Should Property Managers be Reporting to Credit Agencies?

As one of the fastest-growing groups of renters, Gen-Z is entering the market and putting pressure on property managers to start reporting rent payments to the major credit bureaus. Gen-Z is paying higher rent than any other age group, and many want credit for those payments.

Since early last year, financial institutions and credit reporting agencies have been changing policies to create greater financial inclusion. Financial inclusion is an effort to address economic inequality and promote economic growth by ensuring that everyone, regardless of income level or location, has access to financial services. Greater financial inclusion can improve the quality of life and long-term financial health of younger people and is good for the market overall.

In 2022, all the major credit bureaus began including rent payment information in credit reports and in the calculation of credit scores. Rent payment information will be included if the payments are reported, but there is no legal requirement for property managers and landlords to report. Should you report your tenant’s rental payment history to the credit bureaus? The short answer: Yes.

Benefits For Property Managers

I find there are just as many benefits for property managers as for tenants. Reporting to credit agencies can encourage tenants to make on-time rent payments because they know that their credit scores will be impacted by late or missed payments. Less late, partial and missed rental payments save property managers time and money trying to collect payments.

Rent reporting can also make rental payments more transparent. This makes it easier for landlords to verify that tenants have a history of paying rent on time. This could make it easier for landlords to rent to tenants with a limited credit history or poor credit. Offering rent payment reporting can also set you apart from your competition and help you to attract and retain higher-quality tenants. I find that both Millennials and Gen-Z, the two largest populations of renters, are actively seeking rentals where their rent payments will be reported.

Benefits For Tenants

Up until the past year, tenants have been the ones mostly spearheading the movement toward reporting rent payments. For younger tenants, rent is the largest recurring monthly expense that they make, and reporting on-time payments to the credit bureaus can have a significant impact on credit scores. Renters in the younger age groups are more likely to have lower or invisible credit.

Growing up in a time when their parents were over-extended and focused on paying down debt, many have been focused on limiting the amount of debt they take on. I think this is a responsible financial practice that shouldn’t be penalized in credit scoring. Good credit can lead to better financial products, such as lower interest rates on loans and credit cards. Rent reporting can help renters with a limited credit history to access better financial products that they may not have been able to qualify for otherwise.

How To Start Reporting Rent Payments

Because renters can’t report their own payments, the responsibility for reporting falls to the property manager. Luckily, there are many property management systems that can collect rent and report payments directly to credit bureaus.

Note that rent payment reporting can’t be done from peer-to-peer payment apps like Zelle and Venmo, though. The added bonus to dedicated software is that setting up a payment system can decrease late and partial payments because renters can access all payment information in one place and even set up automatic payments.

If you don’t use or want to use an online payment system with this capability, you can submit rent payment reports using a standalone app. These are relatively inexpensive, and I find that they usually pay for themselves.

When setting up credit bureau reporting, consider whether your software reports both on-time and missed payments or only on-time payments. Reporting all on-time and late rental payments will give you leverage that can help you put more pressure on your tenants to keep up with payments.

If you aren’t currently reporting rental payments to credit bureaus, I think this is a relatively easy step that you should consider. While reporting this information is not required, there are benefits for the property manager, tenant and the larger financial market.

Annual Rent Increase Strategies

When it comes to increasing rents, there are some tricks of the trade that landlords and property owners should consider before making a decision. Although the topic seems pretty straightforward, unless the properties are positioned in markets that are in high demand, like anything else, effectively pricing your rents with suitable timing and tact needs to be part of your equation. Otherwise, you may end up with higher vacancies and disgruntled tenants.

For most owners, maximizing cash flow and ROI is a major objective. The standard mentality typically goes something like this: Rent the property. If the tenant renews, then increase rents. Repeat. While this philosophy has merit, there are many instances where more details are worth examining. “Keeping up with inflation” can only hold a certain amount of weight, and most tenants want to make sure they are getting proportional value as their rent costs increase.

So, what is value in a tenant’s mind? For many owners, the thought of continuous investment for a property that may be deemed “just fine” is a hard pill to swallow. However, small consistent acts at times can be just as impactful (and very inexpensive) to a tenant when you decide to increase the rents.

Being consistently responsive

One reason many individuals opt to rent properties is to ensure the owner is responsible when something breaks, leaks or worse. Depending on the lease, typically a large majority of the obligation falls on the owner. The last thing a tenant wants is poor response time when issues due arise. In fact, one of the biggest complaints tenants report is regarding slow maintenance. The faster you can address a tenant’s issues or concerns, the easier it will be to defend your desire to up the rents.

Keeping up common areas

Normal wear and tear is something that cannot be avoided and should always be a part of any owner’s operating cost. Making sure the property’s common areas are kept up at all times is a major component of perceived value in a tenant’s eyes. It also establishes to the tenants that the owner has pride in their property. When the common areas begin to look drab or run down, this can also affect the tenants’ desires to do their part, with the justification that “If the owner doesn’t care, why should we?” Keeping common areas clean, light and modern and adding a new amenity every so often can make a huge difference when it comes time to raise the rents.

Convenience

The world doesn’t appear to be slowing down anytime soon, and making a tenant’s life as streamlined as possible is a smart idea if you plan on increases. Consider electronic-signatures leases, 24-hour maintenance portals, online payment options and package centers. All of these provide tenants the ability to move more fluidly in our fast-paced society. With that said, there still are many individuals who are not as “wired in,” or wanting, or able, to adapt to all the ever-changing technical advances we are seeing. Make sure you have options like P.O. boxes if these tenants want to drop off or mail rent and 24-hour phone lines to help with those who still like to speak to a human being.

Seasons

For many tenants, the time of year plays a major factor in a potential rent increase, especially the holiday season. It’s not uncommon to see many more delinquencies during this time. As people juggle their finances, adding another unexpected economic uptick can at times be the difference between keeping and losing a tenant. Thus, it is also smart to consider this when structuring any increases. After tax season during the springtime is typically an ideal time, since people tend to move more during this period. It also provides the owner with more likelihood of a faster placement if a tenant does decide to move out, versus the winter months when getting properties filled is historically slower-paced.

In the end, taking these simple strategies into consideration before implementing a rent increase can really benefit you and justify the decision. The majority of these cost no more than what standard upkeep would be, and several are more service- and timing-specific that total absolutely nothing out of pocket. For most people, just the thought of moving makes them cringe. If you are able to give your tenants perceived value and excellent service consistently, you can bet your timing for rent increases will be much more welcomed.

Presenting A Rental

If you think you’re ready to market your rental unit to potential renters, think again. It’s a good idea to take a little inventory on how you will debut your investment to the perfect tenant. Although you may have a suitable rental unit available, sometimes it takes a little boost in presentation to seal the deal. A few small touches can make the difference between you collecting monthly rent fast or letting the unit sit for months unoccupied. Here are some staging tips you need to know to make your rental outshine the rest.

Curb Appeal

They say you shouldn’t judge a book by its cover. When it comes to rental units, the outside can be a deal maker or breaker. The first impression of your rental should bring nothing but good vibes. Power wash the driveway and siding of the home to ensure it looks clean and fresh. Mow the lawn and trim the bushes so that the house can become the focal point. Repaint chipped or dull paint to make the colors pop in the eyes of potential renters. Be sure to wash the windows to remove dirt so that they are easy to see out of. The first impression of your rental should bring nothing but good vibes.

Clean Clean Clean

The cleanliness of your rental will play a direct role on how fast the unit is rented. Showing a dirty rental to potential renters is a waste of time and energy. A renter wants to know that you care about your property and are willing to take care of it. Cleaning the unit is an effective way to show that you care about your investment. Whether you do it yourself or have the professionals do it, cleaning the unit from top to bottom is a must; no exceptions.

Make it Neutral

Everyone has their own style. You want a potential renter to come into your vacancy and feel as if they can make it a home of their own. The best way to show the warmth of a lived-in space while exhibiting a blank canvas is to use neutral colors and style. Avoid gender specific pieces in the décor. Keep everything in the middle of the spectrum so that potential renters can envision how they will make themselves at home.