One of the many reasons owners and investors love self-storage over other asset classes is the cash flow properties produce. Unfortunately, delinquent tenants can have significant, negative on this and even create inconsistent profit for a business. To overcome this challenge, you need to be proactive about keeping delinquent accounts in check. It requires multiple steps and actually begins when a new customer signs the lease. Consider the following advice to help keep renters from falling behind and how to address the situation if they do.

State Your Expectations

The self-storage lease agreement is one of the best tools you have to help you manage nonpaying tenants. At the time of rental, you or your staff should tell customers what’ll happen if they fail to pay rent. Having clear communication up front about what’s expected will leave less room for confusion and inconsistency in the future.

Also, make sure you have good contact information for every tenant. This should include their email and phone number, of course, but also an alternate person you can contact if you’re unable to reach the renter. Also, get permission to send texts.

Create a System

Setting up a solid routine to keep all your self-storage tenants on track is vital. With the help of facility-management software, staff can regularly check on delinquencies. Anyone who isn’t actively on autopay with a current credit card is a potential risk. Think about tenants who pay by phone, check or in person, or even those who pay with credit cards that are soon to expire. For some facility operators, this is a significant portion of their customer base.

While it may seem like more work to keep in front of these tenants rather than simply react once they become late, it isn’t. A good operational system will allow you to remind customers about their payments and encourage more of them to pay on time. It’ll also invite more people to sign up for autopay. For example, here’s a simple five-step reminder system:

These notifications are separate from your late-fee letters. They’re simply intended to inform your customer of how their account is accruing fees. Depending on what software your facility uses, these can be delivered as an automated phone call, text message or email with a push of a button. Each customer has different contact preferences, so making sure that all avenues are tried increases the success of collecting those payments.

It’s critical to not only notify tenants about fees but to do so in a timely fashion. Sending invoices the month prior to the due date reminds customers they have a bill. These can be sent through email, snail mail or text message. Even if the account is on autopay, an invoice can still be sent to verify that all credit card information on file is valid and ready to be run on the upcoming due date.

You should also have internal guidelines for when to waive self-storage fees as well as a set auction schedule. This ensures consistency in how you approach delinquent accounts and provides your tenants with clarification on what they should expect in the case of nonpayment. These rules may include:

Keep in mind that your fees can change with an appropriate amount of notice to the customer. If current fees aren’t encouraging tenants to take their rental seriously enough to pay on time, it may be time for a change. The state in which your facility is located may determine how you structure your late fees. Refer to your state self-storage association or attorney for those guidelines.

Make It Easy to Pay

Every self-storage company may run their stores a bit differently, but the goal is the same for all: We want customers to pay their rent. One of the best things we can do is make paying easy for tenants. Something as seemingly innocuous as shortened office hours or lack of a drop box can make it difficult for someone to satisfy their bill. If they must call every month with their payment and give their credit card information over the phone, it could lead to late or missed payments. If the office is only open during typical business hours, it may be difficult for some customers to get their payment to you.

Having multiple avenues to pay allows all tenants to fulfill their commitment based on their preference. For example, you can offer the following:

Change Your Mindset

Every store-level self-storage employee must understand the importance of collections and be able to manage them successfully, and yet most of us dread it. The awkwardness of talking to a customer about money they owe or the stress of having to go through the auction process can make any employee reluctant. However, it’s important to feel comfortable and confident when contacting a customer about delinquency.

To add to the discomfort, there’s a negative feeling in our society about collections. We often think about the loan sharks and repo companies we see on TV and assume that’s how we need to be. This is incorrect. We don’t have to approach collections with cruelty or heartlessness. In fact, empathy is what’s needed to make good connections with our tenants. Compassion will allow tenants to avoid feeling guilty when they have to tell you they can’t pay until they get their next paycheck. If we don’t have empathy, then the likelihood of our failure only increases.

That said, being understanding doesn’t mean rent isn’t collected or that all late fees are waived. Try to learn what’s happening in the tenant’s life so you can find a solution vs. giving away money. It also makes the customer want to pay you, as you’ve been kind and sympathetic. When you send late-notification letters, they should not be aggressive or threatening. Instead, they should be professional and informative, and clearly explain what’s happening with the customer’s account.

Delinquency and collections are part every self-storage operation, and for some of you, it may feel like a constant battle. But if you have a solid system in place, the routine gets easier, and more tenants will pay on time. Making it simple for renters to pay you and having open communication when they’re unable to will help you build a stronger relationship with them and prevent delinquency in the first place.

Cassie Dodgen is president of operations for Pinnacle Storage Managers, the third-party management division of Pinnacle Storage Properties. Her 10 years of industry experience includes acquisitions, development, operations, multi-store leadership and maintaining excellent company culture. Her career has included manning a single site to running several multi-million-dollar businesses. For more information, email [email protected].