or gain the system. This doesn’t create adversarial situations but tends to reduce conflicts at onset because everyone knows where everyone stands from Day One.
The Cost of Not Getting It All
Finally, when it comes down to it, the additional costs, not getting everything is most costly.
Every time someone has to spend unnecessary time accounting things because someone didn’t do it, and it’s been proved countless times, discretionary eye tests exist until someone loses money restoring credibility.
Those expenses occur as tiny little bites into what’s expected but every landlord that doesn’t consider payment tracking as a viable business operation while onsite, ultimate charges come down on inexpensive mistakes made in everyday operations that’ll cost anyone who’s attempted otherwise far more than necessary when the chips are down.
Similar to any business-oriented transaction, where relationships depend on documentation and accountability, the rental experience depends on both transparency from Day One and proper adjudication thereafter.
Don’t let expenses happen to good landlords, they start off as not so awful but snowball into something far less manageable than what’s effectively accounted for in collaborative efforts from Day One at little extra charge.
