Bad Debt

Bad debt is rent or other resident charges that were billed but are not expected to be collected. In multifamily operations, it usually starts as delinquency and becomes bad debt when the balance is determined to be uncollectible and written off. It may involve current or former residents, including unpaid balances after move-out.

A resident moves out owing $1,200 in rent and fees after the security deposit is applied. After repeated collection attempts and a set aging period, the property determines the balance is uncollectible and records it as bad debt.

Bad debt reduces the revenue a property actually keeps and can affect net operating income. Tracking it helps operations leaders understand where rent collection, resident screening, payment follow-up, and move-out collections may need improvement.